What is Form 4562: Depreciation and Amortization?
Form 4562: Depreciation and Amortization is an Internal Revenue Service (IRS) form used to claim deductions for the depreciation or amortization of an asset or real estate for tax reporting purposes.
Key points to remember
- IRS Form 4562 is used to claim deductions for depreciation or amortization of tangible or intangible property.
- Assets such as buildings, machinery, equipment (tangible) or patents (intangible) are eligible.
- Land cannot be depreciated and therefore cannot be declared on the form.
Understanding Form 4562: Depreciation and Amortization
When individuals or businesses purchase a property for use in their business, the IRS does not allow them to claim the full cost as a business deduction in the first year. However, they can deduct a portion of their costs each year by claiming capital cost allowance and reporting it on IRS Form 4562.
Individuals and businesses can claim deductions for tangible assets such as a building and intangible assets such as a patent. Section 179 property, which is actively used for doing business, cannot include investment property, hotels, or property held primarily abroad.
Who can complete Form 4562: Depreciation and Amortization?
Anyone who wishes to claim the following must complete Form 4562 and include the following:
- Depreciation of goods brought into use during the tax year
- A section 179 expense deduction (which may include a carry forward from a previous year)
- Depreciation on any vehicle or other classified property (regardless of its date of entry into service)
- A deduction for any vehicle declared on a form other than Schedule C: Business profit or loss
- Any depreciation on a corporate income tax return other than Form 1120-S: U.S. Income Tax Return for an S corporation
- Amortization of costs that begin in the tax year
Separate forms should be filed for each business or activity for which a Form 4562 is required.For example, a new form must be completed for each depreciation or capital cost allowance claimed for different properties. The IRS does not require that detailed depreciation records be attached, but taxpayers must keep these records in order to calculate capital cost allowance.
This form does not apply to employees who wish to deduct employment-related vehicle expenses.This deduction was discontinued after the adoption of the Tax Reductions and Employment Act.
How to complete Form 4562: Depreciation and Amortization
Filers should include their name, tax identification number, as well as the business activity for which the form is being filed.
Part I of the form deals with the election to spend certain property under section 179. The deduction applies to tangible personal property such as machinery or equipment and to real and qualifying property. Part II describes special depreciation and other depreciation. This section should not include any listed properties. Part III is reserved for MACRS depreciation. In this context, the assets are allocated to a specific asset class, to which is associated an amortization period.
If you need more space, attach additional sheets. However, only complete one Part I in its entirety when calculating your deduction for expenses under section 179. Start by downloading a copy of Form 4562: Depreciation and Amortization.