Examples · made-up property
Look-back cost segregation on a rental you bought 3 years ago
Owners of rentals bought or built in past years who never had a study.
How it works for this kind of property
If you bought a rental a few years ago and your return has depreciated it as one 27.5-year asset, you can still have a study done now.
More on how it works
You do not amend the old returns. Once two or more returns have been filed, the change is an accounting method change: your CPA files Form 3115 with this year's return, and all the depreciation you missed is deducted this year as one catch-up amount.
The bonus rate is the one for the year the property was acquired, so a 2023 purchase uses the 2023 rate, not today's.
Which of the 8 studies fit
| Study | Example result |
|---|---|
| Faster depreciation (cost segregation) | Counted in this example |
| Catch-up on past years | Counted in this example |
| Inventory cost rules and accounting methods | Fits, not counted here |
| When home-sale income is taxed | Doesn't apply here |
| Energy-efficient home and building credits | Doesn't apply here |
| Energy-efficient buildings and solar | Doesn't apply here |
| Research and hiring credits | Worth a question |
| Property and sales tax | Fits, not counted here |
What the engine found, for your CPA
Example: We checked 69 strategies: 13 fit, 4 need a question, 48 don't apply, and 4 are protection checks.
- Faster depreciation (cost segregation): 15-year site work (paving, lighting, fencing, landscaping); Bonus depreciation; Classification rules for this property type; Cost segregation on a building you bought
- Catch-up on past years: Accounting method changes (Form 3115); Form 3115 instead of amended returns; Look-back catch-up on missed depreciation
- Inventory cost rules and accounting methods: Cash method for small businesses
- When home-sale income is taxed: No homes, condos or lots sold under contract.
- Energy-efficient home and building credits: Bought from someone else: 45L goes to the eligible contractor that built the home and had basis in it during construction (Notice 2023-65 sec. 5.02), not to a later buyer.
- Energy-efficient buildings and solar: No commercial or 4+ story multifamily building the taxpayer built or improved.
- Research and hiring credits: Question: Paid family leave credit (45S)
- Property and sales tax: Property tax appeal; Property tax review
Common questions
Do I have to amend my old returns?
Not for depreciation, once two or more returns have been filed. The catch-up goes on this year's return with Form 3115 (an automatic change). Your CPA files it with a timely return, including extensions.
Why is the range narrower than for a new purchase?
A look-back catches up depreciation already missed and uses the bonus rate of the year you bought. Our engine computes both, and the range on this page is what it found for the example.
What if I already sold the property?
A study on a property you no longer own works differently and is a question for your CPA. The look-back on this page is for property you still own.
The rules behind it, for your CPA
- Pub. 946 (2025) Table B-1 asset class 00.3 Land Improvements
- 26 U.S.C. 168(b)(2)(A)
- Pub. 5653 Ch. 2 L(5)
- Notice 2026-11
- Treas. Reg. 1.168(k)-2(b)(3) original use / used property (5-calendar-year lookback)...
- Instructions for Form 4562 (2025)
- Rev. Proc. 2025-23 sec. 6.01, DCN 7; scope and inapplicability list
- Rev. Proc. 2015-13 sec. 7.03(1)
- Instructions for Form 3115 (Rev. December 2022)
- LB&I practice unit COR-C-011 (rev. 3/20/25)
- LB&I practice units 'Accounting Method Basics' and 'Identifying and Handling Claims...
- LB&I Process Unit 'Identifying and Handling Claims for Changes in Accounting Methods'...
Every number on this page is an example for a made-up property, computed by our engine. Not tax advice; your CPA reviews and files.