If you are a business owner and purchased for business or investment purposes any equipment or machinery in 2014, bought a building or other property, or used a vehicle for business, you need to complete Form 4562, Depreciation and Amortization.
The following is an edited version of an article on Investopedia by Barbara E. Weltman that shows how to complete the form under the most common circumstances. (Read Full Article Here)
This part of the form is used to elect to expense tangible property, off-the-shelf software and certain types of realty (e.g., a greenhouse) placed in service in 2014 (called the Section 179 deduction). The maximum amount of this deduction is $500,000 for machinery and equipment (or $250,000 for qualified leasehold, retail and restaurant improvements).
Regardless of the deduction amount, you must apply the limitation that restricts the Section 179 deduction to the extent of your business profits (called “taxable income” without regard to certain deductions) for the year.
This part of the form is used for a special depreciation allowance (also called “bonus depreciation”), which is a 50% allowance claimed in the year that eligible property is placed in service. (For 2015, it’s been eliminated unless reinstated by Congress.)
Do not complete this part for:
Property that is not “eligible property.” Only new property, and not pre-owned property, is eligible.
“Listed property,” which is defined later (in Part V).
This section is for basic depreciation (other than depreciation for listed property, which is entered in Part V) under the Modified Accelerated Cost Recovery System (MACRS) that was created in 1986 and continues to apply today. A single entry on line 17 is used to report deductions for assets placed in service before 2014 (refer to your prior tax returns or any worksheets you may have retained to determine the amount to enter here).
Details about assets placed in service in 2014 are entered on lines 19a through 19i.
This part of the form is merely a summary from parts I, II and III, as well as listed property in Part V. Line 22 is the key entry; it is the amount of depreciation that is deductible. The amount on line 22 is reported on the appropriate line of your tax return.
This section is for claiming write-offs for listed property: cars weighing 6,000 pounds or less, pickup trucks, computers and peripheral equipment, video recording equipment and other property specifically called “listed property.”
Section A is for the depreciation allowance for listed property, including the Section 179 deduction and bonus depreciation.
Section B is used to provide information about vehicles used by sole proprietors, partners or other “more than 5% owners” or people related to these business owners.
Section C is used by an employer to report certain information on employee use of company vehicles.
This part is for any amortization you claim. Amortization costs that begin in 2014 are entered on line 42 (along with a description of the costs and other information); amortization for costs that began before 2014 is entered on line 43.
The Bottom Line
If you didn’t acquire any assets in 2014 and are merely depreciating the cost of assets purchased in prior years, you may not need to complete this form. Not sure about this, or whether you’re up to the task of handling this form? Review the IRS instructions to Form 4562 or consult a tax professional.
This article highlights the basic process of filling out Form 4562. For a step by step version Read Full Article Here:
Questions? Comments? Let us know in the comments section below.
More information about Bassets eDepreciation software can be found at Bassets.net or depre123.com. At Bassets register for our live webinar, download a free evaluation copy and get a personalized pricing estimate. At depre123 try out our Free Depreciation Calculator and check out our cloud based fixed assets application.