Form 4562 is the IRS form used to claim depreciation and amortization deductions on business assets, elect the Section 179 immediate expensing deduction, and claim bonus depreciation — filed as part of the business tax return (irs.gov/forms-pubs/about-form-4562).
Form 4562 (Depreciation and Amortization) is filed with the business's tax return (1040 Schedule C, 1065, 1120-S, or 1120) whenever the business places new depreciable property in service, claims Section 179 expensing, or claims bonus depreciation. It also tracks amortization of intangibles such as startup costs and goodwill. Key sections: Part I covers the Section 179 deduction — a business can elect to immediately expense up to $1,160,000 (2023 limit, adjusted annually; irs.gov/pub/irs-pdf/i4562.pdf) of qualified property placed in service, subject to a phase-out when total property exceeds $2,890,000. Part II covers bonus depreciation (also called additional first-year depreciation) — 60% for property placed in service in 2024, phasing down to 0% by 2027 under TCJA. Parts III–VI cover MACRS depreciation for assets not fully expensed in the current year, listed property (vehicles, computers), and amortization of intangibles under IRC §197. For lenders: Form 4562 is the source of the depreciation add-back in income analysis. When underwriting self-employed borrowers, lenders add depreciation reported on Form 4562 back to net income because it is a non-cash deduction that does not reduce actual cash flow. Large Section 179 or bonus depreciation elections in a single year can significantly depress reported taxable income while leaving cash flow intact — lenders who understand Form 4562 can properly qualify borrowers whose Schedule C or 1120-S income appears low solely due to accelerated depreciation.
For 2024, the Section 179 deduction limit is $1,220,000, with a phase-out beginning at $3,050,000 of total qualifying property placed in service. The limits are indexed annually for inflation. The deduction cannot exceed the business's taxable income for the year (irs.gov/forms-pubs/about-form-4562).
Both allow accelerated write-offs, but they differ in key ways: Section 179 is limited by taxable income and property cost thresholds; bonus depreciation has no taxable income limitation and applies automatically unless the taxpayer elects out. For 2024, bonus depreciation is 60% of qualified property cost. Bonus depreciation phases down: 40% in 2025, 20% in 2026, 0% in 2027 under current law (irs.gov/pub/irs-pdf/i4562.pdf).
Depreciation is a non-cash accounting deduction — it reduces taxable income but does not reduce the business's bank account. Lenders add it back to reported net income to approximate true cash available for debt service. A business showing $50,000 net income after $80,000 of depreciation actually generated $130,000 in pre-depreciation cash flow.
Only if you are claiming a new deduction for an asset placed in service that year, claiming Section 179 or bonus depreciation, or have listed property (vehicles, computers) requiring annual reporting. If all your assets are fully depreciated and you placed no new property in service, you do not need to file Form 4562 that year (irs.gov/forms-pubs/about-form-4562).