Table of Contents
Note.
An estate or trust cannot make this election.
You can elect to expense part or all of the cost of section 179 property (defined earlier) that you placed in service during the tax year and used predominantly (more than 50%) in your trade or business.
However, for taxpayers other than a corporation, this election does not apply to any section 179 property you purchased and leased to others unless:
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You manufactured or produced the property or
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The term of the lease is less than 50% of the property's class life and, for the first 12 months after the property is transferred to the lessee, the deductions related to the property allowed to you as trade or business expenses (except rents and reimbursed amounts) are more than 15% of the rental income from the property.
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The original return you file for the tax year the property was placed in service (whether or not you file your return on time) or
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An amended return filed within the time prescribed by law for the applicable tax year. The election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. The amended return must also include any resulting adjustments to taxable income.
If you elect to expense section 179 property, you must reduce the amount on which you figure your depreciation or amortization deduction (including any special depreciation allowance) by the section 179 expense deduction.
Generally, the maximum section 179 deduction is $250,000.
For an enterprise zone business or a renewal community business, the maximum deduction is increased by the smaller of:
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$35,000 or
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The cost of section 179 property that is also qualified empowerment zone property or qualified renewal property (including such property placed in service by your spouse, even if you are filing a separate return).
For more information, including definitions of qualified empowerment zone property and qualified renewal property, see Pub. 954, Tax Incentives for Distressed Communities.
For certain qualified section 179 GO Zone property in which substantially all of the use is in one or more specified portions of the GO Zone (as defined in section 1400N(d)(6)), the maximum deduction is increased by the smaller of:
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$100,000 or
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The cost of certain qualified section 179 GO Zone property placed in service before January 1, 2009 (including such property placed in service by your spouse, even if you are filing a separate return). See section 1400N(e) for more information.
For all other section 179 GO Zone property placed in service in tax years beginning in 2008, the maximum deduction is $250,000.
For more information, including definitions of qualified GO Zone property and qualified section 179 GO Zone property, see Pub. 946.
For qualified section 179 disaster assistance property placed in service in a federally declared area in which the disaster occurred after December 31, 2007, the maximum deduction is increased by the smaller of:
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$100,000 or
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The cost of qualified section 179 disaster assistance property placed in service after 2007 (including such property placed in service by your spouse, even if you are filing a separate return).
A list of the federally declared disaster areas is available at the Federal Emergency Management Agency (FEMA) web site at www.fema.gov. For more information, including the definition of qualified section 179 disaster assistance property and the eligible disaster areas, see Pub. 946.
You may be able to take an increased section 179 expense deduction for qualified section 179 Recovery Assistance property placed in service in the Kansas disaster area. For more information, including definitions of qualified Recovery Assistance property and qualified section 179 Recovery Assistance property, see Pub. 4492-A.
If applicable, cross out the preprinted entry on line 1 and enter in the right margin the larger amount.
For purposes of the increased section 179 expense deduction, certain qualified section 179 GO Zone property, qualified section 179 Recovery Assistance property, or qualified section 179 disaster assistance property that is located in an empowerment zone (or a renewal community) is treated as qualified empowerment zone property (or qualified renewable property) only if you elect not to treat the property as qualified section 179 GO Zone property, qualified section 179 Recovery Assistance property, or qualified section 179 disaster assistance property.
Enter the cost of all section 179 property placed in service during the tax year. Also include the cost of the following.
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Any listed property from Part V.
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Any property placed in service by your spouse, even if you are filing a separate return.
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50% of the cost of section 179 property that is also qualified empowerment zone property or qualified renewal property.
The amount of section 179 property for which you can make the election is limited to the maximum dollar amount on line 1. In most cases, this amount is reduced if the cost of all section 179 property placed in service during the year is more than $800,000.
However, if you placed certain qualified section 179 GO Zone property in service during the tax year and substantially all of the use of the property is in one or more specified portions of the GO Zone (as defined in section 1400N(d)(6)), the amount of property for which you can make the election is reduced if the cost of all section 179 property placed in service during the year exceeds $800,000 increased by the smaller of:
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$600,000 or
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The cost of certain qualified section 179 GO Zone property placed in service during the tax year.
Note.
For all other qualified section 179 GO Zone property placed in service in tax years beginning in 2008, the maximum limitation is $800,000.
If you placed qualified section 179 disaster assistance property in service in a federally declared disaster area in which the disaster occurred after December 31, 2007, the amount of property for which you can make the election is reduced if the cost of all section 179 property placed in service during the year exceeds $800,000 increased by the smaller of:
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$600,000 or
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The cost of qualified section 179 disaster assistance property placed in service after December 31, 2007.
For more information. see Pub. 946.
If applicable, cross out the preprinted entry on line 3 and enter in the right margin the higher amount.
For a partnership (other than an electing large partnership) these limitations apply to the partnership and each partner. For an electing large partnership, the limitations apply only to the partnership. For an S corporation, these limitations apply to the S corporation and each shareholder. For a controlled group, all component members are treated as one taxpayer.
If line 5 is zero, you cannot elect to expense any section 179 property. In this case, skip lines 6 through 11, enter zero on line 12, and enter the carryover of any disallowed deduction from 2007 on line 13.
If you are married filing separately, you and your spouse must allocate the dollar limitation for the tax year. To do so, multiply the total limitation that you would otherwise enter on line 5 by 50%, unless you both elect a different allocation. If you both elect a different allocation, multiply the total limitation by the percentage elected. The sum of the percentages you and your spouse elect must equal 100%.
Do not enter on line 5 more than your share of the total dollar limitation.
Do not include any listed property on line 6. Enter the elected section 179 cost of listed property in column (i) of line 26.
The carryover of disallowed deduction from 2007 is the amount of section 179 property, if any, you elected to expense in previous years that was not allowed as a deduction because of the business income limitation. If you filed Form 4562 for 2007, enter the amount from line 13 of your 2007 Form 4562.
The total cost you can deduct is limited to your taxable income from the active conduct of a trade or business during the year. You are considered to actively conduct a trade or business only if you meaningfully participate in its management or operations. A mere passive investor is not considered to actively conduct a trade or business.
Note.
If you have to apply another Code section that has a limitation based on taxable income, see Pub. 946 for rules on how to apply the business income limitation for the section 179 expense deduction.
The limitations on lines 5 and 11 apply to the taxpayer, and not to each separate business or activity. Therefore, if you have more than one business or activity, you may allocate your allowable section 179 expense deduction among them.
To do so, write “Summary” at the top of Part I of the separate Form 4562 you are completing for the total amounts from all businesses or activities. Do not complete the rest of that form. On line 12 of the Form 4562 you prepare for each separate business or activity, enter the amount allocated to the business or activity from the “Summary.” No other entry is required in Part I of the separate Form 4562 prepared for each business or activity.
For qualified property (defined below) placed in service during the tax year, you may be able to take an additional 50% (or 30%, if applicable) special depreciation allowance. The special depreciation allowance applies only for the first year the property is placed in service. The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under the modified accelerated cost recovery system (MACRS).
www.irs.gov/irb/2008-32_irb/ar14.html.
Qualified Liberty Zone property is nonresidential real property or residential rental property.
The following rules also apply.
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The 30% special depreciation allowance applies to qualified Liberty Zone property.
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You must have acquired qualified Liberty Zone property by purchase after September 10, 2001. If a binding contract to acquire the property existed before September 11, 2001, the property does not qualify.
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Qualified Liberty Zone property must be placed in service before January 1, 2010.
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The original use of the property within the Liberty Zone must begin with you.
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Substantially all (80% or more) of the use of the property must be in the Liberty Zone in the active conduct of your trade or business.
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For property you sold and leased back or for self-constructed property, special rules apply. See section 1400L(b)(2)(D).
Qualified GO Zone property, including specified GO Zone extension property (defined below), is nonresidential real property and residential rental property.
Specified GO Zone extension property is:
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Nonresidential real property or residential rental property placed in service in specified areas of the GO Zone (as defined in section 1400N(d)(6)(C)) before January 1, 2011, or
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Any of the following types of property placed in service in a building described above before January 1, 2011.
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Tangible property depreciated under MACRS with a recovery period of 20 years or less,
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Water utility property (see 25-year property on page 8),
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Computer software defined in and depreciated under section 167(f)(1), or
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Qualified leasehold improvement property.
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In addition, substantially all (80% or more) of the use of the property described in (a) through (d) above must be in the building and placed in service no later than 90 days after the building is placed in service.
For information, see section 1400N(d)(6) and Notice 2007-36, 2007-17 I.R.B. 1000 at
www.irs.gov/irb/2007-17_IRB/ar12.html.
The following rules also apply.
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The 50% special depreciation allowance applies to specified GO Zone extension property (defined above). For nonresidential real or residential rental property that is specified GO Zone extension property, only the adjusted basis of the property attributable to manufacture, construction, or production before January 1, 2010, is eligible for the special depreciation allowance.
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You must have acquired qualified GO Zone property, including specified GO Zone extension property (defined earlier), by purchase after August 27, 2005. If a binding contract to acquire the property existed before August 28, 2005, the property does not qualify.
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Qualified GO Zone property, other than specified GO Zone extension property (defined earlier), must be placed in service before January 1, 2009.
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The original use of the property within the GO Zone must begin with you after August 27, 2005.
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Substantially all (80% or more) of the use of the property must be in the GO Zone in the active conduct of your trade or business.
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For property you sold and leased back or for self-constructed property, special rules apply. See section 1400N(d)(3).
Qualified cellulosic biomass ethanol plant property is property used solely in the U.S. to produce cellulosic biomass ethanol. Cellulosic biomass ethanol is ethanol produced by hydrolysis of any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. For example, lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis includes bagasse (from sugar cane), corn stalks, and switchgrass.
Qualified cellulosic biofuel plant property is property used solely in the U.S. to produce cellulosic biofuel. Cellulosic biofuel is any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. For example, lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis includes bagasse (from sugar cane), corn stalks, and switchgrass.
The 50% special depreciation allowance applies to qualified cellulosic biomass ethanol plant property and qualified cellulosic biofuel plant property. The property must also meet the following requirements.
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The original use of the property must begin with you after December 20, 2006.
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You must have acquired the property by purchase after December 20, 2006. If a binding contract to acquire the property existed before December 21, 2006, the property does not qualify.
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Qualified cellulosic biomass ethanol property must be placed in service for use in your trade or business or for the production of income before January 1, 2013.
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Qualified cellulosic biofuel plant property must be placed in service for use in your trade or business or for the production of income after October 3, 2008, and before January 1, 2013.
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For property you sold and leased back or for self-constructed property, special rules apply. See section 168(l)(5).
Certain qualified property (defined below) acquired after December 31, 2007, is eligible for a 50% special depreciation allowance. If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify.
Qualified property includes the following.
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Tangible property depreciated under MACRS with a recovery period of 20 years or less.
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Water utility property (see 25-year property on page 8).
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Computer software defined in and depreciated under section 167(f)(1).
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Qualified leasehold improvement property.
Qualified property must also be placed in service before January 1, 2009 (before January 1, 2010, for certain property with a long production period and for certain aircraft). The original use of the property must begin with you after December 31, 2007.
Certain qualified reuse and recycling property (defined below) placed in service after August 31, 2008, is eligible for a 50% special depreciation allowance.
Qualified reuse and recycling property includes any machinery and equipment (not including buildings or real estate), along with any appurtenance, that is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials. This includes software necessary to operate such equipment. See section 168(m)(3) for more information.
Qualified reuse and recycling property must also meet all of the following tests.
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The property must be depreciated under MACRS.
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The property must have a useful life of at least 5 years.
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You must have acquired the property by purchase after August 31, 2008. If a binding contract to acquire the property existed before September 1, 2008, the property does not qualify.
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The property must be placed in service after August 31, 2008.
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The original use of the property must begin with you after August 31, 2008.
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For self-constructed property, special rules apply. See section 168(m)(2)(C).
Qualified reuse and recycling property does not include rolling stock or other equipment used to transport reuse and recyclable materials or any property to which section 168(g) or (k) applies.
You may be able to take a 50% special depreciation allowance for qualified disaster assistance property (defined below) placed in service in federally declared disaster areas in which the disaster occurred after December 31, 2007. A list of the federally declared disaster areas is available at the FEMA web site at www.fema.gov.
Qualified disaster assistance property is:
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Tangible property depreciated under MACRS with a recovery period of 20 years or less,
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Computer software defined in and depreciated under section 167(f)(1),
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Water utility property (see 25-year property on page 8),
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Qualified leasehold improvement property,
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Nonresidential real property, or
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Residential rental property.
Qualified disaster assistance property must also meet all of the following rules.
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The property must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the applicable federally declared disaster area.
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The property must be similar in nature to, and located in the same county as, the property being rehabilitated or replaced.
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Substantially all (80% or more) of the use of the property must be in the active conduct of your trade or business in a federally declared disaster area.
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You must have acquired the property by purchase on or after the applicable disaster date. If a binding contract to acquire the property existed before the applicable disaster date, the property does not qualify.
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The original use of the property within the applicable disaster area must begin with you on or after the applicable disaster date.
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The property is placed in service by you on or before the date which is the last day of the third calendar year following the applicable disaster date (the fourth calendar year in the case of nonresidential real property and residential rental property).
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For property you sold and leased back or for self-constructed property special rules apply. See section 168(n)(2)(C).
For more information, see Pub. 946.
Corporations and a certain automotive partnership may elect to claim pre-2006 unused research credits or minimum tax credits in lieu of claiming the special depreciation allowance for certain property (as defined in section 168(k)(4)(D)) acquired after March 31, 2008, and placed in service before January 1, 2009.
If the election is made, the taxpayer must not take the 50% special depreciation allowance for the property and must depreciate the basis in the property under MACRS using the straight line method. See Lines 19a Through 19i on page 7 for more information.
Once made, the election cannot be revoked without IRS consent.
For more information on making this election, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax—Corporations; and related instructions. Also, see section 168(k)(4).
Qualified property does not include:
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Listed property used 50% or less in a qualified business use (as defined in the instructions for lines 26 and 27),
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Any property required to be depreciated under the alternative depreciation system (ADS) (that is, not property for which you elected to use ADS),
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Qualified Liberty Zone leasehold improvement property,
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Property placed in service and disposed of in the same tax year,
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Property converted from business or income-producing use to personal use in the same tax year it is acquired, or
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Property for which you elected not to claim any special depreciation allowance.
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Any qualified restaurant property (as defined in section 168(e)(7)) placed in service after December 31, 2008.
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Any qualified retail improvement property (as defined in section 168(e)(8)) placed in service after December 31, 2008.
Qualified GO Zone property, including specified GO Zone extension property, also does not include:
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Any tax-exempt bond financed property under section 103,
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Any qualified revitalization building for which you have elected to deduct expenditures under section 1400I, or
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Any property described in section 1400N(p)(3).
In addition, qualified cellulosic biomass ethanol and cellulosic biofuel plant property does not include the following:
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Any tax-exempt bond financed property under section 103.
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Any property for which a deduction was taken under section 179C for certain qualified refinery property.
Qualified disaster assistance property does not include:
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Other bonus depreciation property to which section 168(k) or section 1400N(d) applies.
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Any property described in section 1400N(p)(3).
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Any tax-exempt bond financed property under section 103.
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Any qualified revitalization building for which you have elected to deduct expenditures under section 1400I(a).
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Any property to which section 168(g) applies.
See sections 168(k), 168(l), 168(m), 168(n), 1400L(b), and 1400N(d) for additional information. Also, see Pub. 946.
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Section 179 expense deduction.
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Deduction for removal of barriers to the disabled and the elderly.
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Disabled access credit.
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Enhanced oil recovery credit.
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Credit for employer-provided childcare facilities and services.
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Basis adjustment to investment credit property under section 50(c).
Note.
If you acquired qualified property through a like-kind exchange or involuntary conversion, the carryover basis and any excess basis of the acquired property is eligible for the special depreciation allowance. See Regulations section 1.168(k)-1(f)(5).
If you take the 30% or 50% special depreciation allowance, you must reduce the amount on which you figure your regular depreciation or amortization deduction by the amount deducted. Also, you will not have any AMT adjustment for the property if the depreciable basis of the property for the AMT is the same as for the regular tax.
Note.
If you elect not to have any special depreciation allowance apply, the property may be subject to an AMT adjustment for depreciation.
www.irs.gov/irb/2008-9_IRB/ar10.html for additional guidance on recapture of qualified GO Zone property.
Report on this line depreciation for property that you elect to depreciate under the unit-of-production method or any other
method not based on a term of years (other than the retirement-
replacement-betterment method).
Attach a separate sheet showing:
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A description of the property and the depreciation method you elect that excludes the property from MACRS or the Accelerated Cost Recovery System (ACRS); and
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The depreciable basis (cost or other basis reduced, if applicable, by salvage value, any section 179 expense deduction, deduction for removal of barriers to the disabled and the elderly, disabled access credit, enhanced oil recovery credit, credit for employer-provided childcare facilities and services, any special depreciation allowance, and any other applicable deduction or credit).
For additional credits and deductions that may affect the depreciable basis, see section 1016. Also, see section 50(c) to determine the basis adjustment for investment credit property.
Enter the total depreciation you are claiming for the following types of property (except listed property and property subject to a section 168(f)(1) election).
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ACRS property (pre-1987 rules). See Pub. 534.
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Property placed in service before 1981.
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Certain public utility property which does not meet certain normalization requirements.
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Certain property acquired from related persons.
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Property acquired in certain nonrecognition transactions.
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Certain sound recordings, movies, and videotapes.
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Property depreciated under the income forecast method. The use of the income forecast method is limited to motion picture films, videotapes, sound recordings, copyrights, books, and patents.
If you use the income forecast method for any property placed in service after September 13, 1995, you may owe interest or be entitled to a refund for the 3rd and 10th tax years beginning after the tax year the property was placed in service. For details, see Form 8866, Interest Computation Under the Look-Back Method for Property Depreciated Under the Income Forecast Method.
For property placed in service in the current tax year, you can either include certain participations and residuals in the adjusted basis of the property or deduct these amounts when paid. See section 167(g)(7). You cannot use this method to depreciate any amortizable section 197 intangible. See page 14 of the instructions for more details on section 197 intangibles.
You can elect to amortize all applicable expenses paid or incurred in the current year in creating or acquiring musical compositions or copyrights to musical compositions placed in service during the tax year. If you make the election, amortize the expenses ratably over a 5-year period beginning with the month the property is placed in service. See section 167(g)(8). This election does not apply to the following:
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Expenses that are qualified creative expenses under section 263A(h);
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Property to which a simplified procedure established under section 263A(j) applies;
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Property that is an amortizable section 197 intangible; or
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Expenses that would not be allowable as a deduction.
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Intangible property, other than section 197 intangibles, including:
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Computer software. Use the straight line method over 36 months. A longer period may apply to software leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership). See section 167(f)(1)(C).
If you elect the section 179 expense deduction or take the special depreciation allowance for qualified computer software, you must reduce the amount on which you figure your regular depreciation deduction by the amount deducted.
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Any right to receive tangible property or services under a contract or granted by a governmental unit (not acquired as part of a business).
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Any interest in a patent or copyright not acquired as part of a business.
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Residential mortgage servicing rights. Use the straight line method over 108 months.
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Other intangible assets with a limited useful life that cannot be estimated with reasonable accuracy. Generally, use the straight line method over 15 years. See Regulations section 1.167(a)-3(b) for details and exceptions.
Prior years' depreciation, plus current year's depreciation, can never exceed the depreciable basis of the property.
The term “Modified Accelerated Cost Recovery System” (MACRS) includes the General Depreciation System and the Alternative Depreciation System. Generally, MACRS is used to depreciate any tangible property placed in service after 1986. However, MACRS does not apply to films, videotapes, and sound recordings. For more details and exceptions, see Pub. 946.
For tangible property placed in service in tax years beginning before 2007 and depreciated under MACRS, enter the deductions for the current year. To figure the deductions, see the instructions for line 19, column (g).
To simplify the computation of MACRS depreciation, you can elect to group assets into one or more general asset accounts. The assets in each general asset account are depreciated as a single asset.
Each general asset account must include only assets that were placed in service during the same tax year with the same asset class (if any), depreciation method, recovery period, and convention. However, an asset cannot be included in a general asset account if the asset is used both for personal purposes and business/investment purposes.
When an asset in an account is disposed of, the amount realized generally must be recognized as ordinary income. The unadjusted depreciable basis and depreciation reserve of the general asset account are not affected as a result of a disposition.
Special rules apply to passenger automobiles, assets generating foreign source income, assets converted to personal use, certain asset dispositions, and like-kind exchanges or involuntary conversions of property in a general asset account. For more details, see Regulations section 1.168(i)-1.
To make the election, check the box on line 18. You must make the election on your return filed no later than the due date (including extensions) for the tax year in which the assets included in the general asset account were placed in service. Once made, the election is irrevocable and applies to the tax year for which the election is made and all later tax years.
For more information on depreciating property in a general asset account, see Pub. 946.
Instead of using the above rules, you can elect, for depreciation purposes, to treat the adjusted basis of the exchanged property as if it was disposed of at the time of the exchange or involuntary conversion. Generally, treat the carryover basis and excess basis, if any, for the acquired property as if placed in service on the date you acquired it. The depreciable basis of the new property is the adjusted basis of the exchanged or involuntarily converted property plus any additional amount paid for it. See Regulations section 1.168(i)-6(i).
To make the election, figure the depreciation deduction for the new property in Part III. For listed property, use Part V. Attach a statement indicating “Election made under section 1.168-6(i)” for each property involved in the exchange or involuntary conversion. The election must be made separately by each person acquiring replacement property (for example, by the partnership, by the S corporation, or by the common parent of a consolidated group). The election must be made on your timely filed return (including extensions). Once made, the election cannot be revoked without IRS consent.
If you trade in a vehicle used for employee business use, complete Form 2106, Part II, Section D, instead of Form 4562, to “elect out” of Regulations section 1.168(i)-6. If you do not “elect out,” you must use Form 4562 instead of Form 2106. See the Instructions for Form 2106.
Use lines 19a through 19i only for assets placed in service during the tax year beginning in 2008 and depreciated under the General Depreciation System (GDS), except for automobiles and other listed property (which are reported in Part V).
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A race horse that is more than 2 years old at the time it is placed in service before January 1, 2009.
Note.
Any race horse placed in service after December 31, 2008, and before January 1, 2014, is treated as 3-year property (regardless of the age of the race horse).
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Any horse (other than a race horse) that is more than 12 years old at the time it is placed in service.
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Any qualified rent-to-own property (as defined in section 168(i)(14)).
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Automobiles.
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Light general purpose trucks.
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Typewriters, calculators, copiers, and duplicating equipment.
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Any semi-conductor manufacturing equipment.
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Any computer or peripheral equipment.
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Any section 1245 property used in connection with research and experimentation.
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Certain energy property specified in section 168(e)(3)(B)(vi).
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Appliances, carpets, furniture, etc., used in a rental real estate activity.
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Any machinery or equipment (other than any grain bin, cotton ginning asset, fence, or other land improvement) used in a farming business (as defined in section 263A(e)(4)) where the original use begins with the taxpayer after December 31, 2008, and is placed in service before January 1, 2010.
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Office furniture and equipment.
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Railroad track.
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Any motorsports entertainment complex (as defined in section 168(i)(15)).
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Any natural gas gathering line (as defined in section 168(i)(17)) placed in service after April 11, 2005, the original use of which begins with you after April 11, 2005, and is not under self-construction or subject to a binding contract in existence before April 12, 2005. Also, no AMT adjustment is required.
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Any property that does not have a class life and is not otherwise classified.
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Vessels, barges, tugs, and similar water transportation equipment.
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Any single purpose agricultural or horticultural structure (see section 168(i)(13)).
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Any tree or vine bearing fruit or nuts.
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Any qualified smart electric meter property placed in service after October 3, 2008.
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Any qualified smart electric grid system property placed in service after October 3, 2008.
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Any municipal wastewater treatment plant.
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Any telephone distribution plant and comparable equipment used for 2-way exchange of voice and data communications.
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Any section 1250 property that is a retail motor fuels outlet (whether or not food or other convenience items are sold there).
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Any qualified leasehold improvement property.
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Any qualified restaurant property.
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Initial clearing and grading land improvements for gas utility property.
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Certain electric transmission property specified in section 168(e)(3)(E)(vii) placed in service after April 11, 2005, the original use of which begins with you after April 11, 2005, and is not under self-construction or subject to a binding contract in existence before April 12, 2005.
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Any natural gas distribution line placed in service after April 11, 2005, the original use of which begins with you after April 11, 2005, and is not under self-construction or subject to a binding contract in existence before April 12, 2005.
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Any qualified retail improvement property (as defined in section 168(e)(8)) placed in service after December 31, 2008.
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Farm buildings (other than single purpose agricultural or horticultural structures).
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Municipal sewers not classified as 25-year property.
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Initial clearing and grading land improvements for electric utility transmission and distribution plants.
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Property that is an integral part of the gathering, treatment, or commercial distribution of water that, without regard to this classification, would be 20-year property.
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Municipal sewers. This classification does not apply to property placed in service under a binding contract in effect at all times since June 9, 1996.
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Find the property's class life. See the Table of Class Lives and Recovery Periods in Pub. 946.
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Use the following table to find the classification in column (b) that corresponds to the class life of the property in column (a).
(a) Class life (in years) (See Pub. 946) |
(b) Classification |
4 or less | 3-year property |
More than 4 but less than 10 | 5-year property |
10 or more but less than 16 | 7-year property |
16 or more but less than 20 | 10-year property |
20 or more but less than 25 | 15-year property |
25 or more | 20-year property |
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Section 179 expense deduction.
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Deduction under section 179C for certain qualified refinery property.
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Deduction under section 179D for certain energy efficient commercial building property.
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Deduction for removal of barriers to the disabled and the elderly.
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Disabled access credit.
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Enhanced oil recovery credit.
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Credit for alternative fuel vehicle refueling property.
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Credit for employer-provided childcare facilities and services.
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Any special depreciation allowance included on line 14.
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Any basis adjustment for investment credit property. See section 50(c).
Recovery Period for Most Property
Classification | Recovery period |
3-year property | 3 yrs. |
5-year property | 5 yrs. |
7-year property | 7 yrs. |
10-year property | 10 yrs. |
15-year property | 15 yrs. |
20-year property | 20 yrs. |
25-year property | 25 yrs. |
Residential rental property | 27.5 yrs. |
Nonresidential real property | 39 yrs. |
Railroad gradings and tunnel bores | 50 yrs. |
For qualified Indian reservation property placed in service during the tax year, the following shorter recovery periods apply.
Recovery Period for Qualified
Indian Reservation Property
Property class | Recovery period |
3-year property | 2 yrs. |
5-year property | 3 yrs. |
7-year property | 4 yrs. |
10-year property | 6 yrs. |
15-year property | 9 yrs. |
20-year property | 12 yrs. |
Nonresidential real property | 22 yrs. |
For example, figure depreciation on 5-year property acquired during the tax year that is qualified Indian reservation property
in the same manner as depreciation is figured for 3-year property that is not qualified Indian reservation property. Report
the depreciation on line 19b, entering
“3 yrs.” as the recovery period in column (d).
For more information, including the definition of qualified property, see Pub. 946.
This convention applies to all property reported on lines 19a through 19g, unless the mid-quarter convention applies. It does not apply to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any tax year as placed in service (or disposed of) on the midpoint of that tax year. Enter “HY” in column (e).
If the total depreciable bases (before any special depreciation allowance) of MACRS property placed in service during the last 3 months of your tax year exceed 40% of the total depreciable bases of MACRS property placed in service during the entire tax year, the mid-quarter, instead of the half-year, convention generally applies.
In determining whether the mid-quarter convention applies, do not take into account the following.
-
Property that is being depreciated under a method other than MACRS.
-
Any residential rental property, nonresidential real property, or railroad gradings and tunnel bores.
-
Property that is placed in service and disposed of within the same tax year.
The mid-quarter convention treats all property placed in service (or disposed of) during any quarter as placed in service (or disposed of) on the midpoint of that quarter. However, no depreciation is allowed under this convention for property that is placed in service and disposed of within the same tax year. Enter “MQ” in column (e).
This convention applies only to residential rental property (line 19h), nonresidential real property (line 19i), and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month. Enter “MM” in column (e).
Note.
If you elected to accelerate pre-2006 unused research and minimum tax credits in lieu of special depreciation allowance for eligible property (as discussed on page 5), you must depreciate the basis in the property using the straight line method. Enter “S/L” in this column for the applicable property classification. If you are depreciating other property in the same classification as the property for which this election was made and using a different method, enter “Various” in this column.
-
3-, 5-, 7-, and 10-year property. Generally, the applicable method is the 200% declining balance method, switching to the straight line method in the first tax year that the straight line rate exceeds the declining balance rate.
Note.
The straight line method is the only applicable method for trees and vines bearing fruit or nuts. The 150% declining balance method is the only applicable method for any qualified smart electric meter or any qualified smart electric grid system property placed in service after October 3, 2008.
For 3-, 5-, 7-, or 10-year property eligible for the 200% declining balance method, you can make an irrevocable election to use the 150% declining balance method, switching to the straight line method in the first tax year that the straight line rate exceeds the declining balance rate. The election applies to all property within the classification for which it is made and that was placed in service during the tax year. You will not have an AMT adjustment for any property included under this election.
-
15- and 20-year property (not including qualified leasehold improvement, qualified restaurant property, or qualified retail improvement property), and property used in a farming business. The applicable method is the 150% declining balance method, switching to the straight line method in the first tax year that the straight line rate exceeds the declining balance rate.
-
Water utility property, residential rental property, nonresidential real property, qualified leasehold improvement property, qualified restaurant property, qualified retail improvement property placed in service after December 31, 2008, or any railroad grading or tunnel bore. The only applicable method is the straight line method.
Determine the depreciation rate as follows.
-
If you are using the 200% or 150% declining balance method in column (f), divide the declining balance rate (use 2.00 for 200 DB or 1.50 for 150 DB) by the number of years in the recovery period in column (d). For example, for property depreciated using the 200 DB method over a recovery period of 5 years, divide 2.00 by 5 for a rate of 40%. You must switch to the straight line rate in the first year that the straight line rate exceeds the declining balance rate.
-
If you are using the straight line method, divide 1.00 by the remaining number of years in the recovery period as of the beginning of the tax year (but not less than one). For example, if there are 6½ years remaining in the recovery period as of the beginning of the year, divide 1.00 by 6.5 for a rate of 15.38%.
Multiply the percentage rate determined in Step 1 by the property's unrecovered basis (basis for depreciation (as defined in column (c)) reduced by all prior years' depreciation).
For property placed in service or disposed of during the current tax year, multiply the result from Step 2 by the applicable decimal amount from the tables below (based on the convention shown in column (e)).
Half-year (HY) convention | 0.5 | |||
Mid-quarter (MQ) convention | ||||
Placed in service (or disposed of) during the: |
Placed in service |
Disposed of |
||
1st quarter | 0.875 | 0.125 | ||
2nd quarter | 0.625 | 0.375 | ||
3rd quarter | 0.375 | 0.625 | ||
4th quarter | 0.125 | 0.875 |
Mid-month (MM) convention | |||
Placed in service (or disposed of) during the: |
Placed in service |
Disposed of |
|
1st month | 0.9583 | 0.0417 | |
2nd month | 0.8750 | 0.1250 | |
3rd month | 0.7917 | 0.2083 | |
4th month | 0.7083 | 0.2917 | |
5th month | 0.6250 | 0.3750 | |
6th month | 0.5417 | 0.4583 | |
7th month | 0.4583 | 0.5417 | |
8th month | 0.3750 | 0.6250 | |
9th month | 0.2917 | 0.7083 | |
10th month | 0.2083 | 0.7917 | |
11th month | 0.1250 | 0.8750 | |
12th month | 0.0417 | 0.9583 |
Complete lines 20a through 20c for assets, other than automobiles and other listed property, placed in service only during the tax year beginning in 2008 and depreciated under the Alternative Depreciation System (ADS). Report on line 17 MACRS depreciation on assets placed in service in prior years.
Under ADS, use the applicable depreciation method, the applicable recovery period, and the applicable convention to compute depreciation.
The following types of property must be depreciated under ADS.
-
Tangible property used predominantly outside the United States.
-
Tax-exempt use property.
-
Tax-exempt bond financed property.
-
Imported property covered by an executive order of the President of the United States.
-
Property used predominantly in a farming business and placed in service during any tax year in which you made an election under section 263A(d)(3) not to have the uniform capitalization rules of section 263A apply.
Instead of depreciating property under GDS (line 19), you can make an irrevocable election for any classification of property for any tax year to use ADS. For residential rental and nonresidential real property, you can make this election separately for each property. You may make this election by completing line 20 of Form 4562.
These assets are 50-year property under ADS. There is no separate line to report 50-year property. Therefore, attach a statement showing the same information required in columns (a) through (g). Include the deduction in the line 22 “Total” and write “See attachment” in the bottom margin of the form.
-
Any section 179 expense deduction claimed on the property,
-
Any special depreciation allowance available for the property (unless you elected not to claim it),
-
Any deduction under section 179B for capital costs incurred in complying with Environmental Protection Agency sulfur regulations,
-
Any deduction under section 179C for certain qualified refinery property, and
-
Any deduction under section 179D for certain energy efficient commercial building property.
A partnership (other than an electing large partnership) or S corporation does not include any section 179 expense deduction (line 12) on this line. Instead, any section 179 expense deduction is passed through separately to the partners and shareholders on the appropriate line of their Schedules K-1.
If you are subject to the uniform capitalization rules of section 263A, enter the increase in basis from costs you must capitalize. For a detailed discussion of who is subject to these rules, which costs must be capitalized, and allocation of costs among activities, see Regulations section 1.263A-1.
If you claim the standard mileage rate, actual vehicle expenses (including depreciation), or depreciation on other listed property, you must provide the information requested in Part V, regardless of the tax year the property was placed in service. However, if you file Form 2106 or 2106-EZ, report this information on that form and not in Part V. Also, if you file Schedule C (Form 1040) or Schedule C-EZ (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation), and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C or in Part III of Schedule C-EZ and not on Form 4562.
The section 179 expense deduction should be computed before calculating any special depreciation allowance and/or regular depreciation deduction. See the instructions for line 26, column (i).
Listed property used 50% or less in a qualified business use (as defined in the instructions for lines 26 and 27 below) does not qualify for the section 179 expense deduction or special depreciation allowance.
If you placed in service certain qualified property after December 31, 2007, certain specified GO Zone extension property, qualified Recovery Assistance property, or qualified disaster assistance property during the tax year, you may be able to deduct an additional special depreciation allowance. See the instructions for line 14 for the definition of qualified property and how to figure the deduction. This special depreciation allowance is included in the overall limit on depreciation and section 179 expense deduction for passenger automobiles. See the tables on page 12 for limitations on passenger vehicles and trucks and vans. Enter on line 25 your total special depreciation allowance for all qualified listed property.
Use line 26 to figure depreciation for property used more than 50% in a qualified business use. Use line 27 to figure the depreciation for property used 50% or less in a qualified business use. Also see Limits for passenger automobiles on page 12.
If you acquired the property through a trade-in, special rules apply for determining the basis, recovery period, depreciation method, and convention. For more details, see on page 7. Also, see Regulations section 1.168(i)-6(d)(3).
-
Investment use.
-
Leasing the property to a 5% owner or related person.
-
The use of the property as compensation for services performed by a 5% owner or related person.
-
The use of the property as compensation for services performed by any person (who is not a 5% owner or related person), unless an amount is included in that person's income for the use of the property and, if required, income tax was withheld on that amount.
Excluding these uses above from the numerator, determine your percentage of qualified business use similar to the method used to figure the business/investment use percentage in column (c). Your percentage of qualified business use may be smaller than the business/investment use percentage.
For more information, including the definition of a 5% owner and related person and exceptions, see Pub. 946.
-
Automobiles and other vehicles.
-
Other listed property (computers and peripheral equipment, etc.).
For purposes of the limits for passenger automobiles, the following apply.
-
Passenger automobiles are 4-wheeled vehicles manufactured primarily for use on public roads that are rated at 6,000 pounds unloaded gross vehicle weight or less (for a truck or van, gross vehicle weight is substituted for unloaded gross vehicle weight).
-
Electric passenger automobiles are vehicles produced by an original equipment manufacturer and designed to run primarily on electricity, placed in service after August 5, 1997, and before January 1, 2007.
The following vehicles are not considered passenger automobiles.
-
An ambulance, hearse, or combination ambulance-hearse used in your trade or business.
-
A vehicle used in your trade or business of transporting persons or property for compensation or hire.
-
Any truck or van placed in service after July 6, 2003, that is a qualified nonpersonal use vehicle. A truck or van is a qualified nonpersonal use vehicle only if it has been specially modified with the result that it is not likely to be used more than a de minimis amount for personal purposes. For example, a van that has only a front bench for seating, in which permanent shelving has been installed, that constantly carries merchandise or equipment, and that has been specially painted with advertising or the company's name, is a vehicle not likely to be used more than a de minimis amount for personal purposes.
The business use requirement and the limits for passenger automobiles generally do not apply to passenger automobiles leased or held by anyone regularly engaged in the business of leasing passenger automobiles.
For a detailed discussion on passenger automobiles, including leased automobiles, see Pub. 463.
Table 1—Limits for Passenger Automobiles Placed in Service Before 2004
IF you placed your automobile in service: |
THEN the limit on your depreciation and section 179 expense deduction is: |
June 19—Dec. 31, 1984 | $6,000 |
Jan. 1—Apr. 2, 1985 | $6,200 |
Apr. 3, 1985—Dec. 31, 1986 | $4,800 |
Jan. 1, 1987—Dec. 31, 1990 | $1,475 |
Jan. 1, 1991—Dec. 31, 1992 | $1,575 |
Jan. 1, 1993—Dec. 31, 1994 | $1,675 |
Jan. 1, 1995—Dec. 31, 2003 | $1,775 |
Table 2—Limits for Passenger Automobiles Placed in Service After 2003
IF you placed your automobile in service: |
AND the number of tax years in which this automobile has been in service is: |
THEN the limit on your depreciation and section 179 expense deduction is: |
Jan. 1, 2004 — Dec. 31, 2005 | 4 or more | $1,675 |
Jan. 1 — Dec. 31, 2006 | 3 | $2,850 |
4 | $1,775 | |
Jan. 1 — Dec. 31, 2007 | 2 | $4,900 |
3 | $2,850 | |
Jan. 1— Dec. 31, 2008 | 1 | $2,960* |
2 | $4,800 | |
* If you elect to take the special depreciation allowance for qualified passenger automobiles placed in service in 2008, the limit is $10, 960. |
Table 3—Limits for Trucks and Vans Placed in Service After 2002
IF you placed your truck or van in service: |
AND the number of tax years in which this truck or van has been in service is: |
THEN the limit on your depreciation and section 179 expense deduction is: |
Jan. 1 — Dec. 31, 2003 | 4 or more | $1,975 |
Jan. 1, 2004 — Dec. 31, 2005 | 4 or more | $1,875 |
Jan. 1 — Dec. 31, 2006 | 3 | $3,150 |
4 | $1,875 | |
Jan. 1 — Dec. 31, 2007 | 2 | $5,200 |
3 | $3,050 | |
Jan. 1— Dec. 31, 2008 | 1 | $3,160* |
2 | $5,100 | |
* If you elect to take the special depreciation allowance for qualified trucks and vans placed in service in 2008, the limit is $11,160. |
Table 4—Limits for Electric Passenger Automobiles Placed in Service After August 5, 1997, and Before January 1, 2007
IF you placed your electric automobile in service: |
AND the number of tax years in which this automobile has been in service is: |
THEN the limit on your depreciation and section 179 expense deduction is: |
Aug. 6, 1997 — Dec. 31, 1998 | 4 or more | $5,425 |
Jan. 1, 1999 — Dec. 31, 2002 | 4 or more | $5,325 |
Jan. 1 — Dec. 31, 2003 | 4 or more | $5,225 |
Jan. 1, 2004 — Dec. 31, 2005 | 4 or more | $5,125 |
Jan. 1 — Dec. 31, 2006 | 3 | $8,650 |
4 | $5,225 |
Note.
The limit for automobiles (including trucks and vans) placed in service after December 31, 2008, will be published in the Internal Revenue Bulletin. These amounts were not available at the time these instructions were printed.
-
Designed to seat more than nine persons behind the driver's seat,
-
Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible directly from the passenger compartment, or
-
That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield.
Except as noted below, you must complete lines 30 through 36 for each vehicle identified in Section A. Employees must provide their employers with the information requested on lines 30 through 36 for each automobile or vehicle provided for their use.
Employers providing vehicles to their employees satisfy the employer's substantiation requirements under section 274(d) by maintaining a written policy statement that:
-
Prohibits personal use including commuting or
-
Prohibits personal use except for commuting.
An employee does not need to keep a separate set of records for any vehicle that satisfies these written policy statement rules.
For both written policy statements, there must be evidence that would enable the IRS to determine whether use of the vehicle meets the conditions stated below.
A policy statement that prohibits personal use (including commuting) must meet all of the following conditions.
-
The employer owns or leases the vehicle and provides it to one or more employees for use in the employer's trade or business.
-
When the vehicle is not used in the employer's trade or business, it is kept on the employer's business premises, unless it is temporarily located elsewhere (e.g., for maintenance or because of a mechanical failure).
-
No employee using the vehicle lives at the employer's business premises.
-
No employee may use the vehicle for personal purposes, other than de minimis personal use (e.g., a stop for lunch between two business deliveries).
-
Except for de minimis use, the employer reasonably believes that no employee uses the vehicle for any personal purpose.
A policy statement that prohibits personal use (except for commuting) is not available if the commuting employee is an officer, director, or 1% or more owner. This policy must meet all of the following conditions.
-
The employer owns or leases the vehicle and provides it to one or more employees for use in the employer's trade or business, and it is used in the employer's trade or business.
-
For bona fide noncompensatory business reasons, the employer requires the employee to commute to and/or from work in the vehicle.
-
The employer establishes a written policy under which the employee may not use the vehicle for personal purposes, other than commuting or de minimis personal use (e.g., a stop for a personal errand between a business delivery and the employee's home).
-
Except for de minimis use, the employer reasonably believes that the employee does not use the vehicle for any personal purpose other than commuting.
-
The employer accounts for the commuting use by including an appropriate amount in the employee's gross income.
An employer that provides more than five vehicles to its employees who are not 5% owners or related persons need not complete Section B for such vehicles. Instead, the employer must obtain the information from its employees and retain the information received.
An automobile meets the requirements for qualified demonstration use if the employer maintains a written policy statement that:
-
Prohibits its use by individuals other than full-time automobile salespersons,
-
Prohibits its use for personal vacation trips,
-
Prohibits storage of personal possessions in the automobile, and
-
Limits the total mileage outside the salesperson's normal working hours.
Each year you can deduct part of certain capital costs over a fixed period.
If you amortize property, the part you amortize does not qualify for the section 179 expense deduction or for depreciation.
Attach any information the Code and regulations may require to make a valid election. See the applicable Code section, regulations, and Pub. 535 for more information.
Complete line 42 only for those costs you amortize for which the amortization period begins during your tax year beginning in 2008.
You must amortize geological and geophysical expenses paid or incurred in connection with the exploration or development of oil and gas within the U.S. ratably over a 24-month period. For major integrated oil company (as defined in section 167(h)(5)), the costs paid or incurred after May 17, 2006, and before December 20, 2007, must be amortized ratably over a 5-year period (a 7-year period for costs paid or incurred after December 19, 2007), beginning on the mid-point of the tax year in which the expenses were paid or incurred. See section 167(h).
You can elect to amortize the cost of a certified pollution control facility over a 60-month period (84 months for certain atmospheric pollution control facilities placed in service after April 11, 2005). See section 169 and the related regulations for details and information required in making the election. See Pub. 535 for more information.
You can deduct a special depreciation allowance on a certified pollution control facility that is qualified property. However, you must reduce the amount on which you figure your amortization deduction by any special depreciation allowance allowed or allowable, whichever is greater.
Also, a corporation must reduce its amortizable basis of a pollution control facility by 20% before figuring the amortization deduction.
For individuals reporting amortization of bond premium for bonds acquired before October 23, 1986, do not report the deduction here. See the instructions for Schedule A (Form 1040), line 28.
For taxpayers (other than corporations) claiming a deduction for amortization of bond premium for bonds acquired after October 22, 1986, but before January 1, 1988, the deduction is treated as interest expense and is subject to the investment interest limitations. Use Form 4952, Investment Interest Expense Deduction, to compute the allowable deduction.
For taxable bonds acquired after 1987, you can elect to amortize the bond premium over the life of the bond. See section 171 and Regulations section 1.171-4 for more information. Individuals, also see Pub. 550, Investment Income and Expenses.
You can elect to either amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period. If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. For more information, see Pub. 535.
You can elect to deduct a limited amount of qualifying reforestation costs paid or incurred during the tax year for each qualified timber property. You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year.
If you are otherwise required to file Form T (Timber), Forest Activities Schedule, you can make the election to amortize qualifying reforestation costs by completing Part IV of the form. See the instructions for Form T for more information.
See Pub. 535 for more information on amortizing reforestation costs. Partnerships and S corporations, also see the instructions for line 44.
These amounts are certain capital expenditures that relate to a qualified revitalization building located in an area designated as a renewal community. The amount of qualified revitalization expenditures cannot exceed the commercial revitalization expenditure amount allocated to the qualified revitalization building by the commercial revitalization agency for the state in which the building is located.
You can elect to either: (a) deduct one-half of the expenditures for the year the building is placed in service; or (b) amortize all such expenditures ratably over the 120-month period beginning with the month the building is placed in service. Report any amortization on line 42. Report any deductions on the applicable “Other Deductions” or “Other Expenses” line of your return. This deduction is treated as depreciation for purposes of basis adjustments and ordinary income recapture upon disposition.
You can elect to amortize certain tax preference items over an optional period. If you make this election, there is no AMT adjustment for these expenditures. The applicable expenditures and the optional recovery periods are as follows:
-
Circulation expenditures (section 173) — 3 years,
-
Intangible drilling and development costs (section 263(c)) — 60 months, and
-
Research and experimental expenditures (section 174(a)), mining exploration and development costs (sections 616(a) and 617(a)) — 10 years.
For information on making the election, see Regulations section 1.59-1. Also see Pub. 535.
The following costs must be amortized over 15 years (180 months) starting with the later of (a) the month the intangibles were acquired or (b) the month the trade or business or activity engaged in for the production of income begins:
-
Goodwill;
-
Going concern value;
-
Workforce in place;
-
Business books and records, operating systems, or any other information base;
-
A patent, copyright, formula, process, design, pattern, know-how, format, or similar item;
-
A customer-based intangible (e.g., composition of market or market share);
-
A supplier-based intangible;
-
A license, permit, or other right granted by a governmental unit;
-
A covenant not to compete entered into in connection with the acquisition of a business; and
-
A franchise, trademark, or trade name (including renewals).
A longer period may apply to section 197 intangibles leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership). See section 197(f)(10).
A section 197 intangible is treated as depreciable property used in your trade or business. When you dispose of a section 197 intangible, any gain on the disposition, up to the amount of allowable amortization, is recaptured as ordinary income. If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, calculate the recapture as if all of the section 197 intangibles were a single asset. This rule does not apply to section 197 intangibles disposed of for which the fair market value exceeds the adjusted basis.
For more details on section 197 intangibles, see Pub. 535.
You can elect to amortize the following costs for setting up your business.
-
Business start-up costs (section 195).
-
Organizational costs for a corporation (section 248).
-
Organizational costs for a partnership (section 709).
For business start-up and organizational costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up or organizational costs for the year that your business begins. You are not required to attach a statement to make this election. Once made, the election is irrevocable. Any cost not deducted currently must be amortized ratably over a 180-month period. The amortization period starts with the month you begin business operations. See Temporary Regulations sections 1.195-1T and 1.248-1T.
For business start-up and organizational costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of start-up and organizational costs. If the election is made, you must attach any statement required by Regulations sections 1.195-1(b) and 1.248-1(c). Any costs not deducted currently can be amortized ratably over a 180-month period, beginning with the month you begin business.
Note.
You can apply the provisions of Temporary Regulations sections 1.195-1T and 1.248-1T to all expenses paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. Otherwise, the provisions under Regulations sections 1.195-1(b) and 1.248-1(c) will apply.
For business start-up and organizational costs paid or incurred before October 23, 2004, you can elect an amortization period of 60 months or more.
Attach any statements required by the appropriate section and related regulations to Form 4562 by the due date, including extensions, of your return for the year in which the active trade or business begins. If you have both start-up and organizational costs, attach a separate statement for each type of cost. If you timely filed your return without making the election, you can still make the election on an amended return filed within 6 months of the due date, excluding extensions, of the return. Write “Filed pursuant to section 301.9100-2” on the amended return. See Pub. 535 for more details.
These are costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. You may be able to amortize creative property costs for properties not set for production within 3 years of the first capitalized transaction. These costs are amortized ratably over a 15-year period under the rules of Rev. Proc. 2004-36, 2004-24 I.R.B. 1063.
-
Dividing the amount in column (c) by the number of months over which the costs are to be amortized and multiplying the result by the number of months in the amortization period included in your tax year beginning in 2008 or
-
Multiplying the amount in column (c) by the percentage in column (e).
If you are reporting the amortization of costs that began before your 2008 tax year and you are not required to file Form 4562 for any other reason, do not file Form 4562. Report the amortization directly on the “Other Deductions” or “Other Expenses” line of your return.
Report the total amortization, including the allowable portion of forestation or reforestation amortization, on the applicable “Other Deductions” or “Other Expenses” line of your return. For more details, including limitations that apply, see Pub. 535. Partnerships (other than electing large partnerships) and S corporations, report the amortizable basis of any forestation or reforestation expenses for which amortization is elected and the year in which the amortization begins as a separately stated item on Schedules K and K-1 (Form 1065 or 1120S). See the instructions for Schedule K (Form 1065 or 1120S) for more details on how to report.
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