Practical examples of Form 4562 Depreciation and Amortization
Real‑world examples of Form 4562 depreciation and amortization
Most guides start with definitions. Let’s skip the textbook and go straight to how people actually use this form. Once you see several examples of Form 4562 Depreciation and Amortization in context, the rules behind it make a lot more sense.
Below are different business types and asset purchases, each showing how they typically flow through Form 4562 and then onto a tax return.
Example of Form 4562 for a rideshare driver buying a car (Schedule C)
Imagine Alex, a self‑employed Uber and Lyft driver who buys a new car in 2024 for $38,000, used 80% for business.
Key facts:
- Cost of car: $38,000
- Business use: 80% (based on mileage log)
- Business portion: $30,400
- Placed in service: March 1, 2024
- Alex chooses actual expense method, not standard mileage
On Form 4562:
- Part V (Listed Property) is where the car details go, because passenger autos are considered listed property. Alex reports the cost, business use percentage, and confirms mileage records are kept.
- Part II (Special Depreciation Allowance and Other Depreciation) may come into play if Alex claims bonus depreciation, depending on current limits and the luxury auto rules.
- Part I (Section 179 Deduction) might be partially available, but passenger auto limits will cap how much can be expensed in year one.
In practice, Alex often ends up with a mix: a capped first‑year write‑off (Section 179 and/or bonus) and regular MACRS depreciation on the remaining basis. The exact numbers change every year because the IRS updates the luxury auto caps in annual guidance (see IRS publications and revenue procedures at irs.gov).
This is one of the best examples of Form 4562 Depreciation and Amortization in small business life, because it shows how business‑use percentage, listed property rules, and depreciation limits all collide on a single asset.
Rental property examples of Form 4562 Depreciation and Amortization
Rental real estate owners file Form 4562 all the time, usually attached to Schedule E. Here are two contrasting examples that highlight how buildings and improvements are handled.
Example 1: First‑time rental property owner
Dana buys a single‑family home in 2024 for $320,000 and starts renting it on July 1.
Key facts:
- Purchase price: $320,000
- Land value (non‑depreciable): $80,000 (based on property tax assessment)
- Building value: $240,000
- Placed in service: July 1, 2024
- Residential rental property (27.5‑year MACRS)
On Form 4562, Part III (MACRS Depreciation):
- Dana lists the building as “Residential rental property” with a 27.5‑year recovery period.
- The basis for depreciation is $240,000 (building only).
- Because the property was placed in service mid‑year, the mid‑month convention applies, and the first‑year depreciation is prorated.
The annual depreciation is about \(8,727 if it were a full year (\)240,000 ÷ 27.5). In year one, Dana only gets a partial amount based on the month placed in service, using the IRS MACRS tables.
This is a clean, textbook example of Form 4562 Depreciation and Amortization for long‑term assets: nothing fancy, just straight MACRS over decades.
Example 2: Rental property improvements and repairs
Now suppose in 2025, Dana adds a new roof and also repaints the interior.
Key facts:
- New roof cost: $18,000
- Interior paint: $2,000
- Roof: capital improvement
- Paint: typically a repair/maintenance expense
On Form 4562:
- The roof is a separate depreciable asset, generally treated as a 27.5‑year residential rental improvement under MACRS. Dana lists it in Part III with its own placed‑in‑service date and cost.
- The paint usually does not appear on Form 4562. It’s taken as a regular expense on Schedule E, because it doesn’t materially extend the life of the building.
This is one of the best examples of how Form 4562 interacts with the repair vs. improvement rules described in IRS Publication 527 (Residential Rental Property) and Publication 946 (How To Depreciate Property), both available at irs.gov.
Freelancer home office: computer, furniture, and software
Freelancers and remote workers often hit several lines on Form 4562 at once. Consider Taylor, a graphic designer filing Schedule C.
Key facts:
- New iMac for design work: $3,000 (100% business use)
- Office desk and ergonomic chair: $1,200
- Design software subscription: $600/year
- Placed in service: January 5, 2024
On Form 4562:
- Taylor may elect a Section 179 deduction in Part I to fully expense the iMac and furniture in year one, assuming income and overall Section 179 limits allow it.
- If Section 179 is not used or is limited, the iMac is depreciated over 5 years under MACRS, and the furniture over 7 years, both in Part III.
- The software subscription is usually treated as a current expense on Schedule C, not amortized, because it’s a recurring subscription, not a multi‑year intangible.
This scenario gives clear, practical examples of Form 4562 Depreciation and Amortization for small equipment and furniture, and shows how Section 179 can simplify bookkeeping by front‑loading deductions.
Startup costs and amortization examples
Form 4562 doesn’t just handle physical stuff like cars and buildings. It’s also where you report amortization of certain intangible costs.
Example of amortizing startup costs
Jordan launches a consulting business in 2024 and incurs:
- $7,000 in market research and advertising before opening
- $3,000 in legal and accounting fees to set up the LLC
Total startup costs: $10,000.
Under current rules, Jordan can typically deduct up to $5,000 of startup costs in the first year, with the remainder amortized over 180 months (15 years). The election and amortization details show up on Form 4562, Part VI (Amortization).
On Form 4562:
- Jordan lists the remaining $5,000 as an amortizable asset with a 180‑month recovery period.
- The annual amortization amount is calculated and carried to the return (usually Schedule C or the business return like Form 1065 or 1120‑S).
This is a straightforward example of Form 4562 Depreciation and Amortization for startup costs, and it’s one that many new businesses miss, leaving money on the table.
Example of amortizing a franchise fee
Now consider Priya, who buys a franchise in 2024 and pays a one‑time franchise fee of $60,000 for a 10‑year term.
On Form 4562, Part VI:
- Priya lists the franchise fee as an intangible asset.
- For tax purposes, many intangibles are amortized over 15 years, even if the contract term is shorter. The specifics depend on the nature of the right and current IRS rules.
This gives another set of real examples of Form 4562 Depreciation and Amortization that move beyond buildings and vehicles and into the world of intangibles.
Section 179 vs. bonus depreciation: blended examples
Tax law changes over the last decade have made Form 4562 more dynamic, not less. Section 179 expensing and bonus depreciation have been especially important from 2018 onward.
As of the mid‑2020s, bonus depreciation is phasing down from the 100% rate that applied in earlier years. Section 179 limits are indexed for inflation and adjusted regularly by the IRS. For current numbers, the safest move is to check the latest instructions for Form 4562 and Publication 946 at irs.gov.
Here’s a blended scenario that shows how all of this can appear on one form.
Example: Small manufacturing shop upgrade
Sam runs a small manufacturing shop and in 2024 buys:
- CNC machine: $150,000
- Office computer system: $8,000
- Warehouse lighting upgrade: $12,000 (qualifies as improvement to nonresidential property)
On Form 4562:
- Part I (Section 179): Sam elects to expense the entire \(8,000 of office computers and \)12,000 of lighting under Section 179, assuming enough taxable income and staying under the overall Section 179 cap.
- Part II (Special Depreciation / Bonus): Sam may claim bonus depreciation on the CNC machine if eligible and advantageous, especially if Section 179 is limited by income or the overall investment cap.
- Part III (MACRS): Any remaining basis in the CNC machine after Section 179 and bonus is depreciated over its regular recovery period.
This is one of the best examples of examples of Form 4562 Depreciation and Amortization because it shows:
- How Section 179 is elected asset‑by‑asset.
- How bonus depreciation can complement or replace Section 179.
- How remaining basis flows into standard MACRS schedules.
2024–2025 trends that affect how your examples look
The core structure of Form 4562 hasn’t changed dramatically, but the numbers and percentages behind your calculations do. Recent trends that shape real examples of Form 4562 Depreciation and Amortization include:
- Phase‑down of bonus depreciation: After years at 100%, bonus depreciation rates are stepping down in stages. That means some 2024–2025 assets that used to be fully expensed in year one now generate partial bonus plus MACRS.
- Inflation‑adjusted Section 179 limits: The maximum Section 179 deduction and the phase‑out threshold are adjusted annually for inflation. This especially affects mid‑sized businesses buying large amounts of equipment.
- Greater IRS focus on listed property: Vehicles, in particular, continue to attract IRS scrutiny. Good mileage logs and business‑use documentation matter if you want your examples of Form 4562 Depreciation and Amortization to survive an audit.
- More digital and cloud assets: As more businesses move to SaaS and cloud‑based tools, fewer costs are amortized as traditional software, and more are expensed as ongoing services.
For up‑to‑date technical detail, the IRS’s own resources are the reference point:
Pulling it together: how to recognize your own situation
If you’re trying to match your facts to the best examples of Form 4562 Depreciation and Amortization, start with three questions:
- What did you buy? A car, building, equipment, computer, or intangible right?
- How long will it last? A few years, 5–7 years, or decades? That drives the MACRS or amortization period.
- Do you want to front‑load the deduction? If you have strong income now and expect lower income later, Section 179 and bonus depreciation may be attractive.
Look back at the rideshare car, rental property, freelancer office, startup costs, franchise fee, and manufacturing shop examples. Most real‑world scenarios are some variation of those six. Once you see where your facts line up, Form 4562 stops feeling abstract and starts looking like a checklist: identify the asset, pick the method, apply the percentage, and carry the number to the right line on your return.
And if your situation doesn’t match any of these examples of examples of Form 4562 Depreciation and Amortization, that’s usually a sign you’re dealing with something specialized enough to justify a conversation with a tax professional.
FAQ: examples of Form 4562 Depreciation and Amortization
Q: Can you give a quick example of Form 4562 for a single laptop purchase?
Yes. Suppose a self‑employed consultant buys a \(1,500 laptop in 2024, used 100% for business. They can usually elect to expense the full \)1,500 under Section 179 on Form 4562, Part I, as long as they have enough business income. If they skip Section 179, the laptop is depreciated over 5 years in Part III using MACRS.
Q: Do I need Form 4562 for every asset I buy?
Not always. Small, short‑lived items that are expensed immediately under your accounting policy and tax rules may never appear on Form 4562. The form is used when you claim depreciation, amortization, Section 179, or bonus depreciation for property with a useful life beyond the current year.
Q: What are common examples of assets that go in the amortization section?
Typical examples include startup costs that exceed the immediate deduction limit, certain organizational costs for corporations and partnerships, some franchise fees, and specific purchased intangibles. These are reported in Part VI, with a description, cost, start date, and recovery period.
Q: Is a home office itself reported on Form 4562?
Usually not. The simplified home office method doesn’t touch Form 4562. If you use the actual expense method, the building depreciation for the home office portion can be computed using MACRS rules and may appear on Form 4562, but many tax software packages handle the behind‑the‑scenes math for you.
Q: Where can I see official IRS examples of Form 4562 Depreciation and Amortization?
The IRS often includes sample calculations and tables in Publication 946 and in the Instructions for Form 4562 at irs.gov. While they’re more technical than narrative, they provide authoritative examples of how the agency expects depreciation and amortization to be computed and reported.