IRS Form 4562 Instructions: Section 179, Bonus, and MACRS

The instructions for IRS Form 4562 come down to matching each deduction you’re claiming to the right part of the form: Section 179 expensing goes in Part I, bonus depreciation in Part II, standard MACRS depreciation in Part III, a summary in Part IV, listed property and vehicles in Part V, and amortization in Part VI. You attach the completed form to whatever return reports the business income, whether that’s Schedule C on your personal return, Form 1120 for a corporation, or another business return. For 2026, the stakes are higher than usual: the One, Big, Beautiful Bill Act restored permanent 100% bonus depreciation and roughly doubled the Section 179 limit to $2,560,000.¹

Who Has to File the Form

You need Form 4562 for the tax year if any of these apply:²

You placed depreciable property in service during the year.
You’re claiming a Section 179 deduction, or carrying forward a disallowed Section 179 amount from a prior year.
You’re claiming depreciation on any vehicle or other listed property, regardless of when it was first used.
You’re reporting depreciation on a corporate return other than Form 1120-S.
You’re starting to amortize costs this year.

Enter the business name, taxpayer identification number, and the specific activity the deductions relate to at the top. Run more than one business? File a separate Form 4562 for each. Sole proprietors on Schedule C whose only depreciation is continuing amounts on prior-year assets, with no listed property, can often report it directly on Schedule C and skip the form.

Part I: Section 179 Expensing

Section 179 lets you deduct the full cost of qualifying business property in the year of purchase instead of spreading it over the recovery period. For 2026, the maximum election is $2,560,000, and the property must be used more than 50% for business in the year you place it in service.³

Two limits apply. The dollar cap phases out once your total qualifying property placed in service during the year exceeds $4,090,000, dropping the $2,560,000 maximum dollar-for-dollar and hitting zero at $6,650,000. Then there’s the business income limit: your Section 179 deduction cannot exceed your taxable income from active business operations. Any amount disallowed by the income limit carries forward to future years.¹

Heavy SUVs are a special case. For four-wheeled passenger vehicles rated between 6,001 and 14,000 pounds gross vehicle weight, the 2026 Section 179 cap is $32,000 no matter what the vehicle actually costs. Heavy work trucks, vans, and vehicles with a bed at least six feet long aren’t subject to the SUV limitation.

In Part I, list each qualifying asset, its cost, and the elected amount. Then apply the dollar limit and the business income limit to arrive at the allowable deduction.

Part II: Bonus Depreciation

The One, Big, Beautiful Bill Act restored a permanent 100% additional first-year depreciation deduction for qualified property acquired after January 19, 2025.⁴ For most 2026 purchases, that means the entire remaining cost after any Section 179 deduction can be written off in Year 1. The 100% rate applies to new and used property alike, as long as the property is new to you. IRS Notice 2026-11 sets out interim guidance including rules for self-constructed property and specified plants.⁵

Electing a Lower Rate or Opting Out

Front-loading isn’t always the right move. Unused bonus depreciation doesn’t carry forward as a separate item, so a low-income year can waste the deduction. The law gives you two ways to dial it back:

For the first tax year ending after January 19, 2025, you can elect to deduct 40% instead of 100%. Property with longer production periods and certain aircraft get a 60% election instead.⁵
You can elect out of bonus depreciation entirely for any class of property by attaching a statement to a timely filed return. The election applies to all property in that class placed in service during the year, not to individual assets.⁶

Once you elect out for a class, you can’t revoke that election without IRS consent.² If you missed the deadline on the original return, you can still make the election on an amended return filed within six months of the due date, excluding extensions.

Part III: Standard MACRS Depreciation

Whatever cost basis is left after Section 179 and bonus depreciation gets depreciated under the Modified Accelerated Cost Recovery System. MACRS assigns each asset to a property class that fixes the recovery period. Computers, office machinery, and automobiles are 5-year property. Office furniture is 7-year. Qualified improvement property and land improvements are 15-year. Residential rental is 27.5-year, nonresidential commercial buildings are 39-year.⁷

Land is never depreciable. When you buy a building, you have to allocate part of the purchase price to the land and only depreciate the building portion.

Most personal property uses the 200% declining balance method; real property uses straight-line. Conventions decide how much depreciation you get in the first and last years: half-year is the default for personal property, mid-quarter kicks in if more than 40% of the year’s personal property was placed in service in the last three months, and mid-month applies to residential rental and nonresidential real property.⁸

With 100% bonus depreciation available, Part III now matters most for real property, which generally doesn’t qualify for bonus, and for assets where you elected out. In certain situations the Alternative Depreciation System is required instead of the standard General Depreciation System; ADS uses straight-line over longer recovery periods, giving smaller annual deductions. Mandatory ADS uses include tax-exempt use property, property used predominantly outside the United States, and listed property used 50% or less for business.¹

Part V: Listed Property and Vehicles

Listed property gets its own section because it lends itself to personal use. Passenger vehicles are the main example, and the IRS requires you to track and substantiate business-use percentage each year.

The 50% business-use threshold is the dividing line. Use property more than 50% for business and you qualify for Section 179, bonus depreciation, and accelerated MACRS. Drop to 50% or below and you lose all three; you must use straight-line over the ADS recovery period. If business use was above 50% in earlier years and then falls, you have to recapture the difference between what you deducted and what straight-line would have allowed, and that excess becomes ordinary income.¹

Passenger Automobile Caps for 2026

Even with 100% bonus depreciation restored, passenger automobiles face annual dollar caps. For vehicles placed in service in 2026, Rev. Proc. 2026-15 sets the limits at:⁹

With bonus depreciation:

Year 1: $20,300
Year 2: $19,800
Year 3: $11,900
Each succeeding year: $7,160

Without bonus depreciation:

Year 1: $12,300
Year 2: $19,800
Year 3: $11,900
Each succeeding year: $7,160

These caps apply to standard passenger cars and light trucks under 6,000 pounds. Vehicles rated above 6,000 pounds aren’t subject to the passenger automobile caps, though SUVs between 6,001 and 14,000 pounds still face the $32,000 Section 179 limit.

Substantiating Business Use

Contemporaneous records are required. For vehicles, keep a log showing the date, destination, business purpose, and miles driven for each trip. Reconstruction at year-end won’t hold up in an audit; records should be made at or near the time of each trip, while you have full knowledge of the details.¹⁰ You also need receipts or other documentary evidence for expenditures of $25 or more, except for transportation charges where receipts aren’t readily available. All of this information goes in Part V: date placed in service, business-use percentage, and the depreciation method used.

Part VI: Amortization

Amortization is depreciation’s counterpart for intangible assets. The most common category is Section 197 intangibles, which are amortized over 15 years (180 months) starting in the month of acquisition. Section 197 covers goodwill and going concern value, workforce in place, customer lists, patents, copyrights, formulas and trade secrets, government-granted licenses and permits, covenants not to compete entered into as part of a business acquisition, and franchises, trademarks, and trade names.¹¹

All Section 197 intangibles follow the same 15-year schedule regardless of actual useful life. You can’t accelerate the amortization even if the intangible becomes worthless earlier, with limited exceptions.

Startup and organizational costs get separate treatment. You can immediately deduct up to $5,000 of startup costs and up to $5,000 of organizational costs in the year the business begins operating. Each $5,000 allowance phases out dollar-for-dollar once the respective costs exceed $50,000. Anything beyond the immediate deduction is amortized over 180 months starting when the business opens.¹²

For each intangible in Part VI, list a description, the date amortization begins, the total cost, the amortization period in months, and the current year’s deduction.

What Form 4562 Doesn’t Cover

Selling a depreciated asset doesn’t go on Form 4562. Those sales are reported on Form 4797, though the depreciation figures from your Form 4562 history feed the gain calculation there.¹³¹⁴¹⁵ If a Section 179 property’s business use drops to 50% or below in a later year, Form 4797 Part IV is where you figure the recapture.

Your state return may not follow federal depreciation. Many states decouple from federal bonus depreciation entirely, so you get 100% bonus federally but must depreciate the asset normally for state purposes. Others cap Section 179 well below the federal limit. Check your state’s conformity rules before assuming your Form 4562 numbers carry over.

Records You Have to Keep

Depreciation records last longer than most tax documents. Keep records for each depreciable asset until the statute of limitations expires for the tax year in which you dispose of the property, not the year you placed it in service.¹⁶ In practice, hold onto purchase records, Form 4562 worksheets, and asset schedules for the entire time you own the property plus at least three years after disposal.

For each asset, document the purchase date and price, the date placed in service, the recovery period and method used, any Section 179 or bonus depreciation claimed, and the business-use percentage for listed property. Property received in a tax-free exchange requires keeping records for both the old and the new property until the limitations period expires for the year you finally dispose of the replacement.

1
Internal Revenue Service. Publication 946 (2025), How To Depreciate Property
2
Internal Revenue Service. Instructions for Form 4562 (2025)
3
Internal Revenue Service. Publication 946 (2025), How To Depreciate Property – Section: Electing the Section 179 Deduction
4
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One, Big, Beautiful Bill
5
Internal Revenue Service. Notice 2026-11, Interim Guidance on Additional First Year Depreciation Deduction
6
Internal Revenue Service. Additional First Year Depreciation Deduction (Bonus) – FAQ
7
Internal Revenue Service. Publication 946 (2025), How To Depreciate Property – Section: Which Property Class Applies Under GDS?
8
Internal Revenue Service. Publication 946 (2025), How To Depreciate Property – Section: Which Convention Applies?
9
Internal Revenue Service. Rev. Proc. 2026-15
10
eCFR. 26 CFR 1.274-5A – Substantiation Requirements
11
Office of the Law Revision Counsel. 26 U.S. Code 197 – Amortization of Goodwill and Certain Other Intangibles
12
Internal Revenue Service. Publication 583 (12/2024), Starting a Business and Keeping Records
13
Internal Revenue Service. Instructions for Form 4797
14
Office of the Law Revision Counsel. 26 U.S. Code 1245 – Gain From Dispositions of Certain Depreciable Property
15
Office of the Law Revision Counsel. 26 U.S. Code 1250 – Gain From Dispositions of Certain Depreciable Realty
16
Internal Revenue Service. How Long Should I Keep Records