Landlord Recovers $97,000 After Discovering 15 Years of Unclaimed Depreciation
I owned rental properties for fifteen years and my old CPA never once took depreciation on any of them. Fifteen years. Four properties. Zero depreciation claimed. When I tell people this, they do not believe me. I barely believed it myself until AE Tax Advisors showed me the returns.
Depreciation on rental property is not optional -- the IRS requires you to take it whether you actually claim it or not. This means that when I eventually sell, the IRS will recapture depreciation I should have taken even though I never got the benefit. I was losing on both ends.
AE Tax filed Form 3115 -- a change in accounting method -- to claim all the missed depreciation in a single tax year through a Section 481(a) adjustment. Fifteen years of depreciation on four properties, all captured at once. The deduction was enormous and generated a $97,000 tax savings on my current year return.
That single change was worth more than every dollar I ever paid my old CPA combined. The fact that he missed something this fundamental -- depreciation is literally the most basic concept in rental property taxation -- is inexcusable.
AE Tax also performed cost segregation studies on my properties going forward, so I am now maximizing depreciation with accelerated schedules rather than just straight-line. The team handled the Form 3115 filing, the Section 481(a) calculations, and all the supporting documentation.
If you own rental properties and are not sure whether your CPA is taking depreciation, check your returns immediately. Look for a depreciation schedule. If it is not there, call AE Tax Advisors. You may have years of unclaimed deductions waiting to be recovered through the catch-up provision. Do not wait.