The short answer
Form 3115, Application for Change in Accounting Method, is the IRS form you file to change how you account for an item, including switching from an impermissible to a permissible depreciation method so you can claim depreciation you never took. For depreciation the change is usually automatic under Rev. Proc. 2015-13 and the list of automatic changes in Rev. Proc. 2025-23, as designated change number 7. The catch-up is a section 481(a) adjustment, deducted in full in the year of change when it reduces income.
At a glance
| Use for sellers | Claim missed depreciation without amending old returns |
|---|---|
| Change number | DCN 7 while you own the property; DCN 107 after disposal |
| 481(a) period | Negative in one year; positive generally over four |
| Filing | Original with the timely return; signed copy to the IRS |
Why sellers meet Form 3115: basis drops whether or not you claimed depreciation
Publication 946 says you must reduce basis by depreciation allowed or allowable, whichever is greater, and that if you do not claim depreciation you are entitled to, you still reduce basis by the full allowable amount. Unclaimed depreciation therefore raises your gain on a sale without ever giving you the deduction; see recapture of depreciation you never claimed.
Publication 946 explains that you adopt a method by using the same impermissible method on two or more consecutively filed returns, and that changing it generally requires Form 3115. Section 6.01 of Rev. Proc. 2025-23 makes that change automatic, as change number 7, for property you own at the start of the year of change. It applies to Forms 3115 filed on or after June 9, 2025.
Section 481(a) requires the adjustments needed so that amounts are not duplicated or omitted. Here that is the gap between depreciation you deducted and depreciation allowable for prior years.
Worked example: the catch-up deduction before a sale
Hypothetical: you bought a rental with a building basis of $400,000 and never claimed depreciation for six years. Residential rental property is recovered over 27.5 years, so allowable depreciation is roughly $14,500 a year, or about $87,000 over six years. Filing Form 3115 under change number 7 produces a negative section 481(a) adjustment of about $87,000, taken in full in the year of change. Run your own numbers with your CPA.
Per the Form 3115 instructions, attach the original to your timely filed return, including extensions, for the year of change, and send a signed duplicate to the IRS in Ogden, Utah no earlier than the first day of that year and no later than the original. No user fee applies to automatic changes, and the IRS sends no acknowledgment.
If the property is already gone, section 6.07 of Rev. Proc. 2025-23, change number 107, permits the change for the taxable year in which you disposed of it.
Where it bites in a sale or an exchange
Timing matters. Change number 7 covers property owned at the beginning of the year of change, which points to a Form 3115 filed with the return for a year that began while you still owned the building. For property disposed of earlier, section 6.07 (change number 107) treats the year of disposition as the year of change. The instructions note that the IRS ordinarily will not consent to a change when you stop the business, but they cite both changes as guidance permitting one in a final year.
In an exchange, the allowable depreciation has already reduced the basis that carries into the replacement, as our answer on basis after a 1031 explains, so the catch-up claims a deduction the basis already reflects. Our pages on catch-up depreciation before a sale and cost segregation before selling cover the planning.
Related questions
Do I need advance IRS approval to claim missed depreciation?
Usually not. The change from an impermissible to a permissible depreciation method is on the list of automatic changes, so a timely, complete filing is treated as consent, subject to IRS review, and carries no user fee.
Can I amend my returns instead?
Only in narrow cases. If the impermissible method was used on just one return, Rev. Proc. 2025-23 allows an amended return for that placed-in-service year; once used on two or more consecutive returns, it is a method and Form 3115 is the route.
What if the section 481(a) adjustment increases my income?
A positive adjustment, for example from excess depreciation, is generally spread over four tax years: the year of change and the next three. It is two years if you are under examination, unless an exception applies.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.