Use Form 4562 to offset your operating costs

As a business owner, operating costs can be expensive. Tax breaks can help with offsetting the cost of certain types of property, but in some cases, you can’t claim these expenses all in one year. That’s where Form 4562 comes in. 

Consider these scenarios: You’re landscaper who acquires a used pick-up truck, or a small business that purchases a new office building… The IRS doesn’t allow these business owners to deduct the full cost of these purchases in the year they were bought. But you can deduct a portion of the total costs each year by claiming a depreciation deduction.

However, in some cases, you may be able to deduct all or a larger portion of the cost by claiming bonus depreciation or electing the section 179 deduction.

This post will help you understand the appropriate IRS form to fill out in instances similar to those mentioned above.

Who files Form 4562?

If you’re a small business owner or self-employed person who acquired or bought real or tangible property used for business purposes (other than materials and supplies), you will likely file IRS Form 4562.

All about the Form 4562: Depreciation and Amortization

IRS Form 4562: Depreciation and amortization is the name of this form, but it has additional uses beyond those two ways to claim expenses.

Overall, you’ll need to use this form if you are:

  • Claiming a deduction for amortization or depreciation (Amortization lowers the value of an asset over its useful life, where depreciation expenses tangible property over its useful life. Items that must be amortized include intangible assets like patents and trademarks.)
  • Making an election under section 179 to expense business property
  • Claiming bonus depreciation (also called the special depreciation allowance)
  • Providing information to the IRS about the business use of automobiles and other listed property

Form 4562 includes six parts. You’ll only need to complete the sections that are relevant to your expenses for this tax year.

Part I

This section of Form 4562 is used to expense qualifying property under section 179. Apply the limitation that restricts the section 179 to your taxable deductions taken in part 1, if applicable.

Part II 

This section used to report your business’ bonus depreciation, also called the special first year depreciation allowance, and other depreciation.

Part III

This section shows basic depreciation under the Modified Accelerated Cost Recovery System.

Part IV

This section summarizes the first three parts, and listed property (see section V).

Part V

This part allows you to claim write-offs for qualifying listed property.

Part VI

This section is designed for business owners to amortize property, which means they can make an even tax deduction over a fixed number of years.

Note: The amount you can deduct on Form 4562 changes based on the IRS estimated useful life for each business property.

When is IRS Form 4562 due?

IRS Form 4562 is due alongside your business tax return. For sole proprietors and C corporations, this date usually falls on April 15 if you use a calendar tax year (January 1 through December 31). If this date falls on a weekend or holiday, then it’s due the next business day. Partnerships and calendar tax year S corporation returns are due March 15.

C corporations that use fiscal tax years should file returns the 15th day of the fourth month following the end of their tax year.

Help with small business taxes for Form 4562 and beyond

Block Advisors is dedicated to meeting the tax, bookkeeping and payroll needs of the self-employed and small business owners. Our certified small business tax pros can help guide you to better decisions while taking care of financial tasks so you can focus on what you love. Learn more about our small business tax prep.

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