What Is Form 4562? Best Guide for Business Owners in 2025

When it comes to maximizing tax deductions, business owners need to know their way around IRS forms.

One crucial form that can help reduce taxable income is Form 4562. But what is form 4562 for business owners and what is its impact?

Form 4562 is used to claim deductions for depreciation and amortization.

It allows you to expense certain assets upfront, spread out deductions over time, and take advantage of tax-saving opportunities.

If you’re wondering what is form 4562 and how to fill it out correctly, doola Bookkeeping has you covered. From managing depreciation schedules to ensuring accurate IRS filings, we simplify bookkeeping, so you can focus on growing your business while staying tax-compliant.

This guide will break it all down for you.

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What Is Form 4562?

If you’re a business owner looking to maximize tax deductions, understanding what is form 4562 is essential. Form 4562 is an IRS tax form used to claim deductions for depreciation and amortization on business assets.

These deductions help businesses recover the cost of tangible property—such as equipment, machinery, and vehicles—over time, reducing taxable income.

But what is form 4562 “beyond just deductions”? It enables businesses to optimize their tax strategy by expensing certain assets upfront or spreading deductions over several years, ultimately freeing up capital for growth and reinvestment.

Still wondering what is form 4562, its implications for your business, and where to find it?

You can learn everything about the form on the official IRS website.

Who Needs to File Form 4562?

If you’re wondering what is form 4562 and whether you need to file it, the answer depends on your business assets.

What is form 4562 used for? It’s required for businesses and self-employed individuals who claim depreciation and amortization deductions.

Here are key situations where filing this form is necessary:

1. Businesses that acquire depreciable assets: If your company purchased new or used equipment, machinery, or property exceeding a certain cost threshold, you’ll need to file Form 4562.

2. Self-employed individuals: If you deduct depreciation on work-related property, this form ensures accurate tax reporting.

3. Companies using the Section 179 deduction: Businesses that expense qualifying property upfront instead of depreciating it over time must include Form 4562 in their tax filings.

4. Businesses with amortizable intangible assets: If you own patents, trademarks, or goodwill, Form 4562 is necessary for amortization deductions.

5. Organizations with listed property: If you use business vehicles or other assets for both personal and work-related purposes, this form helps allocate depreciation correctly.

Now that you know what is form 4562 and who needs to file it, let’s break down how to use it effectively.

📌 Download form 4562 to get started.

5 Hacks to Maximize Your Form 4562 Tax Savings

Let’s now discuss what is form 4562 and how to use it to your advantage. These 5 hacks can help you maximize your tax savings:

Leverage the Section 179 Deduction

Instead of spreading deductions over several years, businesses can expense the full cost of qualifying assets in the year of purchase. This is one of the biggest tax-saving opportunities on form 4562.

Take Advantage of Bonus Depreciation

Wondering what is Form 4562 beyond standard depreciation? It allows businesses to claim an immediate 80% depreciation deduction on eligible assets in the first year, significantly reducing taxable income.

Track Business Use Percentage for Vehicles

If a vehicle is used for both business and personal purposes, keeping a detailed log ensures you claim the maximum allowable deduction without triggering IRS red flags.

Utilize MACRS for Higher Initial Deductions

The Modified Accelerated Cost Recovery System (MACRS) lets businesses deduct more in the early years of an asset’s life, boosting cash flow when it matters most.

Don’t Overlook Amortization

Intangible assets like patents and trademarks qualify for amortization, allowing businesses to deduct their costs over time and lower taxable income.

Mastering Form 4562 can unlock major tax advantages—so make sure you’re using it strategically!

Understanding Depreciation and Amortization

To understand what is form 4562 and its business implications better, you need to get familiar with “depreciation” and “amortization” first.

These are methods used to spread out the cost of assets over time, reducing taxable income strategically:

What Is Depreciation?

Depreciation is the process of deducting the cost of tangible business assets—such as equipment, vehicles, and machinery—over their useful life instead of expensing them all at once. This helps businesses manage cash flow and reduce taxable income gradually.

Form 4562 is used to report depreciation deductions, allowing businesses to claim benefits under Section 179, bonus depreciation, and the Modified Accelerated Cost Recovery System (MACRS).

What Is Amortization?

Amortization is the process of deducting the cost of intangible assets—such as patents, trademarks, copyrights, and goodwill—over a fixed period, typically the asset’s useful life. Unlike depreciation, which applies to physical assets:

Amortization spreads out the expense of intangible investments to reduce taxable income gradually.

Form 4562 is used to report these deductions, ensuring businesses can claim amortization expenses properly and optimize their tax savings while staying IRS-compliant.

How to Fill Out Form 4562: Step-by-Step Guide

Now that you’ve understood what is form 4562 and its business impact, let’s help you fill it out correctly to reduce your taxable income.

Here’s a breakdown of its key sections:

Section 1: Section 179 Expense Deduction

This allows businesses to deduct the full cost of qualifying assets, such as equipment and machinery, in the year of purchase instead of spreading it over several years.

Section 2: Special Depreciation Allowance

Businesses can claim an additional deduction for certain new assets acquired during the tax year, providing immediate tax relief.

Section 3: MACRS Depreciation

The Modified Accelerated Cost Recovery System (MACRS) is the primary method of depreciation, allowing larger deductions in the earlier years of an asset’s lifespan to maximize tax savings.

Sections 4 & 5: Listed Property and Amortization

• Listed Property covers assets used for both business and personal purposes, like vehicles and electronics.

• Amortization applies to intangible assets, such as patents and trademarks, letting businesses deduct their costs gradually over time.

Accurately completing Form 4562 ensures you claim the right deductions while staying IRS-compliant.

Want to simplify the process? doola Bookkeeping helps businesses manage asset tracking, depreciation schedules, and tax filings with ease.

Section 179 Deduction vs. Standard Depreciation

When purchasing business equipment or assets, understanding how to deduct their cost can significantly impact your bottom line.

Two common methods—Section 179 deduction and standard depreciation—offer different approaches to tax savings.

Choosing the right one depends on your financial goals and cash flow needs.

📌 What Is Section 179 Deduction?

This tax provision allows businesses to immediately expense the full cost of qualifying assets—such as equipment, machinery, or software—in the year the purchase is made.

It’s like a bonus for businesses that invest in their growth by letting them claim an entire deduction in one go.

📌 What Is Standard Depreciation?

Unlike Section 179, standard depreciation requires businesses to spread the cost of their asset deductions over multiple years.

Depending on the asset, this can mean taking small deductions annually for a number of years, often reducing the immediate tax benefit.

For many small businesses, Section 179 is a game-changer and a preferred strategy.

It provides an opportunity to maximize tax savings upfront, which can be especially helpful for companies looking to reinvest in their operations. By expensing the entire asset cost in the first year, businesses can free up cash flow, making it easier to fund future growth and development.

Next, let’s discuss some common mistakes business owners make when filing Form 4562—and how to avoid them.

Common Mistakes to Avoid When Filing Form 4562

When filing Form 4562, it’s important to steer clear of common pitfalls that could cost your business valuable deductions.

Here are some mistakes to watch out for:

❌ Incorrect Asset Classification:

Not all assets are eligible for accelerated depreciation. Make sure to properly classify your assets to avoid errors in your deduction claims.

❌ Missing Business Use Percentage:

For vehicles and other listed property, you must track the business use percentage accurately. Failing to do so could result in incorrect depreciation calculations.

❌ Not Keeping Proper Records:

To back up your depreciation claims, it’s crucial to maintain thorough and accurate records. Without proper documentation, you risk an audit and disallowance of your deductions.

❌ Overlooking Bonus Depreciation:

Many businesses miss out on additional savings by not taking full advantage of bonus depreciation, which allows for immediate deductions on certain qualified property.

❌ Failing to File on Time:

Missing the filing deadline for Form 4562 can lead to missed deductions and potential penalties. Staying on top of deadlines is key to maximizing your tax benefits.

As you see, comprehending what is form 4562 is not enough. You also need to avoid these mistakes to fully leverage the tax benefits available to your business.

How Form 4562 Affects Your Tax Return

To fully understand what is form 4562 used for, you need to learn how it impacts your tax return. Here’s a breakdown of how it fits into your tax filing

📌 Where to Report Depreciation on Business Tax Forms

• For sole proprietors and single-member LLCs, depreciation is reported on Schedule C of your personal tax return (Form 1040).

• For corporations and partnerships, depreciation is reported on the appropriate business tax return forms (such as Form 1120 for corporations or Form 1065 for partnerships).

📌 How It Impacts Taxable Income and Liability

Claiming depreciation through Form 4562 helps businesses reduce their taxable income, which in turn lowers their overall tax liability. This reduction means businesses can keep more of their profits, giving them the opportunity to reinvest in operations, growth, and future opportunities.

Filing Form 4562: Paper vs. E-Filing

When claiming depreciation and amortization deductions, filing Form 4562 correctly is crucial to avoid errors and delays. But should you file electronically or stick with a paper submission?

Let’s break down the steps and requirements for both methods.

Steps to Submit Form 4562 with Your Tax Return

1. Complete Form 4562 accurately, ensuring all assets are properly categorized.

2. Attach the form to your federal tax return.

3. Submit the return via mail or e-file using IRS-approved software.

IRS Requirements for Electronic vs. Manual Filing

Choosing between electronic and manual filing impacts processing times and accuracy. Let’s explore both the options:

E-Filing is recommended for faster processing, automatic error checks, and quicker IRS confirmations.

Manual Filing requires mailing a paper copy, which can lead to delays and potential errors due to manual data entry.

doola Bookkeeping streamlines IRS paperwork, ensuring that all your financial records are accurate, organized, and compliant.

With doola by your side, you won’t have to stress about deadlines or missing forms—our expert team ensures timely submission, so you can stay focused on growing your business with confidence.

Simplify Tax Compliance With doola Bookkeeping

While form 4562 helps businesses reduce taxable income through depreciation, managing depreciation schedules, amortization, and tax filings can quickly become overwhelming.

That’s where doola Bookkeeping steps in to simplify the process and ensure you stay on top of your finances.

With doola, you get access to a full suite of bookkeeping services, including:

Accurate Asset and Expense Tracking: We ensure all your business assets are properly recorded, making it easy to claim deductions when filing Form 4562.

Maximizing Tax Deductions: Our team of experts uses proven strategies to help you maximize tax savings and keep more money in your pocket.

IRS Compliance Made Easy: Say goodbye to the hassle of manual tracking. We handle the details, so you can focus on growing your business while staying IRS-compliant.

Don’t let the complexity of tax forms like Form 4562 hold you back!

Book a demo with doola today and discover how we can streamline your bookkeeping, so you can focus on what matters most—growing your business.