| Instructions for Form 4562 |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Use Form 4562 to:
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Claim your deduction for depreciation and amortization,
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Make the election under section 179 to expense certain property, and
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Provide information on the business/investment use of automobiles and other listed property.
Except as otherwise noted, complete and file Form 4562 if you are claiming any of the following.
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Depreciation for property placed in service during the 2006 tax year.
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A section 179 expense deduction (which may include a carryover from a previous year).
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Depreciation on any vehicle or other listed property (regardless of when it was placed in service).
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A deduction for any vehicle reported on a form other than Schedule C (Form 1040), Profit or Loss From Business, or Schedule
C-EZ (Form
1040), Net Profit From Business.
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Any depreciation on a corporate income tax return (other than Form 1120S).
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Amortization of costs that begins during the 2006 tax year.
If you are an employee deducting job-related vehicle expenses using either the standard mileage rate or actual expenses, use
Form 2106, Employee
Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, for this purpose.
File a separate Form 4562 for each business or activity on your return for which Form 4562 is required. If you need more space,
attach additional
sheets. However, complete only one Part I in its entirety when computing your section 179 expense deduction. See the instructions
for line 12 on page
3.
For more information about depreciation and amortization (including information on listed property) see the following.
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Pub. 463, Travel, Entertainment, Gift, and Car Expenses.
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Pub. 534, Depreciating Property Placed in Service Before 1987.
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Pub. 535, Business Expenses.
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Pub. 553, Highlights of 2006 Tax Changes.
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Pub. 551, Basis of Assets.
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Pub. 946, How To Depreciate Property.
Depreciation is the annual deduction that allows you to recover the cost or other basis of your business or investment property
over a certain
number of years. Depreciation starts when you first use the property in your business or for the production of income. It
ends when you either take
the property out of service, deduct all your depreciable cost or basis, or no longer use the property in your business or
for the production of
income.
Generally, you can depreciate:
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Tangible property such as buildings, machinery, vehicles, furniture, and equipment; and
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Intangible property such as patents, copyrights, and computer software.
Exception.
You cannot depreciate land.
Section 179 property is property that you acquire by purchase for use in the active conduct of your trade or business, and
is one of the following.
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Tangible personal property.
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Other tangible property (except buildings and their structural components) used as:
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An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity,
gas, water, or
sewage disposal services;
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A research facility used in connection with any of the activities in (1) above; or
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A facility used in connection with any of the activities in (1) above for the bulk storage of fungible commodities.
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Single purpose agricultural (livestock) or horticultural structures.
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Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any
primary product
of petroleum.
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Off-the-shelf computer software.
Section 179 property does not include the following.
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Property held for investment (section 212 property).
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Property used mainly outside the United States (except for property described in section 168(g)(4)).
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Property used mainly to furnish lodging or in connection with the furnishing of lodging (except as provided in section
50(b)(2)).
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Property used by a tax-exempt organization (other than a section 521 farmers' cooperative) unless the property is used mainly
in a taxable
unrelated trade or business.
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Property used by a governmental unit or foreign person or entity (except for property used under a lease with a term of less
than 6
months).
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Air conditioning or heating units.
See the instructions for Part I and Pub. 946.
Amortization is similar to the straight line method of depreciation in that an annual deduction is allowed to recover certain
costs over a fixed
time period. You can elect to amortize such items as the costs of starting a business, goodwill, and certain other intangibles.
See the instructions
for Part VI.
Listed property generally includes the following.
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Passenger automobiles weighing 6,000 pounds or less. See Limits for passenger automobiles on page 9.
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Any other property used for transportation if the nature of the property lends itself to personal use, such as motorcycles,
pick-up trucks,
sport utility vehicles, etc.
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Any property used for entertainment or recreational purposes (such as photographic, phonographic, communication, and video
recording
equipment).
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Cellular telephones (or other similar telecommunications equipment).
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Computers or peripheral equipment.
Exception.
Listed property does not include:
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Photographic, phonographic, communication, or video equipment used exclusively in a taxpayer's trade or business or at the
taxpayer's
regular business establishment;
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Any computer or peripheral equipment used exclusively at a regular business establishment and owned or leased by the person
operating the
establishment; or
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An ambulance, hearse, or vehicle used for transporting persons or property for hire.
For purposes of the exceptions above, a portion of the taxpayer's home is treated as a regular business establishment
only if that portion meets
the requirements for deducting expenses attributable to the business use of a home. However, for any property listed in (1)
above, the regular
business establishment of an employee is his or her employer's regular business establishment.
Generally, commuting is travel between your home and a work location. However, travel that meets any of the following conditions
is not commuting.
-
You have at least one regular work location away from your home and the travel is to a temporary work location in the same
trade or
business, regardless of the distance. Generally, a temporary work location is one where your employment is expected to last
1 year or less. See Pub.
463 for details.
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The travel is to a temporary work location outside the metropolitan area where you live and normally work.
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Your home is your principal place of business for purposes of deducting expenses for business use of your home and the travel
is to another
work location in the same trade or business, regardless of whether that location is regular or temporary and regardless of
distance.
Alternative Minimum Tax (AMT)
Depreciation may be an adjustment for the AMT. However, no adjustment applies in several instances. See Form 4626, Alternative
Minimum
Tax—Corporations; Form 6251, Alternative Minimum Tax—Individuals; Schedule I of Form 1041, U.S. Income Tax Return for Estates
and Trusts;
and the related instructions.
Except for Part V (relating to listed property), the IRS does not require you to submit detailed information with your return
on the depreciation
of assets placed in service in previous tax years. However, the information needed to compute your depreciation deduction
(basis, method, etc.) must
be part of your permanent records.
You may use the depreciation worksheet on page 15 to assist you in maintaining depreciation records. However, the worksheet
is designed only for
federal income tax purposes. You may need to keep additional records for accounting and state income tax purposes.
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