Question

For missed rental depreciations only for some years, how to correctly do the catch up?

Forum|Forum|4 years ago
April 10, 2022
2 replies
0 views

Consider this scenario:
- house bought as rental in 2013
- house rented out right away in 2013
- depreciation taken only in the 2015 tax return for year 2015
- depreciation not taken for the remaining years

I understand that for years 2018, 2019, and 2020 it's possible to amend the tax returns, but not for the earlier year so it is necessary to use the form 3115 to correct and catch up the depreciation.

At this stage, it seems easier to file the 2021 tax return by the deadline, and then take care of filing the form 3115 after (with a professional).

Some questions:
- Is it ok to take the depreciation for the year 2021 in the 2021 tax return, or is it better to not include it and include everything in the form 3115?
- Is it better to file amendments for yers 2018, 2018 and 2020 (amending the correct deduction), or is it ok include that depreciation in the form 3115?
- since the the depreciation was taken for 2015 in the 2015 tax return, is that a problem to file a form 3115 to catch up depreciation for all years 2013-2021 except the portion for 2015?

Thanks!

TurboTax Premier Online

ColeenD3

No, you can't amend for any year and it is better to file an extension and have a professional file Form 3115 for all the years, including 2021.

E

emanuetreAuthor

Thanks for the reply.

Any thought regarding the alternative of (a) file 2021 tax return as is (with our without deduction), and then (b) get the form 3115 in order for the 2022 tax year?

One potential advantage could be to not delay any (other) tax refund (eg overpaid taxes). A potential disadvantage is waiting an extra year to benefit from the catch up deductions.

Thanks!

ColeenD3

You can omit depreciation this year and file Form 3115 in 2022. Do not take depreciation for 2021, since you have already filed for so many years with an impermissible method.

Carl11_2

Employee

@emanuetre confused yet? I think you are.

The 3115 will be included "only" with your 2021 tax return, and you do need to seek professional help. There is no need to amend prior year tax returns, since that's not the way to do it when using an impermissible method for 2 or more years as you have done by not taking depreciation.

Let a professional handle this, as it can be a double whammy if your state also taxes personal income. A pro will be more capable of keeping any fines/penalties that may be assessed, to a minimum.

You can't just do your 2021 tax return and then have a pro take care of it "after the fact" with an earlier return. Doing so will throw things "way" off and I would expect that to raise eyebrows at the IRS. (Weather it actually would or not, I wouldn't know.)