IRS Instruction 4562 – If you’re a business owner, self-employed professional, or investor claiming tax deductions for assets like equipment, vehicles, buildings, or intangibles, IRS Form 4562 is essential. This guide breaks down the latest IRS Instructions for Form 4562 (Depreciation and Amortization, Including Information on Listed Property) for tax year 2025.
Whether you’re maximizing Section 179 expensing, claiming bonus depreciation, or navigating MACRS rules, this article provides clear, actionable steps based on official IRS sources.
Download the official resources:
- Form 4562 (2025)
- Instructions for Form 4562 (2025 Draft)
- Publication 946: How to Depreciate Property
What Is IRS Form 4562?
Form 4562 reports depreciation and amortization deductions on your tax return. It also handles:
- The Section 179 election to immediately expense qualifying property costs.
- Information on the business use of listed property (e.g., vehicles, computers).
You cannot use it for the energy efficient commercial buildings deduction under section 179D—that requires Form 7205.
Depreciation recovers the cost of tangible business assets (machinery, vehicles, buildings) over time. Amortization does the same for intangibles (patents, software, startup costs).
Pro Tip: Attach Form 4562 to your Form 1040 (Schedule C, E, F), 1120, 1120-S, or 1065, depending on your entity type.
Who Must File Form 4562 in 2025?
File a separate Form 4562 for each business or activity if you claim any of the following:
- Depreciation for property placed in service during 2025.
- A Section 179 expense deduction (including carryovers).
- Depreciation on any vehicle or listed property (no matter when placed in service).
- A vehicle deduction on a form other than Schedule C (e.g., Schedule F or Form 2106 for employees).
- Corporate depreciation (except S corporations).
- Amortization starting in 2025.
Employees claiming vehicle expenses use Form 2106 instead.
Major Changes for Tax Year 2025
The One Big Beautiful Bill Act (P.L. 119-21) introduced significant updates:
| Category | 2025 Update |
|---|---|
| Section 179 Limits | Maximum deduction: $2,500,000 Phase-out threshold: $4,000,000 SUV limit: $31,300 |
| Bonus Depreciation | – 100% for qualified property acquired after Jan. 19, 2025 (elect 40%/60% option). – 40% (60% for long-production-period property/aircraft) for property acquired before Jan. 20, 2025 and placed in service in 2025. – New: 100% for qualified production property placed in service after July 4, 2025. |
| Research & Experimental (R&E) Costs | Domestic R&E: Immediate expensing or amortize over 60+ months. Foreign R&E: Amortize over 15 years. |
| Energy Property | Solar/wind energy property no longer qualifies as 5-year MACRS property (for construction after Dec. 31, 2024). |
| Form Updates | New lines for 50-year property (19h/20e), capitalized costs under section 263A (23a/23b), and aircraft ownership (24c). |
These changes make 2025 a great year for aggressive asset write-offs.
Key Concepts: Depreciation vs. Amortization
- Depreciation: For tangible assets (e.g., computers, trucks, office buildings).
- Amortization: For intangibles (e.g., patents, goodwill, startup costs).
MACRS (Modified Accelerated Cost Recovery System) is the primary method:
- GDS (General Depreciation System): Accelerated (200% or 150% declining balance).
- ADS (Alternative Depreciation System): Straight-line (required in some cases).
Conventions:
- Half-year (most common).
- Mid-quarter (if >40% of assets placed in service in Q4).
- Mid-month (real property).
Section 179 Expense Deduction: Instant Write-Off
Section 179 lets you deduct the full cost of qualifying property in the year you place it in service.
2025 Limits:
- Up to $2,500,000.
- Reduced dollar-for-dollar if total qualifying property exceeds $4,000,000.
- Business income limitation: Deduction cannot exceed your taxable business income.
Qualifying Property:
- Tangible personal property.
- Qualified real property (roofs, HVAC, fire protection).
- Off-the-shelf software.
- Certain agricultural structures.
How to Claim:
- Complete Part I of Form 4562.
- List property on lines 6–7.
- Apply limits and carryovers.
Carryover: Unused amounts carry forward to future years.
Bonus Depreciation (Special Depreciation Allowance)
This first-year deduction applies after Section 179.
2025 Rates (thanks to recent legislation):
- 100% for most qualified property acquired after Jan. 19, 2025.
- Option to take 40% (60% for long-production/aircraft) instead.
- 100% for qualified production property (post-July 4, 2025).
Qualified Property:
- MACRS property with ≤20-year recovery period.
- Qualified films, sound recordings, and water utility property.
Important: No bonus on listed property used ≤50% for business.
MACRS Depreciation: Step-by-Step Calculation
- Determine basis (cost minus Section 179/bonus).
- Choose recovery period (e.g., 5 years for cars/computers, 7 years for furniture).
- Select method (200% DB for most).
- Apply convention.
- Use IRS tables or formulas in Part III.
Example: $10,000 5-year asset, half-year convention, 200% DB → First-year rate ≈ 20% ($2,000 deduction).
Listed Property Rules (Vehicles & More)
Listed property includes:
- Passenger automobiles (≤6,000 lbs GVWR).
- Trucks, vans, SUVs (with limits).
- Computers, cameras, etc. (if prone to personal use).
Key Rules:
- >50% qualified business use: Full MACRS + Section 179/bonus.
- ≤50%: Straight-line ADS only; no Section 179 or bonus.
- Recapture: If business use drops ≤50%, repay prior deductions.
Luxury Auto Limits (2025 Examples):
- Year 1: $12,200 (or higher with bonus).
- Year 2: $19,600.
Track mileage meticulously—IRS requires substantiation.
How to Fill Out Form 4562: Part-by-Part Guide?
| Part | Purpose | Key Lines |
|---|---|---|
| I | Section 179 Election | 1–13: Limits, elected costs, income limit |
| II | Special Depreciation & Other | 14: Bonus depreciation |
| III | MACRS Depreciation | 17–21: GDS/ADS tables |
| IV | Summary | 22–23: Totals + capitalized costs |
| V | Listed Property | 24–30: Vehicle details, business % |
| VI | Amortization | 42–44: Startup costs, intangibles |
Step-by-Step:
- Start with Part V if you have listed property.
- Complete Part I for Section 179.
- Calculate bonus in Part II.
- Fill Part III for regular depreciation.
- Total everything in Part IV.
Use the IRS Depreciation Worksheet for tracking.
Common Mistakes to Avoid
- Forgetting to reduce basis after Section 179/bonus.
- Missing mid-quarter convention (triggers audit flags).
- Inadequate records for listed property.
- Claiming bonus on ineligible property.
- Overlooking state conformity (many states don’t follow federal bonus).
Recordkeeping Requirements
Keep records for the entire recovery period + 3 years:
- Purchase date and cost.
- Business use percentage (contemporaneous logs for vehicles).
- Depreciation method and calculations.
Employers: Maintain written vehicle policies.
Get Help and Stay Compliant
- IRS.gov/Form4562 — Latest forms and updates.
- Publication 946 — In-depth depreciation guide.
- Tax software (TurboTax, H&R Block) often auto-generates Form 4562.
- Consult a CPA for complex situations (e.g., aircraft, R&E costs).
Bottom Line: For tax year 2025, Form 4562 offers powerful tools to slash your tax bill through accelerated write-offs. With Section 179 at $2.5 million and 100% bonus depreciation back, now is the time to invest in your business.
Questions? Drop them in the comments. Always verify with the latest IRS instructions, as rules can change.
This guide is for informational purposes only and is not tax advice. Consult a qualified tax professional.