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Publication 534

How To Change Methods(p8)

In some cases, you may change your method of depreciation for property depreciated under a reasonable method. If you change your method of depreciation, it is generally a change in your method of accounting. You must get IRS consent before making the change. However, you do not need permission for certain changes in your method of depreciation. The rules discussed in this section do not apply to property depreciated under ACRS or MACRS.
For information on ACRS elections, see Revocation of election in chapter 1 under Alternate ACRS Method.

Change to the straight line method.(p8)

You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. When the change is made, figure depreciation based on your adjusted basis in the property at that time. Your adjusted basis takes into account all previous depreciation deductions. Use the estimated remaining useful life of your property at the time of change and its estimated salvage value.
You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. You cannot make the change on an amended return filed after the due date of the original return (including extensions).
When you make the change, attach a statement to your tax return showing:
  1. When you acquired the property,
  2. Its original cost or other original basis,
  3. The total amount claimed for depreciation and other allowances since you acquired it,
  4. Its salvage value and remaining useful life, and
  5. A description of the property and its use.
After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS.

Changes that require permission.(p8)

For most other changes in method of depreciation, you must get permission from the IRS. To request a change in method of depreciation, file Form 3115. File the application within the first 180 days of the tax year the change is to become effective. See the Instructions for Form 3115 for more information.

Changes granted automatically.(p9)

The IRS automatically approves certain changes of a method of depreciation. But, you must file Form 3115 for these automatic changes.
However, the IRS can deny permission if Form 3115 is not filed on time. For more information on automatic changes, see the Instructions for Form 3115.

Changes for which approval is not automatic.(p9)

The automatic change procedures do not apply to:
  1. Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System),
  2. Class Life Asset Depreciation Range System, and
  3. Public utility property.
You must request and receive permission for these changes. To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective.

Change from an improper method.(p9)

If the IRS disallows the method you are using, you do not need permission to change to a proper method. You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. However, you must file the amended return before the filing date for the next tax year.