If you’re a property owner, real estate investor, or business using strategies like cost segregation, IRS Form 3115 may be the key to unlocking significant tax savings. Often overlooked, this powerful form allows taxpayers to change accounting methods and capture missed deductions—without amending prior returns.

In this post, we’ll break down what Form 3115 does, when and how to use it, and why it’s especially valuable when paired with cost segregation or energy-efficiency strategies.

What Is IRS Form 3115?

Form 3115, Application for Change in Accounting Method, is used to request approval from the IRS to switch from one accounting method to another—whether for the entire business or a specific item like depreciation.

Common reasons to file Form 3115 include:

• Moving from cash to accrual accounting
• Correcting depreciation methods
• Applying a cost segregation study to retroactively reclassify assets
• Changing how certain deductions or expenses are treated

The Power of Section 481(a): Retroactive Deductions Without Amendments

Let’s say you’ve owned a commercial property for seven years and used straight-line depreciation. By applying a cost segregation study now, you can reclassify components (such as flooring, fixtures, or electrical) into 5-, 7-, or 15-year categories—then immediately claim all the depreciation you missed in one year.

You get to “catch up” without amending a single return.

Filing Form 3115: What You Need to Know

Form 3115 can be dense, but here’s a high-level look at the filing process:

1. Complete the Form
   • Part I: Basic info (name, EIN, etc.)
   • Part II: Automatic vs. non-automatic change
   • Part IV: Specific change details (e.g., depreciation correction)
   • Section 481(a): Where the cumulative adjustment is calculated
     
2. Attach a Statement of Facts
   • Describe the current method, the proposed change, and the rationale for the switch
     
3. File It Right
   • For automatic changes, include the form with your timely filed return (including extensions)
   • Send a copy to the IRS national office in Ogden, UT
     
4. Work with Experts
   • Cost segregation studies often require input from both tax professionals and engineers to ensure accurate schedules and support for the 481(a) adjustment
     

Top Use Cases for Real Estate and Business Owners

• Cost Segregation Studies: Reclassify components of a building to shorter recovery periods and accelerate depreciation.
• 179D Energy Efficiency Deduction: If you’ve installed energy-efficient systems in the past (HVAC, lighting, building envelope), Form 3115 can align accounting methods with 179D deductions.
• Correcting Depreciation Errors: Missed bonus depreciation? Wrong asset classification? Form 3115 is your clean-up tool—no amended returns needed.
  

Key Benefits

• Immediate Tax Savings: Claim years of missed depreciation in one fell swoop.
• Avoid Amended Returns: Make changes going forward without triggering red flags.
• IRS Compliance: Form 3115 provides a clear audit trail and supports long-term compliance.
• Better ROI on Cost Segregation: Pairing Form 3115 with an engineering-based cost seg study ensures your clients actually realize the benefits of accelerated depreciation.

Final Thoughts

IRS Form 3115 is one of the most effective, yet underused, tools in the tax code. When applied correctly—especially alongside cost segregation or 179D deductions—it can unlock serious tax savings, fast.

Want to Explore the Opportunity?

CSSI has completed over 55,000 engineering-based cost segregation studies—with zero audits. If you’d like help determining whether Form 3115 can benefit your clients, connect with:

Bonnie Griffin Kaake
CSSI Contact for COCPA Members, Bonnie.Kaake@CSSIservices.com