How to Fill Out and File Form 4562: Section 179, Bonus, and MACRS

To fill out Form 4562, work through the form’s six parts in the order the statute requires: claim any Section 179 expense in Part I, apply bonus depreciation in Part II on what’s left, run remaining basis through MACRS in Part III, report vehicles and other listed property in Part V, and handle intangibles in Part VI. You fill in only the parts that apply to the assets you actually placed in service during the year, and you attach the completed form to your business return rather than filing it on its own.

Part IV is a summary section that pulls totals from the other parts, so you complete it last even though it sits in the middle of the form.

Do You Even Need to File Form 4562 This Year?

You file Form 4562 for a tax year when any of these are true:

You placed depreciable property in service during the year.
You’re electing a Section 179 expense, including carrying forward an unused amount from a prior year.
You’re claiming depreciation or actual vehicle expenses on any listed property, regardless of when it was first placed in service.
You began amortizing costs during the year.
You’re filing a corporate return other than Form 1120-S that includes depreciation.

A sole proprietor whose only depreciable assets were placed in service in earlier years, and who owns no listed property, reports depreciation directly on the applicable schedule and skips Form 4562 entirely.¹

Records to Pull Before You Open the Form

Missing paperwork is what stalls people partway through. Have all of this in front of you before you start:

Invoices or closing statements showing each asset’s full cost, including sales tax, freight, and installation.
The placed-in-service date for each asset, meaning the date it was ready and available for its intended use, not the purchase date and not the date you first actually used it.¹
A contemporaneous business-use log for any asset used partly for personal purposes. For vehicles, that means dates, destinations, business purpose, and odometer readings.
Prior-year accumulated depreciation for any listed property you’re carrying forward into Part V.
The MACRS class and recovery period for each asset.

Hold onto these records until the statute of limitations expires for the year you dispose of the property, not just for the length of the recovery period. A 39-year building sold in year 40 still needs its original purchase records available through at least year 43.²

The Order of Operations

The form has a required sequence that shapes every number you enter. Apply Section 179 first. Then apply bonus depreciation to the basis that remains. Then run whatever is still left through regular MACRS. This order isn’t a suggestion, and it’s why Part I comes before Part II, which comes before Part III.

Part I: Section 179 Expense

Section 179 lets you deduct the full cost of qualifying property in the year you place it in service instead of recovering it over several years.³

2026 Dollar Limits

The base statutory limits are $2,500,000 for the maximum deduction and $4,000,000 for the phase-out threshold, both inflation-adjusted for tax years after 2025. For 2026, the inflation-adjusted deduction limit is approximately $2,560,000, and the phase-out threshold is approximately $4,090,000. Once your total Section 179-eligible purchases exceed the threshold, the maximum deduction shrinks dollar for dollar; if purchases exceed the threshold by more than the deduction limit, you get no Section 179 deduction that year.³

A second cap: your Section 179 deduction cannot exceed your total taxable income from the active conduct of any trade or business. Section 179 cannot create or increase a net loss. Any amount you can’t deduct because of the income limit carries forward.

What Qualifies

Section 179 property includes tangible personal property (equipment, machinery, furniture, computers), off-the-shelf software, and certain qualified real property improvements to nonresidential buildings such as HVAC systems, fire suppression, alarm and security systems, and roofing. The property must be acquired by purchase for use in the active conduct of a business; gifts, inheritances, and purchases from related parties don’t qualify. Business use must exceed 50% for the year. Land, buildings themselves, property used predominantly outside the United States, and property used to furnish lodging never qualify.³

The SUV Cap

Sport utility vehicles with a gross vehicle weight rating above 6,000 pounds but not more than 14,000 pounds have their own Section 179 ceiling. The statute sets a base cap of $25,000, adjusted for inflation, so for 2026 the cap is approximately $32,000. Heavier commercial trucks and vans, and vehicles with a cargo bed at least six feet long, are outside this limit.

Filling In Part I

Line 1 is the total cost of all Section 179 property placed in service during the year. Line 2 is the current-year deduction limit; Line 3 is the phase-out threshold. If Line 1 exceeds Line 3, Line 4 reduces your available deduction. Lines 6 and 7 list each asset individually with description, cost, and elected amount. Line 11 is your business income limitation. Line 12 is the deduction you actually claim, and any excess pushed out by the income limit shows up on Line 13 as a carryforward.¹

Part II: Bonus Depreciation

After Section 179, Part II claims an additional first-year allowance on the basis that remains. The One, Big, Beautiful Bill Act made bonus depreciation permanently 100% for qualified property acquired after January 19, 2025.⁴

Property acquired after September 27, 2017, but before January 20, 2025, follows the earlier phasedown and is limited to 40% (60% for long-production-period property and certain aircraft).¹

Line 14 is where most filers report bonus depreciation. Multiply the depreciable basis of qualifying property (cost minus any Section 179 amount, credits, and personal-use portion) by the applicable percentage. To skip bonus depreciation on a class of property, attach a statement to your timely filed return identifying the class and stating you’re electing out.

Part III: MACRS Depreciation

Whatever cost basis is left after Section 179 and bonus depreciation is recovered through the Modified Accelerated Cost Recovery System, which assigns every asset a recovery period, a method, and a convention.⁵

Recovery Periods You’ll Encounter Most

5-year: cars, trucks, computers, copiers, research equipment, and appliances or carpets in residential rentals.
7-year: office furniture and fixtures, and any personal property without an assigned class life.
15-year: fences, roads, sidewalks, landscaping, and qualified improvement property.
27.5-year: residential rental buildings.
39-year: nonresidential real property.

Less common classes (3-year, 10-year, 20-year) exist for specific industrial and agricultural assets.⁶

Methods

The default for 5-year and 7-year property is 200% declining balance, which front-loads deductions and switches to straight-line when that produces a bigger number. The 15-year and 20-year classes use 150% declining balance. Real property (27.5 and 39 years) always uses straight-line.

The Half-Year and Mid-Quarter Conventions

The default half-year convention treats every asset as placed in service at the midpoint of the year, so year one gets half a year’s depreciation regardless of the actual date. The half-year convention flips to mid-quarter if more than 40% of your total depreciable basis of personal property placed in service that year lands in the last three months. When triggered, mid-quarter applies to every piece of personal property placed in service that year, not just the fourth-quarter items. Real property, property expensed under Section 179, and property placed in service and disposed of in the same year don’t count toward the 40% test.⁶

A large December purchase can drag your whole year’s depreciation into mid-quarter treatment. Plan late-year buys with the 40% test in mind.

Filling In Part III

Section A (Lines 19a through 19i) is the General Depreciation System. Each line represents a group of assets sharing the same recovery period, convention, and method. For each row you enter the month and year placed in service, the cost basis after any Section 179 and bonus amounts, the recovery period, the convention code (HY or MQ), the method (200DB, 150DB, or S/L), and the computed deduction. Section C covers the Alternative Depreciation System, which uses straight-line over longer periods and is required for certain property types.

Part V: Listed Property

Listed property includes passenger vehicles, other transportation equipment, property generally used for entertainment or recreation, and photocopiers. These assets get their own section because the IRS demands extra substantiation of business use.

For vehicles, you report total miles driven, business miles, commuting miles, and other personal miles. You indicate whether you have written evidence for the business-use claim and whether that evidence is contemporaneous. Without an adequate log, the IRS can disallow the whole deduction.

If business use of listed property falls to 50% or less in any year after you claimed Section 179 or bonus depreciation on it, you owe recapture on the earlier deductions as ordinary income.¹

Annual Caps for Passenger Automobiles Placed in Service in 2026

Passenger automobiles face annual depreciation ceilings regardless of what the car actually cost. For 2026:⁷

With bonus depreciation: $20,300 first year, $19,800 second year, $11,900 third year, $7,160 each year after.
Without bonus depreciation: $12,300 first year, $19,800 second year, $11,900 third year, $7,160 each year after.

Vehicles with a gross vehicle weight rating over 6,000 pounds aren’t “passenger automobiles” for these caps. They can be fully expensed under Section 179 (subject to the SUV cap for certain vehicles between 6,000 and 14,000 pounds) and aren’t restricted by the annual ceilings above.

Part VI: Amortization

Part VI covers intangibles and certain capitalized costs recovered over a fixed period. The most common entries are Section 197 intangibles: goodwill, patents, copyrights, trademarks, customer lists, and covenants not to compete acquired as part of a business purchase. Section 197 intangibles are amortized ratably over 15 years starting in the month of acquisition.⁸

Other Part VI items include organizational and startup expenses, pollution control facility costs, bond premiums, lease acquisition costs, and research and experimental expenditures. Each has its own period set by the authorizing code section.

Line 42 handles costs whose amortization period begins during the current year. For each entry you provide a description, the date amortization begins, the total amount, the code section authorizing it, the period, and the current-year deduction. Line 43 captures continuing amortization from prior years. A property can’t be both amortized and depreciated: if you amortize it, it doesn’t go through Section 179 or MACRS.

Where Software Goes

Off-the-shelf software bought separately is 3-year straight-line property (36 months), and it also qualifies for Section 179 or bonus depreciation, so many businesses deduct the full cost in year one through Part I or Part II. Custom or internally developed software follows the research and experimental rules and is generally amortized over 60 months under Section 174. Software acquired as part of buying a business is a Section 197 intangible amortized over 15 years in Part VI. The same type of asset can land in different parts of the form depending on how you got it.

Never Skip a Deduction You’re Entitled To

If you fail to claim depreciation you were entitled to, the IRS still reduces your basis by the amount you should have deducted. When you eventually sell, your gain is calculated as though you took every deduction, whether you actually did or not. This is the “greater of allowed or allowable” rule.⁹

You lose the tax benefit now, and the IRS still reduces your basis later. If you’ve missed deductions in prior years, file Form 3115 to request a change in accounting method and claim the catch-up adjustment. It’s generally filed with your current-year return rather than through amended prior-year returns.¹⁰

Recapture and Dispositions

Form 4562 is the deduction side. When you sell, trade, or retire the asset, reporting shifts to Form 4797 (Sales of Business Property). Any gain up to the amount of depreciation previously allowed or allowable is recaptured as ordinary income rather than capital gain, and that applies to Section 179, bonus depreciation, and regular MACRS alike.¹¹

If business use of Section 179 or bonus-depreciation property drops to 50% or less before the recovery period ends, you recapture the excess deduction as ordinary income for that year even without a sale. Report it in Part IV of Form 4562 and carry the amount to the appropriate line of your income tax return.

Where the Completed Form Goes

Form 4562 is never filed on its own. Attach it to the return for the business or activity that owns the assets:

Sole proprietors: attach to Schedule C, E, or F filed with Form 1040.
Partnerships: attach to Form 1065.
S corporations: attach to Form 1120-S.
C corporations: attach to Form 1120.
Estates and trusts: attach to Form 1041.

If you run more than one business or activity, file a separate Form 4562 for each one. The totals from each form flow to the applicable line of the corresponding schedule or return.¹

1
Internal Revenue Service. Instructions for Form 4562
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Internal Revenue Service. How Long Should I Keep Records
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Office of the Law Revision Counsel. 26 USC 179 – Election to Expense Certain Depreciable Business Assets
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Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
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Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
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Internal Revenue Service. Publication 946 – How To Depreciate Property
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Internal Revenue Service. Rev. Proc. 2026-15
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Office of the Law Revision Counsel. 26 U.S. Code 197 – Amortization of Goodwill and Certain Other Intangibles
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Internal Revenue Service. Depreciation and Recapture 3
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Internal Revenue Service. About Form 3115, Application for Change in Accounting Method
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Internal Revenue Service. About Form 4797, Sales of Business Property