You bought your rental in 2022. The IRS owes you back-depreciation.
Form 3115 lets you claim every year of missed accelerated depreciation in a single tax year. Most owners discover $50K–$150K of unclaimed deductions on a property they already own.
Form 3115 §481(a) lets a property owner claim every year of missed accelerated depreciation in a single tax year — no amended returns required. On a $500,000 residential rental bought in 2022 and held 4 years, the catch-up adjustment typically lands between $60,000 and $120,000 in Year 1 deductions. At a 32% federal bracket, that's $19,000–$38,000 in tax savings claimed at once. Pre-2025 §168(k) bonus depreciation rates (60–100%) often make a lookback study more valuable than starting cost segregation today.
Three steps. No amended returns.
Five real properties. Five Year-1 outcomes.
Estimates from the same engine that powers the calculator above. Your numbers will vary based on cost basis allocation and your CPA's review.
How the math works in plain terms. Every property has a cost basis at the time it was placed in service — the purchase price minus land value, plus capitalized closing costs and improvements (IRC §1016). Without a study, that basis depreciates straight-line over 27.5 years (residential) or 39 years (commercial). With a cost segregation study, an engineer reclassifies portions of the basis into 5-, 7-, and 15-year buckets that qualify for accelerated and bonus depreciation.
For a property already in service, the §481(a) adjustment computes the difference between depreciation as actually claimed (straight-line) and what should have been claimed under the cost-seg classification. That cumulative gap — every year the deduction was understated — collapses into a single Year-1 deduction on the year of change. The five examples below are typical engine outputs across property types and tax brackets; your study will surface a number specific to your basis allocation, placed-in-service date, and bonus-depreciation rate vintage.
Why Form 3115 beats amending your prior returns.
The instinct most owners have when they discover missed depreciation is to amend the prior years' returns. That is almost always the wrong call. Form 1040X reopens specific tax years — capped at the last three — and requires the IRS to re-examine those returns. A Form 3115 change in accounting method, by contrast, is an automatic-consent filing under Rev. Proc. 2015-13. It does not require IRS pre-approval, does not reopen prior returns, and reaches back to the year the property was placed in service — not just three years. The §481(a) adjustment captures the entire cumulative gap as a single Year-1 deduction.
Form 3115 is the IRS-blessed way to fix missed depreciation. You file it once, attached to your normal return, and the entire catch-up adjustment lands in this year's tax return. Read the full comparison →
Six scenarios where a lookback materially outperforms.
Catch-up depreciation is most valuable when the gap between what you claimed and what you should have claimed is large. The patterns below produce the highest §481(a) adjustments we see in practice.
- Held through 2022 — caught the bonus phase-down. Properties placed in service 2018–2022 accrued §168(k) bonus rates of 100%/100%/100%/80%/60%. A study run today preserves those vintage rates on each year's reclassified basis.
- STR or commercial held 3+ years on straight-line. 5- and 15-year property classes accumulate the largest gaps. A $750K STR placed 2022 typically catches up $130K–$160K.
- Property bought through an LLC or S-corp. Pass-through losses suspended at the entity level can fully release into the catch-up year, depending on basis and at-risk amounts.
- STR owner who newly qualifies for material participation. Catch-up year is the first year losses can offset W-2 income — the lookback consolidates years of suspended passive losses into a usable deduction.
- Owner approaching a 1031 exchange. Take the catch-up first; the §481(a) adjustment lands before recapture rules apply at sale. Higher basis at exchange improves the math on the next property.
- Multiple properties acquired at the same time. One Form 3115 covers a portfolio. Engineering and filing fees scale much better than property-by-property amends.
The mechanics behind the math.
Six guides on how Form 3115 §481(a) actually works, written by the engineering team that runs the calculator.