General Instructions

Purpose of Form

Use Form 4562 to:

  • Claim your deduction for depreciation and amortization,

  • Make the election under section 179 to expense certain property, and

  • Provide information on the business/investment use of automobiles and other listed property.

Who Must File

Except as otherwise noted, complete and file Form 4562 if you are claiming any of the following.

  • Depreciation for property placed in service during the 2013 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 (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business.

  • Any depreciation on a corporate income tax return (other than Form 1120S).

  • Amortization of costs that begins during the 2013 tax year.

If you are an employee deducting job-related vehicle expenses using either the standard mileage rate or actual expenses, use Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, for this purpose.

File a separate Form 4562 for each business or activity on your return for which Form 4562 is required. If you need more space, attach additional sheets. However, complete only one Part I in its entirety when computing your section 179 expense deduction. See the instructions for line 12, later.

Additional Information

For more information about depreciation and amortization (including information on listed property), see the following.

  • Pub. 463, Travel, Entertainment, Gift, and Car Expenses.

  • Pub. 534, Depreciating Property Placed in Service Before 1987.

  • Pub. 535, Business Expenses.

  • Pub. 551, Basis of Assets.

  • Pub. 946, How To Depreciate Property.

Definitions

Depreciation

Depreciation is the annual deduction that allows you to recover the cost or other basis of your business or investment property over a certain number of years. Depreciation starts when you first use the property in your business or for the production of income. It ends when you either take the property out of service, deduct all your depreciable cost or basis, or no longer use the property in your business or for the production of income.

Generally, you can depreciate:

  • Tangible property such as buildings, machinery, vehicles, furniture, and equipment; and

  • Intangible property such as patents, copyrights, and computer software.

Exception.   You cannot depreciate land.

Accelerated Cost Recovery System

The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. It is the name given for the tax rules that allow a taxpayer to recover through depreciation deductions the cost of property used in a trade or business or to produce income. These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. If you placed property in service during this period, you must continue to figure your depreciation under ACRS.

ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. The alternate ACRS method used a recovery percentage based on a modified straight line method. See the instructions for line 16 for more information. For a complete discussion of ACRS, see Publication 534.

Modified Accelerated Cost Recovery System

The Modified Accelerated Cost Recovery System (MACRS) is the current method of accelerated asset depreciation required by the tax code. Under MACRS, all assets are divided into classes which dictate the number of years over which an asset's cost will be recovered. Each MACRS class has a predetermined schedule which determines the percentage of the asset's costs which is depreciated each year. For more information, see Part III–MACRS Depreciation, later. For a complete discussion of MACRS, see chapter 4 of Publication 946.

Section 179 Property

Section 179 property is property that you acquire by purchase for use in the active conduct of your trade or business, and is one of the following.

  • Tangible personal property, including cellular telephones and similar telecommunications equipment.

  • Qualified section 179 real property. For more information, see Special rules for qualified section 179 real property, later.

  • Other tangible property (except buildings and their structural components) used as:

    1. An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services;

    2. A research facility used in connection with any of the activities in (1) above; or

    3. A facility used in connection with any of the activities in (1) above for the bulk storage of fungible commodities.

  • Single purpose agricultural (livestock) or horticultural structures.

  • Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum.

  • Off-the-shelf computer software.

Section 179 property does not include the following.

  • Property held for investment (section 212 property).

  • Property used mainly outside the United States (except for property described in section 168(g)(4)).

  • Property used mainly to furnish lodging or in connection with the furnishing of lodging (except as provided in section 50(b)(2)).

  • Property used by a tax-exempt organization (other than a section 521 farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business.

  • Property used by a governmental unit or foreign person or entity (except for property used under a lease with a term of less than 6 months).

  • Air conditioning or heating units.

See the instructions for Part I and Pub. 946.

Special rules for qualified section 179 real property.   For any tax year beginning in 2012 or 2013, you can elect to treat certain qualified real property placed in service during the tax year as section 179 property. See Election for certain qualified section 179 real property in Part I for information on how to make this election. If the election is made, the term "section 179 property" will include any qualified real property which is:
  • Qualified leasehold improvement property as described in section 168(e)(6),

  • Qualified restaurant property as described in section 168(e)(7), or

  • Qualified retail improvement property as described in section 168(e)(8).

    This property is considered "qualified section 179 real property."

    The maximum section 179 expense deduction that may be expensed for qualified section 179 real property is $250,000 of the total cost of all section 179 property placed in service in 2013. A 2012 deduction attributable to qualified real property which is disallowed under the trade or business income limitation (see Business Income Limit in chapter 2 of Pub. 946) is carried over to 2013. The carryover amount from 2012 (or a portion of the amount) not deducted in 2013 is considered placed in service on the first day of the 2013 tax year. Thus, any such amounts that are not deducted in 2013, plus any 2013 disallowed section 179 expense deductions attributable to qualified section 179 real property, are treated as property placed in service on the first day of 2013 for purposes of computing depreciation (including the special depreciation allowance, if applicable). Any of these amounts will not be reported on line 13 of Form 4562. They will instead be reported on the appropriate line under Part II or Part III of Form 4562. For more information on qualified section 179 real property, see section 179(f) and Pub. 946. Also, see Notice 2013-59.

Amortization

Amortization is similar to the straight line method of depreciation in that an annual deduction is allowed to recover certain costs over a fixed time period. You can amortize such items as the costs of starting a business, goodwill, and certain other intangibles. See the instructions for Part VI.

Listed Property

Listed property generally includes the following.

  • Passenger automobiles weighing 6,000 pounds or less. See Limits for passenger automobiles, later.

  • Any other property used for transportation if the nature of the property lends itself to personal use, such as motorcycles, pick-up trucks, sport utility vehicles, etc.

  • Any property used for entertainment or recreational purposes (such as photographic, phonographic, communication, and video recording equipment).

  • Computers or peripheral equipment.

Exceptions.   Listed property does not include:
  1. Photographic, phonographic, communication, or video equipment used exclusively in a taxpayer's trade or business or at the taxpayer's regular business establishment;

  2. Any computer or peripheral equipment used exclusively at a regular business establishment and owned or leased by the person operating the establishment;

  3. An ambulance, hearse, or vehicle used for transporting persons or property for compensation or hire; or

  4. Any truck or van placed in service after July 6, 2003, that is a qualified nonpersonal use vehicle.

  For purposes of the exceptions above, a portion of the taxpayer's home is treated as a regular business establishment only if that portion meets the requirements for deducting expenses attributable to the business use of a home. However, for any property listed in (1) above, the regular business establishment of an employee is his or her employer's regular business establishment.

Commuting

Generally, commuting is defined as travel between your home and a work location. However, travel that meets any of the following conditions is not commuting.

  • You have at least one regular work location away from your home and the travel is to a temporary work location in the same trade or business, regardless of the distance. Generally, a temporary work location is one where your employment is expected to last 1 year or less. See Pub. 463 for details.

  • The travel is to a temporary work location outside the metropolitan area where you live and normally work.

  • Your home is your principal place of business for purposes of deducting expenses for business use of your home and the travel is to another work location in the same trade or business, regardless of whether that location is regular or temporary and regardless of distance.

Alternative Minimum Tax (AMT)

Depreciation may be an adjustment for the AMT. However, no adjustment applies in several instances. See Form 4626, Alternative Minimum Tax—Corporations; Form 6251, Alternative Minimum Tax—Individuals; Schedule I (Form 1041), Alternative Minimum Tax—Estates and Trusts; and the related instructions.

Recordkeeping

Except for Part V (relating to listed property), the IRS does not require you to submit detailed information with your return on the depreciation of assets placed in service in previous tax years. However, the information needed to compute your depreciation deduction (basis, method, etc.) must be part of your permanent records.

You may use the depreciation worksheet, later, to assist you in maintaining depreciation records. However, the worksheet is designed only for federal income tax purposes. You may need to keep additional records for accounting and state income tax purposes.


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