FORM 4562: DEPRECIATION AND AMORTIZATION

Form 4562- depreciation and amortization

 

Let’s discuss about different parts of Form 4562

 

PART-1 SECTION 179

 

Section 179 of the IRC allows the business to take an immediate deduction for business expenses related to depreciable assets such as equipment, vehicles, and software. 

                     This allows business to lower its current-year tax liability rather than capitalizing an                                                                   asset and depreciating it over time in future tax years.                             

                     Section 179 is limited to maximum deduction of $1,080,000 and a value of property                                                                     purchased to $2,700,000 for year 2022.

       PART-2 Special DEPRECIATION ALLOWANCE AND OTHER DEPRECIATION

Special depreciation is an extra allowance or percentage that you can take only for the first-year when property depreciated under the MACRS method is placed in service.

                        It is available for only Qualified Property and Qualified Property must also be placed in                          service before 01.01.2027, it can either be new property or certain used property. 

                        Qualified Property is:

                        (i) Tangible Property depreciated under MACRS, with recovery period of 20 years or                                 less.

                        (ii) Computer Software defined in and depreciated under Section 167(f)(1)

                        (iii) Water Utility Property

                        (iv) Qualified Film, Television and live theatrical productions, as defined in section                                        181(d) and (e)

                        

A company can take both Bonus Depreciation and Depreciation under Section 179, but Section 179 shall be applied first.  In case of loss you can not claim depreciation under section 179 but you can claim bonus depreciation.

            PART-3 MACRS DEPRECIATION

The MACRS depreciation method allows for larger deductions in the early years of an asset's life, and lower deductions in later years.

              Part 4: Contains Summary , Part5: has details of Listed Property and Part6: contains Amortization Details

 

 

Compiled By:

CA. Harsimran Kaur