Section 179 is reported first on IRS Form 4562 (Depreciation and Amortization), and the final deduction figure from Line 12 then moves to a different location on your tax return depending on how your business is organized. Where to report Section 179 on your tax return is really two questions stacked together: every filer starts with Form 4562, but the destination line varies by entity type. Sole proprietors send it to Schedule C. Partnerships and S corporations pass it through to owners on Schedule K-1. C corporations put it directly on Form 1120.
Start With Form 4562, Part I
Part I of Form 4562 is where the Section 179 calculation lives from start to finish. You list each qualifying asset on Line 6, entering a description, the cost attributable to business use, and the amount you elect to expense.1Internal Revenue Service. Form 4562 – Depreciation and Amortization The elected amount can be less than the full purchase price if you want to depreciate the remainder over time.
Lines 7 through 9 apply the dollar limitation and the investment-based phase-out. For the 2026 tax year, the maximum deduction is $2,560,000 and the investment ceiling is $4,090,000, with the maximum shrinking dollar-for-dollar once total qualifying purchases exceed that ceiling. Line 10 adds any carryover from a prior year in which the taxable income limitation blocked part of your deduction.
Line 11 applies the taxable income limitation. For individuals, this includes income from every active trade or business plus any W-2 wages.2Internal Revenue Service. Instructions for Form 4562 A modest side business combined with a healthy salary from an employer can still support a substantial deduction because the wages count. Married couples filing jointly combine both spouses’ business and wage income.
Line 12 is the final Section 179 deduction: your current-year elected amount plus any carryover, capped at the Line 11 taxable income figure.1Internal Revenue Service. Form 4562 – Depreciation and Amortization Whatever appears on Line 12 is the number that leaves Form 4562 and lands on your main return. Anything the income limit blocks stays with you as a carryover to next year’s Line 10.3Office of the Law Revision Counsel. 26 US Code 179 – Election to Expense Certain Depreciable Business Assets
Filing Form 4562 with your return is itself the Section 179 election. No separate statement is required.4eCFR. 26 CFR 1.179-5 – Time and Manner of Making Election
Sole Proprietors: Schedule C, Line 13
If you file Schedule C (Profit or Loss From Business), the Line 12 amount from Form 4562 goes to Line 13 of Schedule C, labeled “Depreciation and section 179 expense deduction.”5Internal Revenue Service. Instructions for Schedule C (Form 1040) That line combines your Section 179 expense with any regular depreciation you’re claiming.
The deduction reduces your net profit on Schedule C, Line 31. That net profit flows through Schedule 1 to Form 1040 and also drives your self-employment tax base, so a larger Section 179 deduction cuts both income tax and self-employment tax.
Partnerships: Schedule K-1, Box 12
A partnership calculates its total Section 179 deduction on Form 4562, but it does not claim the deduction on Form 1065 itself. The deduction passes through to the partners.
Each partner’s allocated share appears in Box 12 of their Schedule K-1 (Form 1065). From there, each partner runs the amount through their own Form 4562, applying their personal taxable income limitation. If the activity is nonpassive, the deduction is then reported in column (j) of Schedule E (Form 1040), Line 28.6Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065) A partner’s individual income limits can reduce the deduction below what the partnership allocated, so the amount claimed on the personal return may be smaller than what appears in Box 12.
S Corporations: Schedule K-1, Box 11
S corporations use the same pass-through path. The corporation calculates the amount on Form 4562 but does not claim it on Form 1120-S. Each shareholder’s share appears in Box 11 of their Schedule K-1 (Form 1120-S), labeled “Section 179 Deduction.”7Internal Revenue Service. Shareholder’s Instructions for Schedule K-1 (Form 1120-S)
The shareholder then reports the deduction on their individual return through Schedule E, again subject to their own taxable income limitation on their personal Form 4562.
C Corporations: Form 1120, Line 20
C corporations are the direct case. The Line 12 amount from Form 4562 goes to Line 20 of Form 1120, described as “Depreciation from Form 4562 not claimed on Form 1125-A or elsewhere on return.”8Internal Revenue Service. US Corporation Income Tax Return – Form 1120 There is no K-1, no owner-level recalculation, and no additional taxable income test beyond what Form 4562 already applied. The deduction reduces the corporation’s taxable income directly.
Reporting Recapture on Form 4797
If listed property drops to 50% business use or below during its recovery period, or if you sell or otherwise dispose of Section 179 property, part of the tax benefit gets recaptured. The recapture is reported on Form 4797 (Sales of Business Property), in Part IV, Lines 33 through 35.9Internal Revenue Service. Instructions for Form 4797 Line 33 compares the original Section 179 deduction against the depreciation that would have been allowed without the election, and Line 35 produces the amount that gets added back as ordinary income on the form or schedule where you first took the deduction.10Internal Revenue Service. About Form 4797, Sales of Business Property
For listed property specifically, the recapture amount is the excess of your Section 179 deduction over what you would have deducted under the alternative depreciation system.11Office of the Law Revision Counsel. 26 US Code 280F – Limitation on Depreciation for Luxury Automobiles
State Returns May Not Follow the Federal Placement
The federal deduction you report on Form 4562 does not always carry over to your state return dollar-for-dollar. Roughly a dozen states and the District of Columbia do not fully conform to the federal expensing limits, with some capping the state-level Section 179 deduction as low as $25,000 and others allowing $120,000 to $250,000. If your state uses a lower cap, you add back the difference on your state return and depreciate that portion over the asset’s useful life for state purposes. Check your state’s current conformity rules before assuming the federal number flows straight through.