A section 481(a) adjustment is the number that makes an accounting method change whole: the cumulative difference between what you actually deducted under the old method and what you would have deducted had the new method applied from the beginning. In a look-back cost segregation study, the old method is depreciating everything over 27.5 or 39 years and the new method uses the 5, 7, and 15 year classes in IRS Pub 946, so the adjustment is almost always negative, meaning taxpayer-favorable, and it is deducted in full in the single year of change.
The mechanics
IRC section 481(a) requires the adjustment whenever a method changes, so no depreciation is duplicated or skipped across the switch. The procedural rules come from Rev. Proc. 2015-13: a negative adjustment is taken entirely in the year of change, while a positive adjustment (you deducted too much) is spread over 4 years. The adjustment rides on Form 3115, filed with your current return under the automatic consent procedures, and typically appears as an other deduction on the rental schedule or the entity return. The computation includes bonus depreciation under IRC section 168(k) at the rate that applied in the original placed-in-service year: 100% for placements from September 28, 2017 through 2022, then 80% in 2023, 60% in 2024, and 40% for 2025 placements of property acquired on or before January 19, 2025.
Worked example: a duplex owned since 2020
You bought a duplex in July 2020 for $750,000 and allocated $150,000 to land, leaving $600,000 depreciating over 27.5 years. A 2026 study reclassifies 28%, or $168,000, into 5-year and 15-year property. Claimed so far on that slice: about $33,000 across 6 tax years of straight-line. Allowable under the correct method: the full $168,000, because 100% bonus applied in 2020. The section 481(a) adjustment is negative $135,000, deducted on the 2026 return. At a 35% combined marginal rate, that is roughly $47,000 of tax deferred, all from one filing, with no amended returns.
What the adjustment is not
It is not new basis; it only re-times deductions the building's cost already supported, and every dollar reduces basis, so section 1245 and section 1250 recapture at sale grow accordingly. It is not automatically usable: for most owners rental losses are passive under section 469, so without passive income, real estate professional status, or short-term rental non-passive treatment, the catch-up can suspend and carry forward. And it is not available after you sell; the method change must happen in a year you still hold the property.
Amadae's platform computes the section 481(a) catch-up from your prior depreciation schedules as part of its cost segregation screen, so you can see the likely current-year deduction before paying for an engineering study, then prepares the Form 3115 and files the return when you proceed.