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Form 4562: Depreciation and Amortization, Explained

By The Ledgerism Editorial Team · The Ledgerism Brief Editorial Team produces original, methodology-disclosed accounting and tax research—data trackers, databases, and reference guides built to be the most-cited source in the field. Every figure is verified against primary sources including FASB, the IRS, the PCAOB, NASBA, the AICPA, and state boards of accountancy.

Form 4562 is the IRS form businesses use to claim depreciation and amortization, elect the Section 179 expense deduction, take bonus depreciation under IRC Section 168(k), and report business use of listed property such as vehicles. You file it with your income tax return for the year property is placed in service. This guide walks through all six parts of Form 4562, the 2025 dollar limits, and how the One Big Beautiful Bill Act (OBBBA) changed the math.

Who has to file Form 4562

You must file Form 4562 if you are claiming any depreciation for property placed in service during the tax year, a Section 179 deduction (including a carryover from a prior year), depreciation on any vehicle or other listed property regardless of when it was placed in service, amortization that begins during the year, or depreciation on a corporate return other than Form 1120-S.

You file a separate Form 4562 for each separate business or activity that requires it. A sole proprietor with a Schedule C business and a separate rental activity, for example, may file more than one. If you own property placed in service in an earlier year and are only continuing established MACRS depreciation (with no listed property and no new assets), you often can skip the form and report the deduction directly on your business schedule.

The six parts of Form 4562, at a glance

Form 4562 is built as a top-to-bottom stack: you expense first under Section 179, then apply bonus depreciation to what is left, then run regular MACRS on the remaining basis. Each part feeds the next. The table below maps what each part does.

Part I: the Section 179 expense election

Section 179 lets a business deduct the full cost of qualifying equipment in the year it is placed in service instead of depreciating it over years. For tax years beginning in 2025, the maximum Section 179 deduction is $2,500,000. That cap phases out dollar for dollar once total Section 179 property placed in service during the year exceeds $4,000,000, reaching zero at $6,500,000.

Qualifying property generally includes tangible personal property (machinery, equipment, off-the-shelf software) and certain qualified improvement property. The election is made asset by asset on lines 6 and 7.

Two limits can cap the deduction below the statutory maximum. The first is the phase-out above $4,000,000. The second is the business income limitation: the Section 179 deduction cannot create or increase a net loss, and any amount disallowed by that limit carries forward indefinitely. Heavy SUVs (gross vehicle weight over 6,000 pounds) face a separate Section 179 cap of $31,300 for tax years beginning in 2025.

Part II: bonus depreciation and the 100% OBBBA change

Bonus depreciation, the Section 168(k) special depreciation allowance, lets you deduct a percentage of the remaining basis of qualified property in the first year. The One Big Beautiful Bill Act, signed July 4, 2025, permanently restored the 100% rate for qualified property acquired and placed in service after January 19, 2025. This ended the Tax Cuts and Jobs Act phase-down that had dropped the rate to 40% for early 2025.

The dates matter. Property placed in service on or before January 19, 2025, or acquired under a binding contract before January 20, 2025, may be limited to the 40% rate (60% for certain long production period property). To reach 100%, in many cases both the acquisition date and the placed-in-service date need to fall after January 19, 2025.

Bonus depreciation differs from Section 179 in two useful ways. It has no dollar cap and no phase-out based on total purchases, and it can create or increase a net loss where Section 179 cannot. A common ordering is to elect Section 179 first on targeted assets, then let 100% bonus depreciation absorb the residual basis. You can elect out of bonus depreciation by asset class if you would rather spread deductions over time.

Part III: MACRS depreciation

MACRS is the default cost recovery system for most tangible property placed in service after 1986. It assigns each asset a recovery period and a method, then depreciates the basis remaining after any Section 179 and bonus depreciation. The General Depreciation System (GDS) uses accelerated methods; the Alternative Depreciation System (ADS) uses straight-line over longer lives and is required for certain property.

The recovery period drives the annual deduction. Common GDS class lives appear below.

MACRS also applies conventions (half-year, mid-quarter, or mid-month) that set how much depreciation you take in the first and last years. The mid-quarter convention can be triggered when more than 40% of your annual property additions are placed in service in the last quarter.

Part V: listed property and the 50% test

Listed property is property that lends itself to personal use, and the IRS applies stricter rules to it. It includes passenger automobiles and other vehicles, and certain property used for transportation. If qualified business use is not more than 50%, you cannot claim Section 179 or bonus depreciation on the asset and must use ADS straight-line depreciation.

Passenger automobiles carry separate annual depreciation caps under Section 280F (“luxury auto” limits), which change yearly and can stretch the write-off of a car over several years even with bonus depreciation available. Part V requires you to state the business-use percentage and to confirm you have written records (mileage logs or equivalent) supporting it. Weak documentation is a frequent audit issue for vehicle deductions.

Part VI: amortization

Amortization is the straight-line recovery of certain costs over a fixed period, the intangible-asset counterpart to depreciation. Part VI reports costs that begin amortizing during the tax year. The most common is Section 197 intangibles (acquired goodwill, going-concern value, customer lists, covenants not to compete), amortized over 15 years.

Other amortizable items include business startup and organizational costs, certain research or experimental expenditures, lease acquisition costs, and pollution control facilities. Because amortization periods and rules vary by cost type, Part VI asks you to enter the code section, the date amortization begins, the amortizable amount, and the period.

How the parts fit together: a quick example

Suppose a landscaping company buys $300,000 of equipment (7-year property) and places it in service in March 2025. It could elect $100,000 under Section 179 in Part I, then apply 100% bonus depreciation to the remaining $200,000 in Part II, deducting the full $300,000 in year one. If instead it elected out of bonus depreciation on the residual, that $200,000 would flow to Part III and depreciate over seven years under GDS. The choice depends on current income, expected future rates, and state conformity, which often varies from federal treatment.

FAQ

What is Form 4562 used for?

Form 4562 is used to claim depreciation and amortization, elect the Section 179 expense deduction, take bonus depreciation under Section 168(k), and report business use of listed property such as cars. Businesses file it with their income tax return for the year property is placed in service. It calculates first-year and ongoing cost recovery for equipment, buildings, vehicles, and intangibles.

Do I have to file Form 4562 every year?

Not always. You generally must file it in any year you place new property in service, claim Section 179, take amortization that begins that year, or depreciate a vehicle or other listed property. If you are only continuing established MACRS depreciation on older assets, with no listed property and no new additions, you can often report the deduction directly on your business schedule and skip the form.

What is the difference between Section 179 and bonus depreciation?

Both allow a large first-year write-off, but they differ in limits. Section 179 (Part I) has a 2025 cap of $2,500,000, phases out above $4,000,000 of purchases, and cannot create a net loss. Bonus depreciation (Part II) is 100% under OBBBA for qualifying 2025 property, has no dollar cap or phase-out, and can create a loss. Many taxpayers elect Section 179 first, then apply bonus to the rest.

Is bonus depreciation 100% in 2025?

Yes, in many cases. OBBBA, signed July 4, 2025, permanently restored 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. Property placed in service on or before that date, or under a binding pre-January 20, 2025 contract, may be limited to 40% (60% for certain long production period property), so the placed-in-service date is decisive.

What is listed property on Form 4562?

Listed property is property that lends itself to personal use and is subject to stricter rules, reported in Part V. It includes passenger automobiles and other vehicles. If qualified business use is not more than 50%, the taxpayer cannot claim Section 179 or bonus depreciation and must use ADS straight-line depreciation. Written records supporting the business-use percentage, such as a mileage log, are required.

What is the difference between depreciation and amortization on Form 4562?

Depreciation (Parts I through V) recovers the cost of tangible property such as equipment, vehicles, and buildings. Amortization (Part VI) recovers the cost of intangibles such as Section 197 goodwill (15 years), startup costs, and lease acquisition costs, generally on a straight-line basis. The form keeps them separate because they use different methods, periods, and Internal Revenue Code sections.

To go deeper on related choices, see our guides on the Section 199A qualified business income deduction, the business entity comparison for LLCs, S-corps, and C-corps, the Form 3115 change in accounting method used to correct missed depreciation, Section 263A uniform capitalization rules that can require capitalizing costs, and the small business tax report for broader context.

Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.

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