Depreciation and Amortization

Who Files Form 4562

Businesses and rental property owners claiming any of: Section 179 expense, MACRS depreciation on property placed in service during the year, listed property (vehicles, computers used less than 50 percent for business), or amortization of intangible assets (Section 197).

What Form 4562 Reports

Form 4562 has six parts: Section 179 expensing election (Part I), special bonus depreciation allowance (Part II), MACRS depreciation (Part III), summary (Part IV), listed property with detailed mileage and personal use disclosure (Part V), and amortization of Section 197 intangibles (Part VI). Form 4562 is required only in the first year property is placed in service or when claiming Section 179 or listed property.

Key Deadlines

• Filed with the entity's annual return (Form 1040 Schedule C/E, Form 1120, 1120-S, 1065)

Common Mistakes

• Missing the Section 179 election on the original return (it can be made on an amended return only with IRS consent)
• Failing to track listed property business-use percentage, exposing recapture if it falls below 50 percent
• Not coordinating Form 4562 across multiple Schedule Cs or partnerships when the Section 179 limit is shared at the taxpayer level
• Skipping Form 4562 when bonus depreciation is claimed (it is required)

Best Practices

• Make Section 179 elections on the original return. Late or amended elections require IRS consent and are routinely denied.
• For listed property (vehicles, computers), document business-use percentage above 50 percent. Falling below 50 percent triggers depreciation recapture.
• Coordinate Section 179 across multiple Schedule Cs and pass-through entities at the taxpayer level. The dollar limit is per taxpayer, not per business.
• Use bonus depreciation when net operating losses are valuable (Section 179 cannot create an NOL; bonus depreciation can).
• Track depreciation by asset type so recapture on disposition is correctly classified (Section 1245 ordinary versus Section 1250 capital).

Source: Official Form 4562 information at IRS.gov