Form 4562, Depreciation and Amortization

When you must file

You must file Form 4562 if you placed depreciable property in service during the year, claimed Section 179 expense or bonus depreciation, deducted depreciation on listed property such as a vehicle, or amortized intangibles like startup costs and Section 197 goodwill. Continuing depreciation on assets placed in service in earlier years generally does not require a new Form 4562 unless one of the above conditions applies.

Section 179 expensing

Part I lets you elect to immediately expense up to a generous annual cap (over $1 million, indexed) of qualifying tangible personal property placed in service. The deduction phases out dollar-for-dollar above an investment threshold and cannot exceed taxable business income. Section 179 is most useful for active small businesses buying equipment that would otherwise depreciate over five or seven years.

Bonus depreciation

Part II reports the special depreciation allowance (commonly called bonus depreciation) for qualifying new and used property with a recovery period of 20 years or less. The bonus percentage was 100% for property placed in service through 2022 and is phasing down by 20 percentage points per year. Unlike Section 179, bonus depreciation can create a loss.

MACRS depreciation

Part III computes the modified accelerated cost recovery system (MACRS) deduction for the current year. Most small-business equipment uses 5-year (vehicles, computers) or 7-year (office furniture) class lives with the half-year convention. Real property uses 27.5-year (residential rental) or 39-year (commercial, including home office) straight-line.

Listed property and amortization

Part V tracks listed property — passenger autos, certain other transportation, and property used for entertainment — that requires extra substantiation under Section 274. Part VI reports amortization of startup costs (Section 195), organizational costs (Section 248/709), and Section 197 intangibles such as goodwill and customer lists, generally over 15 years.

Penalties for late or missing filings

Late or missing filings of Form 4562, Depreciation and Amortization draw distinct penalties depending on the form: failure-to-file (5% per month, capped at 25%), failure-to-pay (0.5% per month), failure-to-deposit for payroll forms (graduated based on lateness), failure-to-file information returns (per-return penalty that scales with size and lateness), and accuracy-related penalties (20% of underpayment for negligence or substantial understatement). The dollar amounts are not trivial. Calendaring the form's deadline, setting up an electronic reminder a week in advance, and using a payroll or tax-prep service that auto-files are the cheapest defenses against accidental late filings.