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If you purchase property to use in your business, you can deduct a portion of your costs each year by claiming a depreciation deduction and reporting it on IRS Form 4562. The amount you can deduct on Form 4562 will vary depending on the estimated useful life for each piece of property.
Who Must File. Except as otherwise noted, complete and file Form 4562 if you are claiming any of the following. Depreciation for property placed in service during the 2023 tax year. A section 179 expense deduction (which may include a carryover from a previous year).
Depreciation is a deduction that allows the investor to recoup the cost of assets (in this case, the rental property) used as a source of income. Whether or not you choose to take depreciation doesnt matter to the IRS.
IRS Form 4562 is used to claim deductions for the depreciation or amortization of tangible or intangible property. Assets such as buildings, machinery, equipment (tangible), or patents (intangible) qualify. Land cannot depreciate, and so it can not be reported on the form.
Go to .irs.gov/Form4562 for instructions and the latest information. Note: If you have any listed property, complete Part V before you complete Part I. 7 Listed property.
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If you took the special depreciation allowance the first year you placed an item in service, enter the amount of special or bonus depreciation taken in the Prior Special Depreciation field. This amount is shown on the previous years tax return (Depreciation Statement in the Bonus Depreciation column).
Youll need to fill out Form 4562 if youre doing any of the below: Deducting depreciation for property, vehicles, or any other large used throughout that tax year. A deduction for any vehicle reported on a form other than Schedule C (Form 1040) or Schedule C-EZ (Form 1040)