For an enterprise zone business or a renewal community business, the maximum section 179 expense deduction of $100,000 is increased by the smaller of:

For qualified New York Liberty Zone (Liberty Zone) property, the maximum section 179 expense deduction is increased by the smaller of:

If applicable, cross out the preprinted entry on line 1 and enter in the margin the larger amount. For the definitions of enterprise zone business and qualified zone property, see sections 1397C and 1397D. For the definitions of renewal community business and qualified renewal property, see sections 1400G and 1400J(b). For the definition of qualified Liberty Zone property, see section 1400L(b)(2).

Enter the cost of all section 179 property placed in service during the tax year. Include amounts from any listed property from Part V. Also include any section 179 property placed in service by your spouse, even if you are filing a separate return.

Include on this line only 50% of the cost of section 179 property that is also qualified zone property, qualified renewal property, or qualified Liberty Zone property.

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 2002 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%.

The carryover of disallowed deduction from 2002 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 2002, enter the amount from line 13 of your 2002 Form 4562.

The section 179 expense deduction is limited by the “business income” limitation under section 179(b)(3).

For purposes of the rules that follow:

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 aggregate 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.

Enter on line 14 your total special depreciation allowance for all qualified property (other than listed property).

For qualified property (defined below) placed in service after May 5, 2003, an additional 50% special depreciation allowance applies for the first year the property is placed in service. You must have acquired the property after May 5, 2003. If a binding contract to acquire the property existed before May 6, 2003, the property does not qualify. Figure the 50% special allowance by multiplying the depreciable basis (see below) of the property by 50%.

For qualified property (defined below) placed in service during the tax year (for which the 50% special allowance does not apply), an additional 30% special depreciation allowance applies for the first year the property is placed in service. You must have acquired the property after September 10, 2001. If a binding contract to acquire the property existed before September 11, 2001, the property does not qualify. Figure the 30% special allowance by multiplying the depreciable basis of the property by 30%.

To figure the depreciable basis, subtract from the business/investment portion of the cost or other basis of the property the total of the following amounts allocable to the property.

For purposes of the 30% or 50% special allowances, qualified property is:

For purposes of the additional 30% special allowance, qualified property is also qualified Liberty Zone property (defined in section 1400L(b)(2)), other than qualified Liberty Zone leasehold improvement property, not otherwise treated as qualified property.

Qualified property also must meet the following rules.

Qualified property does not include:

If you take the 30% or 50% special 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.

Report on this line depreciation for property that you elect, under section 168(f)(1), 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:

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).

See section 167(f) for more details.

Prior years' depreciation, plus current year's depreciation, can never exceed the depreciable basis of the property.

The basis and amounts claimed for depreciation should be part of your permanent books and records. No attachment is necessary.

For tangible property placed in service in tax years beginning before 2003 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 may elect to group assets into one or more general asset accounts under section 168(i)(4). The assets in each general asset account are depreciated under MACRS as a single asset.

Each 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, and certain asset dispositions. 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.

Use lines 19a through19i only for assets placed in service during the tax year beginning in 2003 and depreciated under the General Depreciation System (GDS), except for automobiles and other listed property (which are reported in Part V).

Complete lines 20a through 20c for assets, other than automobiles and other listed property, placed in service only during the tax year beginning in 2003 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.

Instead of depreciating property under GDS (line 19), you may make an irrevocable election with respect to any classification of property for any tax year to use ADS. For residential rental and nonresidential real property, you may make this election separately for each 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.

An additional 30% special depreciation allowance (or an additional 50% special depreciation allowance for property acquired after May 5, 2003) is allowed for qualified property placed in service during the tax year. 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. However, the limit is increased for passenger automobiles (except for qualified Liberty Zone property) for which the special depreciation allowance is claimed. See the instructions for lines 26 and 27 for details on the limit. Enter on line 25 your total special depreciation allowance for all listed property.

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:

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.

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.

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:

Complete line 42 only for those costs for which the amortization period begins during your tax year beginning in 2003.

If you are reporting the amortization of costs that began before your 2003 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. See Pub. 535.

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.