Section 179 Property - Form 4562

Section 179 Property - Form 4562

Section 179 property refers to tangible personal property or qualified real property that is acquired by purchase for use in the active conduct of a trade or business. Taxpayers may elect to deduct the full cost of such property in the year it is placed in service, up to a specified limit, under Section 179 of the Internal Revenue Code.

What Qualifies as Section 179 Property?

• Qualified section 179 real property, including qualified improvement property as defined in section 168(e)(6).
• Tangible personal property used in a trade or business, such as machinery, equipment, and furniture.
• Property placed in service after 2017 in farming businesses (excluding grain bins, cotton ginning assets, fences, or land improvements).

Maximum Deduction and Thresholds for 2025

• The maximum Section 179 expense deduction for 2025 is $2,500,000 for all qualifying property.
• The deduction begins to phase out if the total cost of Section 179 property placed in service exceeds $4,000,000.
• If the cost exceeds $4,000,000, the deduction is reduced dollar-for-dollar by the amount over the threshold.

Reporting on Form 4562

• File a separate Form 4562 for each business or activity on your return where depreciation or amortization is required.
• Complete only one Part I in its entirety when computing the Section 179 expense deduction. For multiple businesses, use a “Summary” Form 4562 to aggregate totals and allocate amounts to individual forms.
• Disallowed deductions attributable to qualified Section 179 real property can be carried over to the next tax year (e.g., 2025 disallowed amounts carried to 2026).

Special Rules and Considerations

• Do not use Form 4562 to claim the deduction for energy-efficient commercial buildings under Section 179D. Use Form 7205 instead.
• For partnerships and S corporations, enter the smaller of line 5 or the entity’s total income and expenses (excluding credits, tax-exempt income, Section 179 deductions, and compensation deductions).
• Listed property (e.g., vehicles) has special rules and must be reported on line 29 of Form 4562.

Source:

Instructions for Form 4562 (Depreciation and Amortization)

Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.