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What is IRS Form 3115 and it’s connection to Cost Segregation?

Posted on December 10, 2013 by Jeff Hobbs

So, what is IRS Form 3115 and what is it’s connection to cost segregation?

IRS logoOne part of having a cost segregation study done is dealing with the paperwork that comes with it. Lucky for you, our team of professionals will handle all the paperwork in order to ensure that your cost segregation study is following the guidelines set forth by the IRS. With so many different forms to fill out, it can often be a daunting task and this is why we, at Segregation Holding, will handle this for you. One of the many required forms is IRS Form 3115.


IRS Form 3115 is the application for change in accounting method. Since a cost segregation study will change how your personal property and land improvements are depreciated, this form 3115 must be filed with the IRS. Generally speaking, a cost segregation study will reclassify assets that can be depreciated over a 5, 7 or 15 year period. This reclassification of assets often leads to a lowered income tax burden as well as an increase in cash flow. What business could not use an increase in their cash flow…right?

The IRS requires that form 3115 be submitted when any change in the accounting method has been made and this includes the following situations:

  • Switching from a cash basis method to an accrual basis method
  • Switching from an accrual basis method to a cash basis method
  • Change in method or basis used to value inventory
  • A change in depreciation or amortization method.

This form 3115 can be filled in advance or can be filed after the changes have been made. If you are filing form 3115 as an automatic change, it must be included with the federal income tax return for the year that change took place. If you are filing form 3115 in advance, be sure to file the year that you plan to have the changes become effective. Don't worry if all this sounds like too much to worry about as we always have you covered here at Segregation Holding.

taxformSince a cost segregation study will change how certain assets are depreciated, this form 3115 is required by the IRS . We understand that the filing of form 3115 is without a doubt overwhelming and this is why we handle everything for you. We work hard to help you save more of your hard earned money and as long as your business is profitable, we can help.

Contact us at 972-897-8019.

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