If you bought a short-term rental property in a prior tax year and didn't claim bonus depreciation under §168(k), you can file IRS Form 3115 with your current-year return to capture all missed depreciation — including 100% bonus depreciation on 5-year and 15-year property — in a single §481(a) adjustment. No amended return required, no statute-of-limitations cutoff, and no IRS pre-approval needed (it's an automatic accounting method change under Rev. Proc. 2024-23). On a $1M STR bought in 2024 with no bonus depreciation taken, the catch-up typically unlocks $200,000–$280,000 of bonus-eligible deductions — claimed entirely in the current return.
It happens constantly. An investor buys an STR. The CPA filing their return is a generalist who doesn't specialize in real estate. The property gets put on a straight 27.5-year or 39-year schedule. No cost segregation study is commissioned. No bonus depreciation is claimed. The investor leaves $50,000–$150,000+ in Year 1 federal tax savings on the table.
A year later, the investor learns about the STR loophole. The internet says: "It's too late — you can't claim bonus depreciation after the first year."
The internet is wrong. Form 3115 and the §481(a) catch-up adjustment exist precisely to fix this situation. Here's exactly how it works in 2026.
What Form 3115 does (and why it's powerful)
IRS Form 3115 is the "Application for Change in Accounting Method." It's used when a taxpayer wants to switch from one accounting method to another going forward. For depreciation purposes, switching from straight-line depreciation (the default) to a cost-segregation-based method that includes bonus depreciation is treated as a change in accounting method — and Form 3115 is the vehicle.
The magic is the §481(a) adjustment. When you change methods, the IRS doesn't make you restate every prior year. Instead, it calculates the cumulative difference between what you did deduct under the old method and what you would have deducted under the new method, and lets you claim that entire difference in the current tax year as a single adjustment.
The §481(a) adjustment is one of the highest-ROI tax filings available to STR investors. On a $1M STR owned for two years where no bonus depreciation was taken, the §481(a) catch-up alone commonly produces $200k+ of deduction in the current return — without requiring any amended returns for prior years.
Form 3115 vs. amended return: when each is right
| Attribute | Form 3115 + §481(a) | Amended return (1040-X) |
|---|---|---|
| How many prior years can you fix? | All of them (no statute limit) | 3 years (statute of limitations) |
| When is the deduction claimed? | Current year (one return) | Per-year (one amended return per year) |
| Refund timing | Current-year refund or reduced liability | Per-year refunds, can take months each |
| Number of returns to file | One Form 3115 + one current return | One Form 1040-X per prior year |
| IRS pre-approval needed? | No (automatic change under Rev. Proc. 2024-23) | No |
| Best use case | Multi-year missed depreciation, property held > 1 year | Single-year correction within statute, property < 1 year old |
For nearly every STR investor in the "I didn't claim bonus depreciation" situation, Form 3115 is the right answer. Amended returns make sense only when (a) the property was placed in service less than a year ago, or (b) you're fixing only the most recent return for other reasons.
Worked example: $1M STR bought 2024, no depreciation claimed
Investor bought a $1M short-term rental in Joshua Tree on March 1, 2024. Generalist CPA put the property on straight 27.5-year depreciation. No cost seg study, no bonus depreciation. Now it's tax filing season for 2026 — two and a half years later. Investor learns about the STR loophole and files Form 3115. For a worked example on a $2.995M Joshua Tree property yielding $803,596 in bonus-eligible property, see the case study in our 2026 STR Bonus Depreciation Market Study.
At a 37% federal marginal rate plus 3.8% NIIT savings (where applicable), that's roughly $87,000 in federal tax savings claimed on the 2026 return — without the investor needing to amend 2024 or 2025 returns at all.
Even better: because the §481(a) adjustment is a non-recurring item, it doesn't have to be spread across multiple years. The full deduction lands in the current year, which often produces an immediate refund (if the investor had already paid 2026 estimated taxes) or substantially eliminates the year's federal liability.
The "allowed or allowable" rule — why this matters even more
There's a second, often-overlooked reason to file Form 3115. Under IRC §1250(b)(3), depreciation recapture at sale is calculated on depreciation "allowed or allowable" — meaning the IRS treats you as having taken the depreciation whether or not you actually claimed it.
You owe recapture even if you forgot the deduction. If you sell an STR without having claimed bonus depreciation, the IRS still calculates recapture as if you had. You eat the recapture cost without ever getting the deduction benefit. Form 3115 is what prevents this — it converts unclaimed depreciation into actually-claimed depreciation, so the tax benefit shows up on your return.
This is the often-missed asymmetry that makes Form 3115 essentially a free win for STR investors who haven't claimed bonus depreciation. You're going to be taxed as if you took the deduction. The only question is whether you actually get the deduction.
Eligibility: who can file Form 3115 for this
The §481(a) catch-up for bonus depreciation is available when all of these are true:
- The property has been owned for at least one tax year. If you bought in 2026 and are filing your 2026 return, use a normal depreciation election — Form 3115 is for multi-year situations.
- The current depreciation method is "wrong" relative to what's available. If your current method is straight-line and bonus depreciation is available under §168(k), the change qualifies.
- The change is on the "automatic" list. Most cost segregation changes qualify under Rev. Proc. 2024-23, Designated Change Number 7 (general cost recovery method change) or DCN 87 (depreciation of MACRS property).
- The property qualifies for the STR loophole or otherwise qualifies for bonus depreciation. For STRs claiming non-passive treatment, this means the 7-day rule + material participation must be met for the catch-up year and going forward.
The process: what filing Form 3115 actually involves
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Commission a cost segregation study (or AI estimate)
Engineering study from a qualified firm is the gold standard for the §481(a) calculation. AI-driven estimates (like DepreciMax) can be used to scope the deduction and set expectations before commissioning the formal study.
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Calculate the §481(a) adjustment
Total bonus-eligible deduction (new method) minus total depreciation already claimed (old method) = the §481(a) adjustment. Your CPA or cost seg firm computes this.
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File Form 3115 with the current-year return
Form 3115 attaches to your timely-filed (with extensions) current-year Form 1040. Identify the correct DCN (typically 7 or 87 for cost seg changes) and document the §481(a) adjustment.
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Send a duplicate copy to the IRS National Office
For automatic changes, mail a duplicate Form 3115 to the IRS National Office Ogden, UT, address listed in the form instructions. No fee for automatic changes.
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Claim the deduction on the current return
The §481(a) adjustment shows on the current return as "other income" or "other deduction" — a negative number when claiming missed deductions. The deduction flows through normally.
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Continue the new method going forward
From the catch-up year onward, all future depreciation is calculated under the new method (cost segregation with bonus dep on eligible classes). No further Form 3115 needed.
Run an AI report on your existing STR before you call your CPA
DepreciMax can scope the §481(a) catch-up in minutes. Upload photos of the property you already own — get back an estimated bonus-eligible deduction so you walk into the CPA conversation with a number, not a question.
Run a Property Report — $99 →Cost & timing: what to expect
- Cost segregation study (formal): $4,000–$8,000 from established firms (KBKG, Engineered Tax Services, Capstan, ETS).
- DepreciMax AI report (planning estimate): $99. Use this to scope expected ROI before committing to a formal study.
- CPA Form 3115 filing fee: typically $1,500–$3,500 added to the current-year return.
- Timeline: 30–60 days for the formal cost seg study, then your CPA files Form 3115 with the current return. Refunds (if any) follow normal IRS processing — usually 6–12 weeks after filing.
Total all-in cost: $5,000–$11,000. On the $1M Joshua Tree example above with $87k in tax savings, the net unlocked is roughly $76,000–$82,000 — a 7–16x ROI on the cost of the filing.
When NOT to file Form 3115
Form 3115 is the right tool in most missed-depreciation cases, but not all:
- Property was bought in the current tax year. Use a standard depreciation election on the current return, not Form 3115.
- The property doesn't qualify for bonus depreciation. If it's a long-term rental (no STR loophole) and you're not a real estate professional, the catch-up deduction is passive and can only offset passive income — limiting the benefit.
- You're selling the property in the same year. The deduction shows up in the year of sale, but the recapture also lands there — somewhat neutralizing the benefit (though usually still net positive because of the rate differential between §1245 ordinary income recapture and the §168(k) deduction's tax savings).
- Your AGI in the catch-up year is unusually low. If you're in a low bracket for the catch-up year, the savings are smaller. Wait for a higher-income year if you can.
The bottom line: don't leave the deduction on the table
The single most common Form 3115 conversation: an investor bought an STR 18+ months ago, never claimed bonus depreciation, and assumed the opportunity was gone. It's not. Form 3115 and §481(a) are the IRS's own mechanism for catching up missed accounting elections — and they were designed for exactly this situation.
If you own an STR placed in service in 2023, 2024, or 2025 without bonus depreciation taken, the conversation with your CPA this filing season should start with: "What does the §481(a) catch-up look like on this property?"
Scope your catch-up before you talk to your CPA
Run a $99 DepreciMax report on the STR you already own. Get the bonus-eligible breakdown, the projected §481(a) deduction, and a number to bring into the cost-seg-study conversation.
Run a Property Report — $99 →Frequently asked questions
What is Form 3115 and why does it matter for STR investors?
Form 3115 is the IRS Application for Change in Accounting Method. It enables a §481(a) catch-up adjustment that captures all missed bonus depreciation in the current tax year — without amended returns for prior years.
Can I still claim bonus depreciation on an STR I bought in 2024 or 2023?
Yes. If the property was placed in service in a prior tax year, file Form 3115 in the current year. The §481(a) adjustment captures the entire missed deduction at once.
What's the difference between Form 3115 and an amended return?
Amended returns fix one prior year, subject to a three-year statute of limitations. Form 3115 catches up all prior missed depreciation in the current return, no statute limit. Form 3115 is almost always the right answer for multi-year STR depreciation catch-up.
Does Form 3115 require IRS pre-approval?
No — for cost segregation method changes, this is an automatic accounting method change under Rev. Proc. 2024-23, DCN 7 or DCN 87. File with the current return, send a duplicate to the IRS National Office.
How much can I save with a Form 3115 catch-up?
On a $1M STR with no bonus depreciation previously claimed, expect $200,000–$280,000 of bonus-eligible deduction captured in the catch-up — roughly $75,000–$105,000 in federal tax savings at a 37% rate.
Do I still owe depreciation recapture on a Form 3115 catch-up if I sell?
Yes, but recapture applies whether you claimed the deduction or not (under §1250(b)(3) "allowed or allowable"). Form 3115 doesn't increase your recapture; it just ensures you get the deduction you're already going to be taxed on at sale.
This article is informational only and not tax advice. Form 3115 filings have technical requirements. Engage a CPA experienced with cost segregation and §481(a) adjustments before relying on this strategy.