Filing taxes can feel overwhelming, especially when dealing with business assets like equipment, vehicles, or property. That’s where IRS Form 4562 comes in; it helps you claim depreciation and amortization deductions. Done right, it can reduce your taxable income and save you money. With the support of professional tax services such as MadTax, business owners can avoid mistakes and maximize their benefits.
This guide explains Form 4562 step-by-step, making it easier for you to understand how and when to file.
What Are Depreciation and Amortization?
Depreciation is the process of spreading the cost of tangible assets, like vehicles, machinery, or equipment, over several years. Instead of deducting the full cost in one year, you gradually claim portions through Form 4562.
Amortization works similarly but applies to intangible assets such as patents, trademarks, goodwill, or software. Since these don’t have a physical form, their value is written off gradually.
Understanding these two concepts is essential before filling out the form.
What Is IRS Form 4562?
Form 4562 is used to claim deductions for depreciation and amortization of business assets. It ensures you get credit for the wear, tear, or loss of value of property used in your operations.
You’ll file this form not just in the year you buy a business asset, but also in the years that asset continues to depreciate. It can also be used to claim bonus depreciation and Section 179 deductions.
When Should You File Form 4562?
You must include Form 4562 with your annual tax return if any of the following situations apply:
- You purchased and placed a new business asset into service during the year.
For example, if you bought office furniture, a delivery van, or new machinery for your business, you’ll need to report it on Form 4562. - You are claiming depreciation on assets from prior years.
Even if you purchased the asset in a previous year, you must continue to report its yearly depreciation until the asset is fully written off. - You want to take a Section 179 deduction or claim bonus depreciation.
This allows you to immediately deduct all or part of the cost of qualifying property in the year it was placed into service, rather than spreading it over multiple years. - You are reporting amortization of intangible assets.
This includes assets like software, patents, trademarks, or goodwill that don’t have a physical form but provide long-term business value.
What Information Do You Need to Fill Out Form 4562?
Before you start, gather the following details:
- Purchase cost of the asset
- Date the asset was placed in service
- Business income earned in that year
- Receipts and records of purchase
If the asset (like a vehicle) is used for both business and personal purposes, you’ll also need to provide:
- The percentage of business vs. personal use
- Logs or mileage records to support your claim
Who Can File Form 4562?
Form 4562 should be filed by any business or self-employed individual who:
- Is depreciating business assets
- Claims Section 179 deductions
- Deducts vehicle or listed property expenses
- Reports amortization costs
This applies whether you file as a sole proprietor, partnership, corporation, or S corporation.
How to File Form 4562: Key Instructions
The form is divided into sections:
Part I: Section 179 Deductions
This section lets you immediately deduct the cost of qualifying property (up to IRS limits). If your purchases exceed the maximum allowed, the remainder carries forward to future years.
It’s especially useful for small businesses that want faster cost recovery. Qualifying assets include machinery, vehicles, and equipment.
Part II: Special Depreciation Allowance
This part provides an additional deduction in the first year that certain property is placed in service.
It helps businesses reduce taxable income quickly and is often applied to new equipment or qualified improvements.
Part III: MACRS Depreciation
Here, you report depreciation using the Modified Accelerated Cost Recovery System (MACRS), which spreads costs over specific recovery periods.
MACRS accelerates deductions, allowing larger write-offs in early years and smaller ones later.
Part IV: Summary
This section provides a total of all deductions claimed across the form.
It ensures you do not exceed IRS limits and that your reported deductions match your tax return.
Part V: Listed Property
This section covers property with both business and personal use, such as vehicles or laptops.
You must maintain accurate usage records since personal use can reduce allowable deductions.
Part VI: Amortization
This part deals with intangible assets, including software, patents, and goodwill.
Amortization spreads the cost over time, ensuring expenses align with the asset’s useful life.
Filing Form 4562 Made Easy with The MadTax
Understanding Form 4562 instructions is the first step, but filing it correctly is critical. At The MadTax, our tax experts handle the details for you, whether it’s Section 179, MACRS depreciation, or amortization, so you can focus on running your business without stress.
MadTax, Simplifying Taxes, Maximizing Savings. We ensure your deductions are maximized while keeping you fully compliant with IRS rules. With our guidance, you gain peace of mind knowing your business finances are in expert hands.