Form 4562: Depreciation and Amortization is an IRS form used to claim deductions for the depreciation or amortization of an asset, expense certain property, and provide information on the business or investment use of automobiles and any other listed property.
Key Points to Remember
- Key Deductions: IRS Form 4562 permits claims for the depreciation or amortization on both tangible and intangible property.
- Qualified Assets: Items like buildings, machinery, equipment (tangible), or patents (intangible) qualify for deductions.
- Land Limitations: Land isn’t eligible for depreciation and thus cannot be listed on this form.
The Essence of Form 4562: Depreciation and Amortization
When businesses or individuals purchase property for business use, the IRS doesn’t allow them to claim the full cost as a business deduction in the first year. Instead, these owners can deduct a portion each year via a depreciation deduction reported on IRS Form 4562.
Eligible Deductions
Businesses and individuals can claim deductions for both tangible assets like buildings and intangible ones like patents. Section 179 property—critical for business activities—cannot include investment properties, hotels, or properties mainly held abroad.
Who Should File Form 4562?
Here’s a list of those who need to file Form 4562:
- Depreciation Claims: For property that began service during the tax year.
- Section 179 Deduction: Including possible carryovers from prior years.
- Vehicles and Listed Property: Any vehicle or listed property depreciation requirements.
- Alternative Reporting: For any vehicle deductions reported on forms other than Schedule C
- Corporate Tax Returns: Depreciation on corporate returns except Form 1120-S
- Amortization Expenses: Related to costs starting during the tax year.
Separate forms are necessary for every business or activity necessitating a Form 4562. Each unique deduction claim requires a new form. Detailed depreciation records do not need to be attached to the form; however, maintaining these records to calculate depreciation deductions accurately is highly recommended.
Note: This form is not applicable for employees who intend to deduct work-related vehicle expenses, as this deduction has been eliminated under the Tax Cuts and Jobs Act.
Steps to File Form 4562: Depreciation and Amortization
Filing Requirements: Include personal details such as name, taxpayer identification number, and associated business activity.
- Part I: Election to Expense Certain Property Under Section 179 includes deductions for tangible property like machinery and equipment, and real property.
- Part II: Covers special depreciation allowances and other depreciation except that listed property.
- Part III: Concerns MACRS depreciation where assets get allocated to specified classes with designated depreciation periods.
Tip: If more space is required, additional sheets can be attached, but complete just one Part I entirely when figuring your section 179 deduction.
Get Started: Download the form using this PDF link and begin tackling your depreciation and amortization for precision and maximum tax benefits.
Related Terms: MACRS, tax accounting, business expenses, tax forms.
References
- Internal Revenue Service. “Instructions for Form 4562”, Page 1.
- Internal Revenue Service. “Instructions for Form 4562”, Page 2.
- U.S. Congress. “H.R.1 - An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018”.
