When to use it
You discover that an asset placed in service years ago was never depreciated, or was depreciated using an impermissible method (wrong class life, wrong convention, missed bonus depreciation). The cumulative missed depreciation can be claimed in the year of change as a Section 481(a) adjustment.
Form 3115
File Form 3115 to request a change in method of accounting for depreciation. Most depreciation changes are "automatic consent" changes under Rev. Proc. 2024-23 (or successor) — the IRS approves them automatically when 3115 is filed in duplicate.
Section 481(a) adjustment
The cumulative difference between the old (wrong) method and the new (correct) method becomes a Section 481(a) adjustment. Net negative adjustments (additional deduction) are claimed in full in the year of change. Net positive adjustments (additional income) are spread over four years.
Common situations
Forgot to depreciate a vehicle placed in service in 2018; used 7-year MACRS for office equipment that should have been 5-year; missed bonus depreciation for property placed in service in 2020; treated a long-lived building improvement as a current expense and now want to capitalize it.
Limitations
Some depreciation changes are not eligible for automatic consent (e.g., switching from accelerated to straight-line on existing assets in some cases). Always check the current revenue procedure list before assuming automatic consent applies.
Where this fits in the larger Schedule C picture
Schedule C has more than two dozen named expense lines plus an "Other expenses" catch-all. For most small businesses, four or five lines drive the bulk of the deduction total — vehicle, home office, depreciation, contract labor or wages, and supplies — and the remaining lines individually contribute small amounts that nevertheless add up. Treating each named line as a recurring decision rather than an afterthought, and revisiting the categories each January, often surfaces $2,000–$5,000 in additional legitimate deductions that a less disciplined process would have missed entirely.
Documentation that survives an exam
An IRS examination of this deduction will request three things: proof of payment (bank or card statement), proof of the underlying transaction (invoice or receipt), and proof of business purpose (a contemporaneous note or calendar entry). The first two are usually trivial to produce; the third is where most filers fall short. Capturing business purpose at the moment of the expense — a one-line note in your bookkeeping software or a category and memo on the receipt-capture app — converts a generic charge into a documented deduction that will withstand scrutiny three to six years later when memory has faded.