What is Form 3115 used for?

Form 3115 — Application for Change in Accounting Method — is filed when a taxpayer changes the method by which an item is treated on the tax return. The most common depreciation use is to claim previously-missed depreciation through a §481(a) adjustment, typically following a cost segregation study on a property acquired in a prior year.

Do I have to amend prior returns?

No. Form 3115 is specifically designed to avoid amending prior returns. The §481(a) adjustment captures the cumulative difference between the old method and the new method as a single deduction (or income, if a positive adjustment) in the year of change. This is faster, less risky, and procedurally preferred over amending three or more years of returns.

Is Form 3115 automatic or does it require IRS approval?

Most depreciation method changes — including cost-segregation-driven reclassifications — qualify for automatic consent under Rev. Proc. 2015-13 (as updated by subsequent revenue procedures, currently Rev. Proc. 2026-08 for §168(k)). Automatic consent means the IRS is deemed to consent once Form 3115 is properly filed; no advance approval is needed. Non-automatic changes require IRS approval and a $14,200 user fee.

When is the §481(a) adjustment included in income?

Negative §481(a) adjustments (additional deductions, as with missed depreciation) are claimed in full in the year of change. Positive §481(a) adjustments of $50,000 or more are spread over four years; smaller positive adjustments are also taken fully in year of change unless elected to be spread.

What is the deadline to file Form 3115?

Form 3115 for automatic-consent changes must be filed with the original (timely-filed) tax return for the year of change. A separate copy is filed with the IRS office in Ogden, UT (per current procedures). The deadline is the original due date of the return, including extensions. There is no second-chance window — missing the deadline forfeits automatic consent for that year.

Form 3115 — IRS Depreciation Rules

Plain-English definition

Form 3115 — Application for Change in Accounting Method — is the IRS form used to change the method by which an item is treated on the tax return. For depreciation purposes, Form 3115 is the mechanism by which:

Missed depreciation from prior years is captured (cost segregation studies, late §168(k) bonus elections, MACRS class corrections)
The cumulative correction is taken as a §481(a) adjustment in the year of change
Prior returns are not amended — the adjustment is in a single year, prospective

The procedural authority is Rev. Proc. 2015-13, which establishes both automatic-consent and non-automatic-consent paths.

What §481(a) does

26 U.S.C. § 481(a)

“In computing the taxpayer’s taxable income for any taxable year (referred to in this section as the ‘year of the change’)— (1) if such computation is under a method of accounting different from the method under which the taxpayer’s taxable income for the preceding taxable year was computed, then (2) there shall be taken into account those adjustments which are determined to be necessary solely by reason of the change in order to prevent amounts from being duplicated or omitted.”

Source: Cornell LII · IRS.gov

The §481(a) adjustment is the cumulative difference between (a) total depreciation that would have been allowed under the new method from the property’s placed-in-service date through the year of change, and (b) total depreciation actually claimed under the old method during the same period.

For missed depreciation, this is almost always a negative §481(a) — a deduction in the year of change capturing all the depreciation that should have been taken but wasn’t.

Cost segregation use case

The most common Form 3115 use in real estate: a property is acquired in year X, depreciated as 39-year nonresidential or 27.5-year residential without cost segregation. In year X+3 (or X+5, etc.), an engineering cost segregation study reclassifies portions of the building into 5-year, 7-year, and 15-year property.

The §481(a) adjustment captures:

Catch-up MACRS depreciation on the newly-reclassified components for years X, X+1, X+2 (i.e., the additional depreciation that would have been taken in those years under the 5/7/15-year schedules instead of 39/27.5)
Catch-up §168(k) bonus depreciation at the rates that applied to each placed-in-service year (e.g., 100% for 2018–2022 property, 80% for 2023 property, 60% for 2024 property)
Combined into a single deduction reported on the year-X+3 tax return

The taxpayer does not amend years X, X+1, or X+2. The §481(a) adjustment is the entire mechanism.

The Form 3115 designated change number (DCN) for a depreciation method change associated with cost segregation is DCN 7 under Rev. Proc. 2015-13.

	Automatic consent	Non-automatic consent
IRS approval	Deemed approved on proper filing	Must be approved in advance
User fee	None	$14,200 (2026)
Filing deadline	With original return (incl. extensions)	Before year of change ends (typically)
Filing location	One copy with return + one copy to Ogden, UT	One copy with consent application
Common changes	Most depreciation, cost seg, §168(k) catch-up, repair regs	Specialized changes not on the auto-consent list
Risk	Lower — DCN-listed changes have defined procedures	Higher — IRS reviews and may decline

For cost segregation under DCN 7, automatic consent is the standard path. Rev. Proc. 2026-08 is the current automatic-consent procedures document covering §168(k) late elections.

Mechanics of the §481(a) adjustment

The §481(a) calculation runs in two pieces:

Piece 1: New-method cumulative depreciation

Calculate what total depreciation would have been from placed-in-service date through the year before the year of change, using:

The new MACRS classifications (5-yr, 7-yr, 15-yr for the cost-segregated components)
The §168(k) bonus rate that applied in each placed-in-service year (not the current rate)
The applicable conventions (half-year, mid-quarter, mid-month per the property type)

Piece 2: Old-method cumulative depreciation

Calculate what total depreciation was actually claimed under the old method (typically straight-line 27.5 or 39 years) from placed-in-service date through the same period.

The adjustment

§481(a) adjustment = (Piece 1) − (Piece 2)

If positive (rare for missed depreciation), it’s income — typically spread over four years. If negative (the usual case), it’s a deduction in the year of change.

Worked example

Property: $1.2M residential rental duplex, placed in service June 2023, owned by an LLC taxed as a partnership.

Year of change: 2026 (cost segregation study performed in 2026, applied retroactively).

Old method (claimed 2023, 2024, 2025): straight-line 27.5-yr, mid-month June convention.

2023: $22,440 (7 months mid-month)
2024: $38,540
2025: $38,540
Cumulative through 2025: $99,520

New method (would have been claimed 2023, 2024, 2025): with engineering cost segregation reclassifying 22% to 5-yr personal property, 8% to 15-yr land improvements, plus §168(k) bonus at the rate in effect each year.

The 2023 placed-in-service year captures 80% bonus on the accelerated buckets (the 2023 §168(k) rate, not the current 100%):

2023 bonus on 5-yr (22% × $1.02M × 80%) = $179,520
2023 bonus on 15-yr (8% × $1.02M × 80%) = $65,280
2023 MACRS on remaining 5-yr basis = $4,488 (residual at 5-yr DDB w/ half-year)
2023 MACRS on remaining 15-yr basis = $544 (residual at 15-yr 150%DB w/ half-year)
2023 MACRS on 27.5-yr basis (the 70% structural portion) = $15,708 (mid-month June)
2023 new-method total: $265,540
2024 new-method: $32,234 (MACRS on residual + structural)
2025 new-method: $30,002

Cumulative through 2025 under new method: $327,776

§481(a) adjustment: $327,776 − $99,520 = −$228,256 (negative = deduction)

The 2026 return reports a $228,256 §481(a) deduction. The 2026 forward-looking depreciation continues on the new schedule. No 2023, 2024, or 2025 returns are amended.

Common errors

Filing Form 3115 with the wrong tax year. Form 3115 must be filed with the year of change return — not the year following. Filing in year X+4 to capture a change that should have been made in year X+3 misses the window.
Using the current §168(k) rate retroactively. The §481(a) calculation uses the bonus rate that applied in each placed-in-service year, not the current 100% rate. A 2023 placed-in-service property gets 80% bonus in the §481(a), even if filed in 2026.
Skipping the Ogden copy. Automatic-consent Form 3115 requires two copies — one attached to the original return, one mailed separately to the IRS in Ogden, UT. Missing the Ogden copy can invalidate the change.
Amending instead of filing 3115. A cost segregation study on a property held more than one year is a method change, not an error. Filing amended returns for the prior years is the wrong mechanism and can be disallowed by the IRS as failure to follow the prescribed §481(a) procedure.
Treating §481(a) as eligible for §168(k) bonus. The §481(a) adjustment captures depreciation that should have been taken under the new method, including bonus depreciation at the historic rates. The adjustment itself is not an additional asset placed in service in the year of change — there’s no separate bonus depreciation on the §481(a).
Designated Change Number (DCN) errors. The DCN identifies the specific change being made. DCN 7 (cost segregation), DCN 86 (TPR-related changes), DCN 199 (late §168(k) election) — using the wrong DCN can result in IRS rejection. The Rev. Proc. 2015-13 Appendix lists all current automatic-consent DCNs.

Sources

Statute: 26 U.S.C. § 481(a) — Cornell LII
Regulations: Treas. Reg. § 1.446-1(e) (method-change procedures)
Revenue procedures: Rev. Proc. 2015-13 (master automatic-consent procedures, as updated); Rev. Proc. 2026-08 (current §168(k) automatic consent)
Forms: IRS Form 3115 (current revision) + Instructions for Form 3115
Publications: Pub. 946 — How to Depreciate Property, Ch. 1 on changes in accounting method

Filing Form 3115 for missed depreciation on a specific property? The §481(a) adjustment calculation depends on the property’s full history — placed-in-service date, original classifications, prior-year bonus rates, and the cost segregation reclassification proposed. A worked Form 3115 §481(a) calculator shows the per-property adjustment with documented sources.

Form 3115 — Application for Change in Accounting Method