Form 4562 instructions: depreciation, section 179 and bonus

“If you elect to expense section 179 property, you must reduce the amount on which you figure your depreciation or amortization deduction (including any special depreciation allowance) by the section 179 expense deduction.” IRS, Instructions for Form 4562 (2025)

Who has to file Form 4562?

Form 4562 is filed by any taxpayer claiming depreciation on property placed in service during the tax year, a section 179 expense deduction, or depreciation on a vehicle or other listed property. The Instructions for Form 4562 (2025) list the full set of triggers:

• Depreciation for property placed in service during the 2025 tax year
• A section 179 expense deduction, including a carryover from a prior year
• Depreciation on any vehicle or other listed property, regardless of when placed in service
• A deduction for any vehicle reported on a form other than Schedule C
• Any depreciation on a corporate income tax return other than Form 1120-S
• Amortization of costs that begins during the 2025 tax year

A separate Form 4562 is filed for each business or activity that needs one, but only one Part I is completed in full, because the section 179 limits on lines 5 and 11 apply to the taxpayer and not to each activity. The other forms show only the amount allocated to that activity on line 12. The 2025 form adds line 19h and line 20e for 50-year property, splits line 23 into lines 23a and 23b for section 263A costs, and adds line 24c for aircraft. Energy efficient commercial building deductions under section 179D go on Form 7205 instead.

Where does each fixed asset document go on Form 4562?

Each fixed asset document maps to a Form 4562 part, and the asset's acquisition date, class and business use decide the line. The table follows the 2025 form and the Instructions for Form 4562 (2025).

Line 22 totals line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. The total goes to the depreciation line of the return, such as Schedule C, line 13, or Schedule E, line 18. Partnerships and S corporations follow the separate line 22 instructions, since their section 179 deduction is not part of line 22 and is passed through to owners on Schedule K instead. Listed property never goes in Part II or III; it is reported in Part V and carried to line 21.

What are the 2025 section 179 limits on Form 4562?

For tax years beginning in 2025, the Instructions for Form 4562 set the maximum section 179 expense deduction at $2,500,000, reduced by the amount by which the cost of section 179 property placed in service during the year exceeds $4,000,000. The same 2025 instructions cap the section 179 deduction for certain sport utility vehicles at $31,300. IRC section 179(b) now states the $2,500,000 and $4,000,000 amounts directly.

Line 11 adds a second cap: the deduction cannot exceed taxable income from the active conduct of a trade or business, figured before the section 179 deduction. For individuals, the line 11 instructions include wages as an employee and exclude the deduction for half of self-employment tax and any net operating loss deduction. Anything elected but disallowed by line 11 carries forward on line 13. For a partnership or S corporation, the limits apply to the entity and again to each owner. Married individuals filing separately split the line 5 limit 50/50 unless they elect another split.

How does bonus depreciation work on Form 4562 for 2025?

The special depreciation allowance on Form 4562, line 14, depends on when the property was acquired. The Instructions for Form 4562 (2025) say P.L. 119-21, commonly known as the One Big Beautiful Bill Act, reinstated the 100% special depreciation allowance for certain qualified property acquired and placed in service after January 19, 2025.

Qualified property generally means MACRS property with a recovery period of 20 years or less, certain computer software, water utility property and qualified film, television, live theatrical and sound recording productions, new or certain used. The allowance comes after section 179 and before regular MACRS, and the basis for both is reduced by it. A taxpayer can elect out by class of property with a statement on a timely filed return. Listed property used 50% or less for business and property required to use ADS do not qualify.

What does a Form 4562 calculation look like?

For example, a sole proprietor with $400,000 of business income places two assets in service in 2025 and uses each 100% for business. Server equipment (5-year property) bought January 10, 2025, for $200,000 is placed in service in February, with a $50,000 section 179 election. Production machinery (7-year property) bought in March 2025 for $300,000 is placed in service in April. Nothing is placed in service in the last 3 months, so the half-year convention applies.

Line 14 totals $360,000. The 20% first-year rate is the half-year convention rate for 5-year property in Table A-1 of Pub. 946 (2025). The machinery has no basis left for MACRS. Had the server been acquired after January 19, 2025, line 14 would be $450,000 and line 19b would be zero.

What do reviewers check on Form 4562?

A reviewer checking Form 4562 confirms six items, each tied to the 2025 instructions. The prior-year Form 4562 and the fixed asset register come first, because line 10, line 17 and every basis on line 19 depend on them, and a missed carryover is invisible on the current-year form. Purchase agreements matter as much as invoices this year, since the acquisition date, not the invoice or placed-in-service date, sets the special allowance rate.

Depreciation claimed here comes back when the asset is sold, as ordinary income on Form 4797, or earlier if business use of section 179 property drops to 50% or less, covered in section 179 recapture. For rental property, the line 22 total lands on Schedule E, line 18, or Form 8825, line 14.