Depreciation rental property

Forum|Forum|2 years ago
April 11, 2024
1 reply
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Did not depreciate the rental property for 4 years. Want to start it. Turbotax assumes the depreciation amount for prior years which I did not do. Do I accept the depreciation amount turbotax calculates for prior years or enter 0?

Best answer by AmeliesUncle

Because you did not claim depreciation for the first two years, you set an "accounting method". That means you are not allowed to start claiming depreciation unless you file Form 3115. While filing Form 3115, you can also 'catch up' on the missed depreciation.

Carl11_2

Employee

You have to file IRS Form 3115 in order to correct your depreciation method. You don't have a choice here. While the TTX package does include the form, it does not offer much help, as that form can be (and usually is) complicated. Basically, since you did not depreciate for more than 2 consecutive years, you have to use form 3115 for a "change in accounting method". You should seek professional help with this... expecially if your state taxes personal income.
Per IRS Publication 946 at https://www.irs.gov/pub/irs-pdf/p946.pdf starting on page 13:
Generally, you must get IRS approval to change your
method of accounting. You must generally file Form 3115,
Publication 946 (2023) Chapter 1 Overview of Depreciation 13
Application for Change in Accounting Method, to request
a change in your method of accounting for depreciation.
The following are examples of a change in method of
accounting for depreciation.
• A change from an impermissible method of determin-
ing depreciation for depreciable property if the imper-
missible method was used in two or more consecu-
tively filed tax returns.
• A change in the treatment of an asset from nondepre-
ciable to depreciable or vice versa.
• A change in the depreciation method, period of recov-
ery, or convention of a depreciable asset.
• A change from not claiming to claiming the special de-
preciation allowance if you did not make the election
to not claim any special allowance.
• A change from claiming a 50% special depreciation al-
lowance to claiming a 100% special depreciation al-
lowance for qualified property acquired and placed in
service by you after September 27, 2017 (if you did
not make the election under section 168(k)(10) to
claim a 50% special depreciation allowance).

bad4na2Author

I understand that I should have file the depreciation from the beginning. Also understand that IRS would calculate depreciations even if I didn't file for depreciation when my property is sold. So my question is can I forfeit the depreciation of prior years and start new? I know I would be at a loss for not thaking the prior years of depreciation deduction. If yes, do what do I put for pior years of deduction amount?