Form 4562 Explained: Depreciation, Section 179 and Bonus Depreciation

If you bought equipment, a vehicle or software for your business, Form 4562 is how the cost turns into a deduction. It's one of the more technical IRS forms, but once you know what each part does, it's manageable. Here's what the 2025 instructions say.

Who must file Form 4562

You complete Form 4562 if you're claiming any of these:

• Depreciation for property placed in service during the 2025 tax year
• A section 179 expense deduction, including a carryover from an earlier year
• Depreciation on any vehicle or other listed property, whenever it was placed in service
• A deduction for any vehicle reported on a form other than Schedule C
• Any depreciation on a corporate return, other than Form 1120-S
• Amortization of costs that begins during the 2025 tax year

File a separate Form 4562 for each business or activity that needs one. Employees claiming job-related vehicle costs use Form 2106 instead.

The parts of the form

Part	What it covers
Part I	Election to expense property under section 179
Part II	Special (bonus) depreciation allowance and other depreciation
Part III	MACRS depreciation, the standard method for most business assets
Part IV	Summary
Part V	Listed property, such as vehicles
Part VI	Amortization

Section 179 limits for 2025, as of October 2026

Limit	Amount for tax years beginning in 2025
Maximum section 179 deduction	$2,500,000
Phase-out starts when section 179 property placed in service exceeds	$4,000,000
Maximum for sport utility vehicles	$31,300

Section 179 lets you expense part or all of the cost of qualifying property in the year you place it in service, rather than spreading it over years. The property must be used more than 50% in your business. If business use drops to 50% or less before the end of its recovery period, the benefit comes back as other income on your return. There's also a business income limit: a deduction you can't use because of it carries over to the next year.

Bonus depreciation is back to 100%

This is the change most owners have heard about but haven't pinned down. The One Big Beautiful Bill Act reinstated the 100% special depreciation allowance for qualifying property acquired and placed in service after 19 January 2025. Property placed in service in 2025 but acquired before 20 January 2025 is limited to 40%.

Here's the insight that saves surprises: you don't have to take the full 100%. The instructions let you elect a 40% allowance instead for property placed in service in the first tax year ending after 19 January 2025, and you can elect not to take any bonus depreciation for a whole class of property placed in service that year. That matters if a smaller deduction this year suits your income better.

Half-year or mid-quarter: timing your purchases

For most assets, MACRS uses the half-year convention, treating everything placed in service during the year as placed in service at the midpoint. But if more than 40% of the total depreciable basis of MACRS property you placed in service during the year was placed in service in the last 3 months, the mid-quarter convention generally applies. A big December equipment buy can therefore change how much you deduct on everything bought that year.

Vehicles and other listed property

Vehicles go in Part V. Use line 26 for property used more than 50% for qualified business use and line 27 for 50% or less. If a vehicle was used more than 50% for business in its first year and 50% or less later, you may have to add back part of the depreciation you claimed, including bonus depreciation. Keep a mileage log from day one.

Amortization, and what doesn't go on this form

Part VI is for amortization: spreading certain costs over time rather than depreciating a physical asset. You only report it on Form 4562 in the year the amortization begins. And there's one thing you'd expect to find here that isn't: the deduction for energy efficient commercial buildings under section 179D doesn't go on Form 4562. The instructions say it's claimed on Form 7205 instead. If you've made upgrades like that, don't hunt for a line that isn't there.

A checklist before you file

1. List every asset placed in service this year with its cost, date and business use percentage.
2. Decide on section 179, bonus depreciation, or regular MACRS for each one.
3. Check the 40% last-quarter test before year-end purchases.
4. Confirm vehicles and listed property are used more than 50% for business, with records.
5. Carry forward any section 179 amount disallowed last year.
6. Complete a separate Form 4562 for each business or activity.

Running a business from home? My guide to the simplified home office deduction sits alongside this, and these tax tips for the self-employed cover the rest of the year-end list.

My verdict

For most small businesses, Form 4562 comes down to one decision: expense the asset now with section 179 or bonus depreciation, or spread it out. With 100% bonus depreciation back, writing off everything this year is tempting, but it isn't always smart, especially if your income is low this year and expected to rise. Model both before you file, and keep business use records for anything with wheels.

Frequently asked questions

What is Form 4562 used for?

To claim depreciation and amortization, make the section 179 election, and report business use of vehicles and other listed property.

Who has to file Form 4562?

Anyone claiming depreciation on property placed in service this year, a section 179 deduction, depreciation on vehicles or listed property, or amortization that starts this year.

What is the section 179 limit for 2025?

As of October 2026, $2,500,000 for tax years beginning in 2025, reduced once qualifying purchases exceed $4,000,000, with a $31,300 limit for SUVs.

Is bonus depreciation 100% again?

Yes, for qualifying property acquired and placed in service after 19 January 2025. Property acquired earlier and placed in service in 2025 gets 40%.

What is the mid-quarter convention?

If more than 40% of your year's MACRS property basis was placed in service in the last 3 months, the mid-quarter convention generally applies instead of half-year.

Do I need a separate Form 4562 for each business?

Yes. File one for each business or activity that requires it.