Depreciation and Amortization
Form 4562 : Depreciation and Amortization is an Internal Revenue Service (IRS) form used to claim deductions for the depreciation or amortization of an asset or piece of property for tax filing purposes.
When individuals or businesses purchase property to use in their business, the IRS does not allow them to claim the full cost as a business deduction in the first year. However, they can deduct a portion of their costs each year by claiming a depreciation deduction and reporting it on IRS Form 4562.
Individuals and businesses can claim deductions for both tangible assets such as a building and intangible assets such as a patent. Section 179 property, which is actively used to conduct business, cannot include investment property, hotels, or property primarily held abroad.
What is MACRS Depreciation?
MACRS depreciation is the tax depreciation system used in the United States. MACRS is an acronym for Modified Accelerated Cost Recovery System. Under MACRS, fixed assets are assigned to a specific asset class, which has a designated depreciation period associated with it. The Internal Revenue Service has published a complete set of depreciation tables for each of these classes. The classes are noted in the following table.