Here’s one that surprises a lot of real estate investors.

You pull out an old rental return and realize the property wasn’t depreciated correctly, or maybe depreciation was missed altogether.

A lot of people think, “Well, at least my basis is still higher.”

Not necessarily.

The IRS says your basis generally has to be reduced by the depreciation you could have taken, even if you never actually claimed it.

That means ignoring depreciation can be a double hit: you missed the deduction, and your basis may still be reduced.

The good news is there may be ways to correct missed depreciation, depending on the situation. Sometimes that involves a Form 3115 and a catch-up adjustment rather than simply pretending the old numbers never happened.

I tell investors this all the time:

Pull out your depreciation schedule before you pull out your checkbook for the next deal.

Anyone here ever review an old return and discover depreciation was missed or calculated wrong?