IRS Form 4562: How to Report Depreciation and Amortization

What Is Form 4562: Depreciation and Amortization?

Form 4562: Depreciation and Amortization is an Internal Revenue Service (IRS) form used to claim depreciation or amortization deductions on eligible tangible and intangible assets. It’s commonly used by businesses to spread an asset’s cost over multiple years rather than deducting it all at once.

How Depreciation and Amortization Work With Form 4562

When individuals or businesses purchase property to 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 a depreciation deduction and reporting it on IRS Form 4562.

Individuals and businesses can claim deductions for both tangible assets such as a building and intangible assets such as a patent. Section 179 property, which is actively used to conduct business, cannot include investment property, hotels, or property primarily held abroad.

Eligibility Requirements for Filing Form 4562

Anyone who wants to claim the following must fill out Form 4562 and include the following:

• Depreciation for property placed in service during the tax year
• A section 179 expense deduction (which may include a carryover from a previous year)
• Depreciation on any vehicle or other listed property (regardless of when it was placed in service)
• A deduction for any vehicle reported on a form other than Schedule C: Profit or Loss From Business
• 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 during the tax year

Separate forms must be filed for each business or activity for which a Form 4562 is required. For example, a new form must be filled out for each depreciation or amortization deduction being claimed for different properties. The IRS does not require detailed depreciation records to be attached, but taxpayers should keep such records in order to calculate the depreciation deduction.

This form does not apply to employees who wish to deduct job-related vehicle expenses. That deduction has been discontinued after the passing of the Tax Cuts and Jobs Act.

Filing Instructions for Form 4562

Filers must include their name, taxpayer identification number, as well as the business activity for which the form is being filed.

Part I of the form deals with Election to Expense Certain Property Under Section 179. The deduction applies to tangible personal property like machinery or equipment and for real, qualified property. Part II outlines the special depreciation allowance and other depreciation. This section must not include listed property. Part III is reserved for MACRS depreciation. Under this, assets are assigned to a specific asset class, which has a depreciation period associated with it.

If you need more space, attach additional sheets. However, complete only one Part I in its entirety when computing your section 179 expense deduction. Start by downloading a copy of Form 4562: Depreciation and Amortization.

The Bottom Line

IRS Form 4562 lets businesses and some individuals claim depreciation and amortization on eligible tangible and intangible assets, but not land. Good records matter even though they aren’t filed with the form, and different sections cover different rules (for example, Section 179 in Part I and MACRS in Part III). Employees generally can’t deduct job-related vehicle expenses under current Tax Cuts and Jobs Act rules.