Tax Filing & Cost Segregation

[Neera Melwani]

Hi Everyone! In 2022, I was taking SL depreciation for my rental properties (1 apartment building and 4 4-plexes). I did a cost segregation study in order to take advantage of bonus depreciation and I have  a couple questions.

1. Does the form 3115 need to be filled out and approved PRIOR to making the change? 

2. Is the change ever not approved?

3. Do I need to amend prior returns, or can I take the catchup all in 2023?

4. Has anyone ever done this themself using TurboTax? I've used CPAs in the past, and prefer to do the accounting myself.

Thank you!

[Jake Drum]

I doubt TurboTax would let you attempt a 3115, but maybe. 

If you want to change to cost seg allocations in 2023, the 3115 essentially calculates what amount would have been taken in prior years had the cost seg allocation been used for those years, then it backs out what was actually taken to arrive at the catch up amount (called a 481(a) adjustment). You get to deduct the full 481(a) catch up amount in the current year.

1. No you can file the 3115 with your 2023 return

2. It falls under the automatic consent procedures, so it does not need approval - it could still be audited though 

3. Form 3115 prevents you from having to amend prior year returns

4. I am sure plenty have tried to DIY it