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Department of the Treasury 2020 Internal Revenue Service Instructions for Form 4562 Depreciation and Amortization (Including Information on Listed Property)

Section references are to the Internal Revenue • A section 179 expense deduction Generally, you can depreciate: Code unless otherwise noted. (which may include a carryover from a • Tangible property such as buildings, previous year). machinery, vehicles, furniture, and Future Developments • Depreciation on any vehicle or other equipment; and For the latest information about listed property (regardless of when it • Intangible property such as patents, developments related to Form 4562 and was placed in service). copyrights, and computer software. its instructions, such as legislation A deduction for any vehicle reported • Exception. You cannot depreciate enacted after this form and instructions on a form other than Schedule C (Form land. were published, go to IRS.gov/ 1040), Profit or Loss From Business. Form4562. • Any depreciation on a corporate Accelerated Cost Recovery income tax return (other than Form System 1120-S). What's New The Accelerated Cost Recovery System Amortization of costs that begins • (ACRS) applies to property first used Section 179 deduction dollar limits. during the 2020 tax year. For tax years beginning in 2020, the before 1987. It is the name given for the maximum section 179 expense If you are an employee deducting tax rules that allow a taxpayer to recover deduction is $1,040,000 ($1,075,000 for job-related vehicle expenses using through depreciation deductions the qualified enterprise zone property). This either the standard mileage rate or cost of property used in a trade or limit is reduced by the amount by which actual expenses, use Form 2106, business or to produce income. These the cost of section 179 property placed Employee Business Expenses, for this rules are mandatory and generally apply in service during the tax year exceeds purpose. to tangible property placed in service $2,590,000. Also, the maximum section after 1980 and before 1987. If you File a separate Form 4562 for each 179 expense deduction for sport utility placed property in service during this business or activity on your return for vehicles placed in service in tax years period, you must continue to figure your which Form 4562 is required. If you beginning in 2020 is $25,900. depreciation under ACRS. need more space, attach additional The increased section 179 deduction sheets. However, complete only one ACRS consists of accelerated for an enterprise zone business has Part I in its entirety when computing depreciation methods and an alternate been terminated for property placed in your section 179 expense deduction. ACRS method that could have been service in tax years beginning after See the instructions for Line 12, later. elected. The alternate ACRS method December 31, 2020. See the used a recovery percentage based on a instructions for Part I. Additional Information modified straight line method. See the Special depreciation allowance for For more information about depreciation instructions for line 16 for more qualified second generation biofuel and amortization (including information information. For a complete discussion plant property. The special on listed property), see the following. of ACRS, see Pub. 534. depreciation allowance will not apply to • Pub. 463, Travel, Gift, and Car qualified second generation biofuel Expenses. Modified Accelerated Cost plant property placed in service after • Pub. 534, Depreciating Property Recovery System December 31, 2020. Placed in Service Before 1987. The Modified Accelerated Cost • Pub. 535, Business Expenses. Recovery System (MACRS) is the General Instructions • Pub. 551, Basis of Assets. current method of accelerated asset • Pub. 946, How To Depreciate depreciation required by the tax code. Property. Under MACRS, all assets are divided Purpose of Form into classes which dictate the number of Use Form 4562 to: Definitions years over which an asset's cost will be • Claim your deduction for depreciation recovered. Each MACRS class has a and amortization, Depreciation predetermined schedule which • Make the election under section 179 Depreciation is the annual deduction determines the percentage of the to expense certain property, and that allows you to recover the cost or asset's costs which is depreciated each • Provide information on the business/ other basis of your business or year. For more information, see Part III. investment use of automobiles and investment property over a certain MACRS Depreciation, later. For a other listed property. number of years. Depreciation starts complete discussion of MACRS, see when you first use the property in your chapter 4 of Pub. 946. Who Must File business or for the production of Except as otherwise noted, complete income. It ends when you either take the Section 179 Property and file Form 4562 if you are claiming property out of service, deduct all your Section 179 property is property that any of the following. depreciable cost or basis, or no longer you acquire by purchase for use in the • Depreciation for property placed in use the property in your business or for active conduct of your trade or service during the 2020 tax year. the production of income. business, and is one of the following.

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• Qualified section 179 real property. • Qualified improvement property as 3. An ambulance, hearse, or vehicle For more information, see Special rules described in section 168(e)(6), and used for transporting persons or for qualified section 179 real property, • Any of the following improvements to property for compensation or hire; or later. nonresidential real property placed in 4. Any truck or van placed in service • Tangible personal property, including service after the date the nonresidential after July 6, 2003, that is a qualified cellular telephones, similar real property was first placed in service. nonpersonal use vehicle. telecommunications equipment, and air 1. Roofs. conditioning or heating units (for For purposes of the exceptions example, portable air conditioners or 2. Heating, ventilation, and above, a portion of the taxpayer's home heaters). Also, tangible personal air-conditioning property. is treated as a regular business property may include certain property 3. Fire protection and alarm establishment only if that portion meets used mainly to furnish lodging or in systems. the requirements for deducting connection with the furnishing of lodging 4. Security systems. expenses attributable to the business (except as provided in section 50(b)(2)). use of a home. However, for any This property is considered "qualified property listed in (1) above, the regular • Other tangible property (except section 179 real property." buildings and their structural business establishment of an employee components) used as: A deduction attributable to qualified is his or her employer's regular business section 179 real property which is establishment. 1. An integral part of manufacturing, disallowed under the trade or business production, or extraction, or of income limitation (see Business Income Commuting furnishing transportation, Limit in chapter 2 of Pub. 946) for 2020 Generally, commuting is defined as communications, electricity, gas, water, can be carried over to 2021. Thus, the travel between your home and a work or sewage disposal services; amount of any 2020 disallowed section location. However, travel that meets any 2. A research facility used in 179 expense deduction attributable to of the following conditions is not connection with any of the activities in qualified section 179 real property will commuting. (1) above; or be reported on line 13 of Form 4562. • You have at least one regular work location away from your home and the 3. A facility used in connection with Amortization any of the activities in (1) above for the travel is to a temporary work location in bulk storage of fungible commodities. Amortization is similar to the straight line the same trade or business, regardless • Single purpose agricultural (livestock) method of depreciation in that an annual of the distance. Generally, a temporary or horticultural structures. deduction is allowed to recover certain work location is one where your • Storage facilities (except buildings costs over a fixed time period. You can employment is expected to last 1 year and their structural components) used in amortize such items as the costs of or less. See Pub. 463 for details. connection with distributing petroleum starting a business, goodwill, and • The travel is to a temporary work or any primary product of petroleum. certain other intangibles. See the location outside the metropolitan area instructions for Part VI. • Off the shelf computer software. where you live and normally work. Listed Property • Your home is your principal place of Section 179 property does not business for purposes of deducting include the following. Listed property generally includes the expenses for business use of your • Property held for investment (section following. home and the travel is to another work 212 property). • Passenger automobiles weighing location in the same trade or business, • Property used mainly outside the 6,000 pounds or less. See Limits for regardless of whether that location is United States (except for property passenger automobiles, later. regular or temporary and regardless of described in section 168(g)(4)). • Any other property used for distance. • Property used by a tax-exempt transportation if the nature of the organization (other than a section 521 property lends itself to personal use, Alternative Minimum Tax such as motorcycles, pick-up trucks, farmers' cooperative) unless the (AMT) property is used mainly in a taxable sport utility vehicles, etc. Depreciation may be an adjustment for unrelated trade or business. • Any property used for entertainment the AMT. However, no adjustment Property used by a governmental unit or recreational purposes (such as • applies in several instances. See Form or foreign person or entity (except for photographic, phonographic, 6251, Alternative Minimum property used under a lease with a term communication, and video recording Tax—Individuals; Schedule I (Form of less than 6 months). equipment). 1041), Alternative Minimum Exceptions. Listed property does not See the instructions for Part I and Tax—Estates and Trusts; and the include: Pub. 946. related instructions. 1. Photographic, phonographic, Special rules for qualified section communication, or video equipment Recordkeeping 179 real property. You can elect to used exclusively in a taxpayer's trade or treat certain qualified real property Except for Part V (relating to listed business or at the taxpayer's regular property), the IRS does not require you placed in service during the tax year as business establishment; section 179 property. See Election for to submit detailed information with your certain qualified section 179 real 2. Any computer or peripheral return on the depreciation of assets property in Part I for information on how equipment used exclusively at a regular placed in service in previous tax years. to make this election. If the election is business establishment and owned or However, the information needed to made, the term "section 179 property" leased by the person operating the compute your depreciation deduction will include any qualified real property establishment; (basis, method, etc.) must be part of which is: your permanent records.

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You may use the depreciation Revocation. The election (or any the increased section 179 expense TIP worksheet, later, to assist you in specification made in the election) can deduction for that property, the benefit maintaining depreciation be revoked without obtaining IRS of the increased section 179 expense records. However, the worksheet is approval by filing an amended return. deduction must be reported as “other designed only for federal income tax The amended return must be filed within income” on your return. Similar rules purposes. You may need to keep the time prescribed by law for the apply if qualified Liberty Zone property additional records for accounting and applicable tax year. The amended ceases to be used in the Liberty Zone, if state income tax purposes. return must include any resulting qualified section 179 GO Zone property adjustments to taxable income or to the ceases to be used in the GO Zone, if tax liability (for example, allowable qualified section 179 Recovery Specific Instructions depreciation in that tax year for the item Assistance property ceases to be used of section 179 property to which the in the Recovery Assistance area, if Part I. Election To Expense revocation pertains). For more qualified empowerment zone property Certain Property Under information and examples, see ceases to be used in an empowerment zone by an enterprise zone business, or Section 179 Regulations section 1.179-5(c)(3) and (c)(4). Once made, the revocation is if qualified renewal property ceases to irrevocable. be used in a renewal community by a renewal community business in any Note. An estate or trust cannot make If you elect to expense section year after you claim the increased this election. ! 179 property, you must reduce section 179 expense deduction. CAUTION the amount on which you figure You can elect to expense part or all your depreciation or amortization Line 2 of the cost of section 179 property deduction (including any special Enter the total cost of all section 179 (defined earlier) that you placed in depreciation allowance) by the section property you placed in service during service during the tax year and used 179 expense deduction. the tax year (including the total cost of predominantly (more than 50%) in your qualified real property that you elect to trade or business. Line 1 treat as section 179 property). Also, include the cost of the following. However, for taxpayers other than a Generally, the maximum section 179 expense deduction is $1,040,000 for • Any listed property from Part V. corporation, this election does not apply • Any property placed in service by to any section 179 property you section 179 property (including qualified section 179 real property) placed in your spouse, even if you are filing a purchased and leased to others unless: separate return. This includes qualified • You manufactured or produced the service during the tax year beginning in 2020. section 179 real property that your property; or spouse made the election to treat as • The term of the lease is less than You can use Worksheet 1 to section 179 property for 2020. 50% of the property's class life and, for assist you in determining the the first 12 months after the property is amount to write on line 1. Line 3 transferred to the lessee, the deductions The amount of section 179 property for related to the property allowed to you as For an enterprise zone business, the which you can make the election is trade or business expenses (except maximum deduction is increased by the limited to the maximum dollar amount rents and reimbursed amounts) are smaller of: on line 1. This amount is reduced if the more than 15% of the rental income • $35,000; or cost of all section 179 property placed in from the property. • The cost of section 179 property that service in 2020 is more than Election. You must make the election is also qualified empowerment zone $2,590,000. property placed in service in the tax on Form 4562 filed with either: For a partnership (other than an • The original return you file for the tax year beginning before January 1, 2021 (including such property placed in electing large partnership), these year the property was placed in service limitations apply to the partnership and (whether or not you file your return on service or purchased by your spouse, even if you are filing a separate return). each partner. For an electing large time), or partnership, the limitations apply only to • An amended return filed within the Note. The increased section 179 the partnership. For an S corporation, time prescribed by law for the applicable expense deduction has been terminated these limitations apply to the S tax year. The election made on an for property placed in service in tax corporation and each shareholder. For a amended return must specify the item of years beginning after December 31, controlled group, all component section 179 property to which the 2020. members are treated as one taxpayer. election applies and the part of the cost of each such item to be taken into Recapture rule. If the section 179 Line 5 account. The amended return must also property is not used predominantly (more than 50%) in your trade or If line 5 is zero, you cannot elect to include any resulting adjustments to expense any section 179 property. In taxable income. business at any time before the end of the property's recovery period, the this case, skip lines 6 through 11, enter Election for certain qualified benefit of the section 179 expense zero on line 12, and enter the carryover section 179 real property. You can deduction must be reported as “other of any disallowed deduction from 2019 elect to expense certain qualified real income” on your return. (which does not include amounts property that you first placed in service attributable to qualified section 179 real If any qualified section 179 disaster property) on line 13. as section 179 property for tax years assistance property ceases to be used beginning in 2020. For more in the applicable federally declared See Special rules for qualified information, see Election above. disaster area in any year after you claim section 179 real property, earlier.

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Worksheet 1. Worksheet for Lines 1, 2, and Note. If you have to apply another 3 Keep for Your Records Code section that has a limitation based on taxable income, see Pub. 946 for Maximum section 179 limitation calculation. rules on how to apply the business income limitation for the section 179 1.* Enter total cost of section 179 property (including qualified section 179 real expense deduction. property) placed in service during the tax year beginning in 2020 ...... Individuals. Enter the smaller of line 5 2. The maximum section 179 deduction limitation for 2020 ...... $1,040,000 or the total taxable income from any 3. Enter the smaller of line 1 or line 2 here ...... trade or business you actively 4. If you have an enterprise zone business (see the instructions for Line 1, conducted, computed without regard to earlier), enter the smaller of $35,000 or the cost of the qualified section 179 any section 179 expense deduction, the property that is also qualified empowerment zone property placed in service in deduction for one-half of the tax year beginning before January 1, 2021 ...... self-employment taxes under section 164(f), or any net operating loss 5. Add lines 3 and 4. Enter this amount here and on Form 4562, line 1 ...... deduction. Also, include all wages, Maximum threshold cost of section 179 property before reduction in limitation calculation. salaries, tips, and other compensation 6. Enter the amount from line 1 here and on Form 4562, line 2 ...... you earned as an employee (from Form 1040, line 1). Do not reduce this amount 7. Base maximum threshold cost of section 179 property before reduction in $2,590,000 by unreimbursed employee business limitation for 2020. Enter this amount on Form 4562, line 3 ...... expenses. If you are married filing a joint Maximum elected cost for Form 4562, lines 6 and 7, column (c). return, combine the total taxable incomes for you and your spouse. 8. Enter the smaller of line 1 or line 5. The total amount you enter on Form 4562, lines 6 and 7, column (c), cannot exceed this amount ...... Partnerships. Enter the smaller of line 5 or the partnership's total items of * For line 1 of this worksheet, include the total amount of eligible section 179 property (including qualified section 179 real property), not just the amount for which you are making the election. See the instructions for Line 2. income and expense, described in section 702(a), from any trade or business the partnership actively conducted (other than credits, If you are married filing separately, expense. See the line 19 and line 20 tax-exempt income, the section 179 you and your spouse must allocate the instructions. expense deduction, and guaranteed dollar limitation for the tax year. To do To report your share of a section 179 payments under section 707(c)). so, multiply the total limitation that you expense deduction from a partnership would otherwise enter on line 5 by 50% or an S corporation, write “from S corporations. Enter the smaller of (0.50), unless you both elect a different Schedule K-1 (Form 1065)” or “from line 5 or the corporation's total items of allocation. If you both elect a different Schedule K-1 (Form 1120-S)” across income and expense described in allocation, multiply the total limitation by columns (a) and (b). section 1366(a) from any trade or the percentage elected. The sum of the business the corporation actively percentages you and your spouse elect Line 7 conducted (other than credits, must equal 100%. Enter the amount that you elected to tax-exempt income, the section 179 expense for listed property (defined expense deduction, and the deduction Do not enter on line 5 more than your for compensation paid to the share of the total dollar limitation. earlier) on line 29 here. For more information, see Part V—Listed corporation's shareholder-employees). Line 6 Property, later. Corporations other than S corpora- Do not include any listed property on Line 10 tions. Enter the smaller of line 5 or the line 6. Enter the elected section 179 corporation's taxable income before the cost of listed property in column (i) of The carryover of disallowed deduction section 179 expense deduction, net line 26. from 2019 is the amount of section 179 operating loss deduction, and special property, if any, you elected to expense deductions (excluding items not derived Column (a)—Description of proper- in previous years that was not allowed from a trade or business actively ty. Enter a brief description of the as a deduction because of the business conducted by the corporation). property you elect to expense (for income limitation. If you filed Form 4562 example, truck, office furniture, qualified for 2019, enter the amount from line 13 Line 12 improvement property, roof, etc.). of your 2019 Form 4562. The limitations on lines 5 and 11 apply Column (b)—Cost (business use on- Line 11 to the taxpayer, and not to each ly). Enter the cost of the property. If you separate business or activity. Therefore, The total cost you can deduct is limited acquired the property through a if you have more than one business or to your taxable income from the active trade-in, do not include any carryover activity, you may allocate your allowable conduct of a trade or business during basis of the property traded in. Include section 179 expense deduction among the year. You are considered to actively only the excess of the cost of the them. conduct a trade or business only if you property over the value of the property meaningfully participate in its traded in. To do so, write “Summary” at the top management or operations. A mere of Part I of the separate Form 4562 you Column (c)—Elected cost. Enter the passive investor is not considered to are completing for the total amounts amount you elect to expense. You can actively conduct a trade or business. from all businesses or activities. Do not depreciate the amount you do not complete the rest of that form. On line 12 of the Form 4562 you prepare for

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each separate business or activity, enter Certain qualified property • The property must be depreciated the amount allocated to the business or acquired before September 28, 2017. under MACRS. activity from the “Summary.” No other Certain qualified property with a long • The property must have a useful life entry is required in Part I of the separate production period and certain aircraft of at least 5 years. Form 4562 prepared for each business acquired before September 28, 2017, • You must have acquired the property or activity. and placed in service in 2020, is eligible by purchase after August 31, 2008. If a for a 30% special depreciation binding contract to acquire the property Part II. Special allowance. existed before September 1, 2008, the Depreciation Allowance Qualified property must also be property does not qualify. • The property must be placed in and Other Depreciation placed in service before January 1, 2021. The original use of the property service after August 31, 2008. Line 14 must begin with you. • The original use of the property must begin with you after August 31, 2008. For qualified property (defined below) Certain qualified property • For self-constructed property, special placed in service during the tax year, acquired after September 27, 2017. rules apply. See section 168(m)(2)(C). you may be able to take an additional Certain qualified property (defined special depreciation allowance. The Qualified reuse and recycling below) acquired after September 27, property does not include rolling stock special depreciation allowance applies 2017, and placed in service before only for the first year the property is or other equipment used to transport January 1, 2023 (or before January 1, reuse and recyclable materials or any placed in service. The allowance is an 2024, for certain property with a long additional deduction you can take after property to which section 168(g) or (k) production period and for certain applies. any section 179 expense deduction and aircraft), is eligible for a special before you figure regular depreciation depreciation allowance of 100% of the Certain plants bearing fruits and under the modified accelerated cost depreciable basis of the property. nuts. You can elect to claim a 100% recovery system (MACRS). Qualified property is: special depreciation allowance for the Qualified property. You can take the • Tangible property depreciated under adjusted basis of certain specified special depreciation allowance for MACRS with a recovery period of 20 plants (defined later) bearing fruits and qualified second generation biofuel years or less. nuts planted or grafted after September plant property placed in service before • Computer software defined in and 27, 2017, and before January 1, 2023. January 1, 2021, certain qualified depreciated under section 167(f)(1). A specified plant is: property acquired before September 28, • Water utility property (see 25-year • Any tree or vine that bears fruits or 2017, certain qualified property property), later. nuts, and acquired after September 27, 2017, • Qualified film, television, and live • Any other plant that will have more qualified reuse and recycling property, theatrical productions, as defined in than one yield of fruits or nuts and and certain plants bearing fruits and sections 181(d) and (e). generally has a pre-productive period of nuts. Qualified property must also be more than 2 years from planting or grafting to the time it begins bearing Qualified second generation placed in service before January 1, fruits or nuts. biofuel plant property. Qualified 2027 (or before January 1, 2028, for second generation biofuel plant certain property with a long production Any property planted or grafted property is property used in the United period and for certain aircraft), and can outside the United States does not States solely to produce second be either new property or certain used qualify as a specified plant. generation biofuel (as defined in section property. If you elect to claim the special 40(b)(6)(E)). See Pub. 946 for more information. depreciation allowance for any specified The 50% special depreciation Also, see section 168(k) and plant, the special depreciation allowance applies to qualified second Regulations sections 1.168(k)-2 and allowance applies only for the tax year generation biofuel plant property. The 1.1502-68. in which the plant is planted or grafted. The plant will not be treated as qualified property must also meet the following Qualified reuse and recycling requirements. property eligible for the special property. Certain qualified reuse and depreciation allowance in the • The original use of the property must recycling property (defined below) begin with you after December 20, subsequent tax year in which it is placed placed in service after August 31, 2008, in service. 2006. is eligible for a 50% special depreciation • You must have acquired the property allowance. To make the election, attach a by purchase after December 20, 2006. If statement to your timely filed return a binding contract to acquire the Qualified reuse and recycling (including extensions) indicating you are property existed before December 21, property includes any machinery and electing to apply section 168(k)(5) and 2006, the property does not qualify. equipment (not including buildings or identifying the specified plant(s) for • Qualified second generation biofuel real estate), along with any which you are making the election. plant property must be placed in service appurtenance, that is used exclusively Once made, the election cannot be for use in your trade or business or for to collect, distribute, or recycle qualified revoked without IRS consent. reuse and recyclable materials. This the production of income before See sections 4 and 5 of Revenue January 1, 2021. includes software necessary to operate such equipment. See section 168(m)(3) Procedure 2020-25, 2020-19 I.R.B. 785, For property you sold and leased for more information. available at IRS.gov/irb/ back or for self-constructed property, 2020-19_IRB#REV-PROC-2020-25 for special rules apply. See section 168(l) Qualified reuse and recycling special rules for making a late election, (4). property must also meet all of the or revoking the election under section following tests.

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168(k)(5), for tax years ending in 2018, For additional credits and deductions any special depreciation allowance for 2019, and 2020. Also, see sections 5 that affect the depreciable basis, see any class of property for tax years and 6 of Revenue Procedure 2020-50, section 1016. Also, see Pub. 946. ending in 2018, 2019, and 2020. Also, 2020-48 I.R.B. 1122, available at see sections 5 and 6 of Revenue IRS.gov/irb/2020-48_IRB#REV- Note. If you acquired qualified property Procedure 2020-50, 2020-48 I.R.B. PROC-2020-50 for special rules for through a like-kind exchange or 1122, available at IRS.gov/irb/ making a late election or revoking the involuntary conversion after September 2020-48_IRB#REV-PROC-2020-50 for election under section 168(k)(5), for tax 27, 2017, and the qualified property is special rules for making a late election years beginning in 2016 through 2020. new property, the carryover basis and or revoking the election, to not deduct any excess basis of the acquired any special depreciation allowance for Exceptions. Qualified property does property is eligible for the special any class of property for tax years not include: depreciation allowance. beginning in 2016 through 2020. • Listed property used 50% or less in a Generally, a like-kind exchange after qualified business use (as defined in the Note. If you elect to not have any instructions for lines 26 and 27); December 31, 2017, is an exchange of real property. special depreciation allowance apply, • Any property required to be the property placed in service during the depreciated under the alternative If you acquired qualified property tax year will not be subject to an AMT depreciation system (ADS) (that is, not through a like-kind exchange or adjustment for depreciation. property for which you elected to use involuntary conversion after September ADS); 27, 2017, and the qualified property is Recapture. When you dispose of • Property placed in service and used property, only the excess basis of property for which you claimed a special disposed of in the same tax year; the acquired property is eligible for the depreciation allowance, any gain on the • Property converted from business or special depreciation allowance. disposition is generally recaptured (included in income) as ordinary income income-producing use to personal use If you take the special in the same tax year it is acquired; or up to the amount of the depreciation ! depreciation allowance, you previously allowed or allowable for the • Property for which you elected not to CAUTION must reduce the amount on property, including the special claim any special depreciation which you figure your regular allowance. depreciation allowance. For more depreciation or amortization deduction information, see MACRS recapture, In addition, qualified second by the amount deducted. Also, you will later. If qualified GO Zone property generation biofuel plant property does not have any AMT adjustment for (including specified GO Zone property) not include the following. depreciation for the qualified property. ceases to be qualified GO Zone • Any tax-exempt bond financed property, if qualified Recovery Election out. You can elect, for any property under section 103. Assistance property ceases to be class of property, to not deduct any • Any property for which a deduction qualified Recovery Assistance property, special depreciation allowance for all was taken under section 179C for if qualified cellulosic biomass ethanol such property in such class placed in certain qualified refinery property. plant property ceases to be qualified service during the tax year. • Other bonus depreciation property to cellulosic biomass ethanol plant which section 168(k) applies. To make an election, attach a property, if qualified second generation statement to your timely filed return See sections 168(l), 168(k), and biofuel plant property ceases to be (including extensions) indicating the qualified second generation biofuel 168(m) for additional information. Also, class of property for which you are see Pub. 946. plant property, or if qualified disaster making the election and that, for such assistance property ceases to be How to figure the allowance. Figure class, you are not to claim any special qualified disaster assistance property in the special depreciation allowance by depreciation allowance. any year after the year you claim the multiplying the depreciable basis of the The election must be made special depreciation allowance, the property by the applicable percentage. separately by each person owning excess benefit you received from To figure the depreciable basis, qualified property (for example, by the claiming the special depreciation subtract from the business/investment partnership, by the S corporation, or for allowance must be recaptured as portion of the cost or other basis of the each member of a consolidated group ordinary income. For information on property any credits and deductions by the common parent of the group). depreciation recapture, see Pub. 946. allocable to the property. The following If you timely filed your return without Also, see Notice 2008-25, 2008-9 I.R.B. are examples of some credits and making an election, you can still make 484, available at IRS.gov/irb/ deductions that reduce the depreciable the election by filing an amended return 2008-09_IRB/ar10.html for additional basis. within 6 months of the due date of the guidance on recapture of qualified GO • Section 179 expense deduction. return (excluding extensions). Write Zone property. • Deduction for removal of barriers to “Filed pursuant to section 301.9100-2” Line 15 the disabled and the elderly. on the amended return. Disabled access credit. Report on this line depreciation for • Once made, the election cannot be Enhanced oil recovery credit. property that you elect to depreciate • revoked without IRS consent. • Credit for employer-provided under the unit-of-production method or childcare facilities and services. See sections 4 and 5 of Revenue any other method not based on a term • Basis adjustment to investment credit Procedure 2020-25, 2020-19 I.R.B. 785, of years (other than the property under section 50(c). available at IRS.gov/irb/ retirement-replacement-betterment • Section 181 expense deduction. 2020-19_IRB#REV-PROC-2020-25 for method). special rules for making a late election, Attach a separate sheet showing: or revoking the election, to not deduct

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• A description of the property and the For property placed in service in the sound recordings. For more details and depreciation method you elect that current tax year, you can either include exceptions, see Pub. 946. excludes the property from MACRS or certain participations and residuals in the Accelerated Cost Recovery System the adjusted basis of the property or (ACRS); and deduct these amounts when paid. See Section A • The depreciable basis (cost or other section 167(g)(7). You cannot use this basis reduced, if applicable, by salvage method to depreciate any amortizable Line 17 value, any section 179 expense section 197 intangible. For more details, For tangible property placed in service deduction, deduction for removal of see the instructions on section 197 in tax years beginning before 2020 and barriers to the disabled and the elderly, intangibles, later. depreciated under MACRS (“MACRS disabled access credit, enhanced oil • Intangible property, other than asset”), enter the deductions for the recovery credit, credit for section 197 intangibles, including: current year. To figure the deductions, employer-provided childcare facilities 1. Computer software. Use the see the instructions for line 19, column and services, any special depreciation straight line method over 36 months. A (g). allowance, and any other applicable longer period may apply to software deduction or credit). leased under a lease agreement Note. If you dispose of a portion of a entered into after March 12, 2004, to a MACRS asset and are required to (or For additional credits and deductions tax-exempt organization, governmental elect to) take the basis of the asset into that may affect the depreciable basis, unit, or foreign person or entity (other account, you must reduce the basis and see section 1016. Also, see section than a partnership). See section 167(f) depreciation reserve of the MACRS 50(c) to determine the basis adjustment (1)(C). asset by the basis and depreciation for investment credit property. reserve attributable to the disposed If you elect the section 179 Line 16 portion as of the first day of the tax year expense deduction or take the before you compute the depreciation Enter the total depreciation you are special depreciation allowance deduction for the current year. To figure claiming for the following types of for qualified computer software, you the depreciation deduction for the property (except listed property and must reduce the amount on which you remaining MACRS asset and the property subject to a section 168(f)(1) figure your regular depreciation disposed portion, see the instructions election). deduction by the amount deducted. for line 19, column (g). For more ACRS property (pre-1987 rules). See • information, see Regulations section Pub. 534. 2. Any right to receive tangible 1.168(i)-8. • Property placed in service before property or services under a contract or 1981. granted by a governmental unit (not Line 18 acquired as part of a business). • Certain public utility property which To simplify the computation of MACRS does not meet certain normalization 3. Any interest in a patent or depreciation, you can elect to group requirements. copyright not acquired as part of a assets into one or more general asset • Certain property acquired from business. accounts. The assets in each general related persons. 4. Residential mortgage servicing asset account are depreciated as a • Property acquired in certain rights. Use the straight line method over single asset. nonrecognition transactions. 108 months. • Certain sound recordings, movies, Each general asset account must and videotapes. 5. Other intangible assets with a include only assets that were placed in • Property depreciated under the limited useful life that cannot be service during the same tax year and income forecast method. The use of the estimated with reasonable accuracy. that have the same depreciation income forecast method is limited to Generally, use the straight line method method, recovery period, and motion picture films, videotapes, sound over 15 years. See Regulations section convention. However, an asset cannot recordings, copyrights, books, and 1.167(a)–3(b) for details and be included in a general asset account if patents. exceptions. the asset is used both for personal purposes and business/investment If you take the special Prior years' depreciation, plus purposes. current year's depreciation, can ! depreciation allowance for a When an asset in an account is CAUTION qualified film, television, or live never exceed the depreciable basis of the property. disposed of, the amount realized must theatrical production, you must reduce generally be recognized as ordinary the amount on which you figure your income. The unadjusted depreciable regular depreciation deduction by the Part III. MACRS basis and depreciation reserve of the amount deducted. Depreciation general asset account are not affected If you use the income forecast as a result of a disposition. method for any property placed in Special rules apply to passenger service after September 13, 1995, you The term “Modified Accelerated Cost automobiles, assets generating foreign may owe interest or be entitled to a Recovery System” (MACRS) includes source income, assets converted to refund for the 3rd and 10th tax years the General Depreciation System and personal use, certain asset dispositions, beginning after the tax year the property the Alternative Depreciation System. and like-kind exchanges or involuntary was placed in service. For details, see Generally, MACRS is used to conversions of property in a general Form 8866, Interest Computation Under depreciate any tangible property placed asset account. For more details, see the Look-Back Method for Property in service after 1986. However, MACRS Regulations section 1.168(i)-1 (as in Depreciated Under the Income Forecast does not apply to films, videotapes, and effect for tax years beginning on or after Method. January 1, 2014).

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To make the election, check the box the partnership, by the S corporation, or The original use of the property must on line 18. You must make the election by the common parent of a consolidated begin with you after 2017. on your return filed no later than the due group). The election must be made on 7-year property includes: date (including extensions) for the tax your timely filed return (including • Office furniture and equipment. year in which the assets included in the extensions). Once made, the election • Railroad track. general asset account were placed in cannot be revoked without IRS consent. • Any motorsports entertainment service. Once made, the election is Generally, a like-kind exchange complex (as defined in section 168(i) irrevocable and applies to the tax year after December 31, 2017, is an (15)). for which the election is made and all ! CAUTION exchange of real property. • Any natural gas gathering line (as later tax years. defined in section 168(i)(17)) placed in For more information on depreciating Lines 19a Through 19i service after April 11, 2005, the original use of which begins with you after April property in a general asset account, see Use lines 19a through 19i only for 11, 2005, and is not under Pub. 946. assets placed in service during the tax self-construction or subject to a binding year beginning in 2020 and depreciated Section B contract in existence before April 12, under the General Depreciation System 2005. Also, no AMT adjustment is Property acquired in a like-kind ex- (GDS), except for automobiles and required. change or involuntary conversion. other listed property (which are reported Any used agricultural machinery and Generally, you must depreciate the in Part V). • carryover basis of property you acquire equipment placed in service after 2017, Column (a) — Classification of prop- in a like-kind exchange or involuntary grain bins, cotton ginning assets, or erty. Sort the property you acquired conversion during the current tax year fences used in a farming business (but and placed in service during the tax over the remaining recovery period of no other land improvements). year beginning in 2020 according to its the property exchanged or involuntarily • Any property that does not have a classification (3-year property, 5-year converted. Use the same depreciation class life and is not otherwise classified. property, etc.) as shown in column (a) of method and convention that was used 10-year property includes: lines 19a through 19i. The for the exchanged or involuntarily • Vessels, barges, tugs, and similar classifications for some property are converted property. Treat any excess water transportation equipment. shown below. For property not shown, basis as newly placed in service • Any single purpose agricultural or see Determining the classification, later. property. Figure depreciation separately horticultural structure (see section 168(i) for the carryover basis and the excess 3-year property includes: (13)). basis, if any. • A race horse that is more than 2 • Any tree or vine bearing fruit or nuts. years old at the time it is placed in These rules apply only to acquired • Any qualified smart electric meter service before January 1, 2009. property with the same or a shorter property. Note. Any race horse placed in service recovery period or the same or a more • Any qualified smart electric grid after December 31, 2008, and before accelerated depreciation method than system property. January 1, 2022, is treated as 3-year the property exchanged or involuntarily 15-year property includes: property (regardless of the age of the converted. For additional rules, see • Any municipal wastewater treatment race horse). Regulations section 1.168(i)-6(c) and plant. Any horse (other than a race horse) Pub. 946. • • Any telephone distribution plant and that is more than 12 years old at the comparable equipment used for 2-way Election out. Instead of using the time it is placed in service. exchange of voice and data above rules, you can elect, for • Any qualified rent-to-own property (as communications. depreciation purposes, to treat the defined in section 168(i)(14)). • Any section 1250 property that is a adjusted basis of the exchanged 5-year property includes: retail motor fuels outlet (whether or not property as if it was disposed of at the • Automobiles. food or other convenience items are time of the exchange or involuntary • Light general purpose trucks. sold there). conversion. Generally, treat the • Typewriters, calculators, copiers, and • Initial clearing and grading land carryover basis and excess basis, if duplicating equipment. improvements for gas utility property. any, for the acquired property as if • Any semi-conductor manufacturing • Certain electric transmission property placed in service on the date you equipment. specified in section 168(e)(3)(E)(v) acquired it. The depreciable basis of the • Any qualified technological placed in service after April 11, 2005, new property is the adjusted basis of the equipment. the original use of which begins with you exchanged or involuntarily converted • Any section 1245 property used in after April 11, 2005, and is not under property plus any additional amount connection with research and self-construction or subject to a binding paid for it. See Regulations section experimentation. contract in existence before April 12, 1.168(i)-6(i). • Certain energy property specified in 2005. To make the election, figure the section 168(e)(3)(B)(vi). • Qualified improvement property, as depreciation deduction for the new • Appliances, carpets, furniture, etc., defined in section 168(e)(6), placed in property in Part III. For listed property, used in a rental real estate activity. service by you after December 31, use Part V. Attach a statement • Any new machinery or equipment 2017. indicating “Election made under section (other than any grain bin, cotton ginning 20-year property includes: 1.168(i)-6(i)” for each property involved asset, fence, or other land • Farm buildings (other than single in the exchange or involuntary improvement) used in a farming purpose agricultural or horticultural conversion. The election must be made business and placed in service after structures). separately by each person acquiring 2017, in tax years ending after 2017. replacement property (for example, by

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• Municipal sewers not classified as Column (b) — Month and year Recovery Period for Qualified 25-year property. placed in service. For lines 19h and • Initial clearing and grading land 19i, enter the month and year you Indian Reservation Property improvements for electric utility placed the property in service. If you transmission and distribution plants. converted property held for personal Recovery 25-year property is water utility use to use in a trade or business or for Property class period property, which is: the production of income, treat the 3-year property ...... 2 yrs. • Property that is an integral part of the property as being placed in service on 5-year property ...... 3 yrs. gathering, treatment, or commercial the conversion date. 7-year property ...... 4 yrs. distribution of water that, without regard 10-year property ...... 6 yrs. Column (c) — Basis for depreciation to this classification, would be 20-year 15-year property ...... 9 yrs. (business/investment use only). To property. 20-year property ...... 12 yrs. find the basis for depreciation, multiply Municipal sewers. Nonresidential real • the cost or other basis of the property by This classification does not apply to property ...... 22 yrs. the percentage of business/investment property placed in service under a use. From that result, subtract any binding contract in effect at all times For example, figure depreciation on credits and deductions allocable to the since June 9, 1996. 5-year property acquired during the tax property. The following are examples of year that is qualified Indian reservation Residential rental property is a some credits and deductions that property in the same manner as building in which 80% or more of the reduce the basis for depreciation. depreciation is figured for 3-year total rent is from dwelling units. • Section 179 expense deduction. property that is not qualified Indian Nonresidential real property is any • Deduction for removal of barriers to reservation property. Report the real property that is neither residential the disabled and the elderly. depreciation on line 19b, entering “3 rental property nor property with a class • Disabled access credit. yrs.” as the recovery period in column life of less than 27.5 years. • Enhanced oil recovery credit. (d). For more information, including the 50-year property includes any • Credit for alternative fuel vehicle definition of qualified property, see Pub. improvements necessary to construct or refueling property. 946. improve a roadbed or right-of-way for • Credit for employer-provided railroad track that qualifies as a railroad childcare facilities and services. Note. You can elect, for any class of grading or tunnel bore under section • Any special depreciation allowance qualified Indian reservation property, to 168(e)(4). included on line 14. not accelerate depreciation for all such • Any basis adjustment for investment property in such class placed in service There is no separate line to report credit property. See section 50(c). during the tax year. 50-year property. Therefore, attach a statement showing the same For additional credits and deductions To make this election, attach a information as required in columns (a) that affect the depreciable basis, see statement to your timely filed return through (g). Include the deduction in the section 1016 and Pub. 946. (including extensions) indicating the class of property for which you are line 22 “Total” and write “See Column (d) — Recovery period. making the election and that, for such attachment” in the bottom margin of the Determine the recovery period from the class, you are electing not to apply form. following table. See Pub. 946 for more section 168(j). Once made, the election information on the recovery period for Determining the classification. If is irrevocable. your depreciable property is not listed MACRS property. above, determine the classification as Column (e) — Convention. The follows. Recovery Period for Most applicable convention determines the portion of the tax year for which Property 1. Find the property's class life. See depreciation is allowable during a year the Table of Class Lives and Recovery property is either placed in service or Periods in Pub. 946. Recovery Classification period disposed of. There are three types of 2. Use the following table to find the 3-year property ...... 3 yrs. conventions. To select the correct classification in column (b) that 5-year property ...... 5 yrs. convention, you must know the type of corresponds to the class life of the 7-year property ...... 7 yrs. property and when you placed the property in column (a). 10-year property ...... 10 yrs. property in service. 15-year property ...... 15 yrs. Half-year convention. This (a) (b) 20-year property ...... 20 yrs. convention applies to all property Class life (in years) Classification 25-year property ...... 25 yrs. (See Pub. 946) Residential rental reported on lines 19a through 19g, 4 or less ...... 3-year property property ...... 27.5 yrs. unless the mid-quarter convention More than 4 but less than 5-year property Nonresidential real applies. It does not apply to residential 10 ...... property ...... 39 yrs. rental property, nonresidential real 10 or more but less than 7-year property Railroad gradings and tunnel property, and railroad gradings and 16 ...... bores ...... 50 yrs. tunnel bores. It treats all property placed 16 or more but less than 10-year property in service (or disposed of) during any 20 ...... Indian reservation property. For tax year as placed in service (or 20 or more but less than 15-year property qualified Indian reservation property disposed of) on the midpoint of that tax 25 ...... placed in service before January 1, year. Enter “HY” in column (e). 25 or more ...... 20-year property 2022, the following shorter recovery periods apply. Mid-quarter convention. If the total depreciable bases (before any special

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depreciation allowance) of MACRS election to use the 150% declining in the first year that the straight line rate property placed in service during the balance method, switching to the exceeds the declining balance rate. last 3 months of your tax year exceed straight line method in the first tax year • If you are using the straight line 40% of the total depreciable bases of that the straight line rate exceeds the method, divide 1.00 by the remaining MACRS property placed in service declining balance rate. The election number of years in the recovery period during the entire tax year, the applies to all property within the as of the beginning of the tax year (but mid-quarter, instead of the half-year, classification for which it is made and not less than one). For example, if there convention generally applies. that was placed in service during the tax are 61/2 years remaining in the recovery In determining whether the year. You will not have an AMT period as of the beginning of the year, mid-quarter convention applies, do not adjustment for any property included divide 1.00 by 6.5 for a rate of 15.38%. under this election. take into account the following. Step 2. Multiply the percentage rate • Property that is being depreciated For 3-, 5-, 7-, or 10-year property determined in Step 1 by the property's under a method other than MACRS. used in a farming business and placed unrecovered basis (basis for • Any residential rental property, in service after 2017, in tax years ending depreciation (as defined in column (c)) nonresidential real property, or railroad after 2017, the 150% declining balance reduced by all prior years' depreciation. gradings and tunnel bores. method is no longer required. However, • Property that is placed in service and the 150% declining balance method will Step 3. For property placed in disposed of within the same tax year. continue to apply to any 15- or 20-year service or disposed of during the current The mid-quarter convention treats all property used in a farming business to tax year, multiply the result from Step 2 property placed in service (or disposed which the straight line method does not by the applicable decimal amount from of) during any quarter as placed in apply or to property for which you elect the tables below (based on the service (or disposed of) on the midpoint the use of the 150% declining balance convention shown in column (e)). of that quarter. However, no method. depreciation is allowed under this • 15- and 20-year property and Half-year (HY) convention...... 0.5 convention for property that is placed in property used in a farming business. Mid-quarter (MQ) service and disposed of within the same The applicable method is the 150% convention tax year. Enter “MQ” in column (e). declining balance method, switching to the straight line method in the first tax Placed in service Placed (or disposed of) in Disposed Mid-month convention. This year that the straight line rate exceeds convention applies only to residential during the: service of the declining balance rate. For 3-, 5-, 7-, 1st quarter ... 0.875 0.125 rental property (line 19h), nonresidential and 10-year property used in a farming 2nd quarter .. 0.625 0.375 real property (line 19i), and railroad business and placed in service after 3rd quarter ... 0.375 0.625 gradings and tunnel bores. It treats all 2017, see 3-, 5-, 7-, or 10-year property 4th quarter ... 0.125 0.875 property placed in service (or disposed above. of) during any month as placed in • Water utility property, residential service (or disposed of) on the midpoint rental property, nonresidential real of that month. Enter “MM” in column (e). property, or any railroad grading or Mid-month (MM) Column (f) — Method. Applicable tunnel bore. The only applicable convention depreciation methods are prescribed for method is the straight line method. Placed in service Placed each classification of property as (or disposed of) in Disposed Column (g) — Depreciation deduc- during the: service of follows. However, you can make an tion. To figure the depreciation 1st month .... 0.9583 0.0417 irrevocable election to use the straight deduction, you may use optional Tables 2nd month .... 0.8750 0.1250 line method for all property within a A through E, which begin later. Multiply 3rd month .... 0.7917 0.2083 classification that is placed in service column (c) by the applicable rate from 4th month .... 0.7083 0.2917 during the tax year. Enter “200 DB” for the appropriate table. See Pub. 946 for 5th month .... 0.6250 0.3750 200% declining balance, “150 DB” for complete tables. If you disposed of the 6th month .... 0.5417 0.4583 150% declining balance, or “S/L” for property during the current tax year, 7th month .... 0.4583 0.5417 straight line. multiply the result by the applicable 8th month .... 0.3750 0.6250 • 3-, 5-, 7-, and 10-year property. decimal amount from the tables in Step 9th month .... 0.2917 0.7083 Generally, the applicable method is the 3, later. Or, you may compute the 10th month .... 0.2083 0.7917 200% declining balance method, deduction yourself by completing the 11th month .... 0.1250 0.8750 switching to the straight line method in following steps. 12th month .... 0.0417 0.9583 the first tax year that the straight line rate exceeds the declining balance rate. Step 1. Determine the depreciation rate as follows. Short tax years. See Pub. 946 for Note. The straight line method is the • If you are using the 200% or 150% rules on how to compute the only applicable method for trees and declining balance method in column (f), depreciation deduction for property vines bearing fruit or nuts. The 150% divide the declining balance rate (use placed in service in a short tax year. declining balance method is the only 2.00 for 200 DB or 1.50 for 150 DB) by applicable method for any qualified the number of years in the recovery Section C smart electric meter or any qualified period in column (d). For example, for smart electric grid system property property depreciated using the 200 DB Lines 20a Through 20d placed in service after October 3, 2008. method over a recovery period of 5 Complete lines 20a through 20d for For 3-, 5-, 7-, or 10-year property years, divide 2.00 by 5 for a rate of 40%. You must switch to the straight line rate assets, other than automobiles and eligible for the 200% declining balance other listed property, placed in service method, you can make an irrevocable

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only during the tax year beginning in Table of Class Lives and Recovery MACRS, any gain on the disposition is 2020 and depreciated under the Periods. generally recaptured (included in Alternative Depreciation System (ADS). Use line 20a for all property income) as ordinary income up to the Report on line 17 MACRS depreciation depreciated under ADS, except amount of the depreciation previously on assets placed in service in prior property that does not have a class life, allowed or allowable for the property. years. residential rental and nonresidential real Depreciation, for this purpose, includes any of the following amounts taken Under ADS, use the applicable property, water utility property, and during the 2020 tax year. depreciation method, the applicable railroad gradings and tunnel bores. Use Any section 179 expense deduction recovery period, and the applicable line 20b for property that does not have • claimed on the property. convention to compute depreciation. a class life. Use line 20c for residential rental property. Use line 20d for • Any special depreciation allowance The following types of property must nonresidential real property. available for the property (unless you be depreciated under ADS. elected not to claim it). • Tangible property used Residential rental property. The • Any deduction under section 179B for predominantly outside the United ADS recovery period for residential capital costs incurred in complying with States. rental property placed in service after Environmental Protection Agency sulfur • Tax-exempt use property. 2017 is 30 years. The ADS recovery regulations. • Tax-exempt bond financed property. period for residential rental property There is no recapture for residential • Imported property covered by an placed in service before January 1, rental and nonresidential real property, executive order of the President of the 2018, is 30 years if the property is held unless that property is qualified property United States. by an electing real property trade or for which you claimed a special • Property used predominantly in a business (as defined in section 163(j)(7) depreciation allowance (discussed farming business and placed in service (B)) and sections 168(g)(1)(A), (B), (C), earlier). For more information on during any tax year in which you made (D), or (E) did not apply to the property depreciation recapture, see Pub. 946. an election under section 263A(d)(3) to before January 1, 2018. Report not have the uniform capitalization rules depreciation for these assets on Part IV. Summary of section 263A apply. line 20c. For more information, see Pub. • Any nonresidential real property, 946. Line 22 residential rental property, or qualified Water utility property and railroad A partnership (other than an electing improvement property held by an gradings and tunnel bores. These large partnership) or S corporation does electing real property trade or business assets are 50-year property under ADS. not include any section 179 expense (as defined in section 163(j)(7)(B)). There is no separate line to report deduction (line 12) on this line. Instead, • Any property that has a recovery 50-year property. Therefore, attach a any section 179 expense deduction is period of 10 years or more under statement showing the same passed through separately to the section 168(c) that is held by an electing information required in columns (a) partners and shareholders on the farming business (as defined in section through (g). Include the deduction in the appropriate line of their Schedules K-1. 163(j)(7)(C)). line 22 “Total” and write “See Line 23 Instead of depreciating property attachment” in the bottom margin of the under GDS (line 19), you can make an form. If you are subject to the uniform capitalization rules of section 263A, irrevocable election for any Column (b) — Month and year classification of property for any tax year enter the increase in basis from costs placed in service. For residential you must capitalize. For a detailed to use ADS. For residential rental and rental property and 40-year property, nonresidential real property, you can discussion of who is subject to these enter the month and year placed in rules, which costs must be capitalized, make this election separately for each service or converted to use in a trade or property. You make this election by and allocation of costs among activities, business or for the production of see Regulations section 1.263A-1. completing line 20 of Form 4562. income. See sections 4 and 5 of Revenue Column (c) — Basis for depreciation Part V. Listed Property Procedure 2020-25, 2020-19 I.R.B. 785, (business/investment use only). See available at IRS.gov/irb/ the instructions for line 19, column (c). If you claim the standard mileage 2020-19_IRB#REV-PROC-2020-25 for rate, actual vehicle expenses (including special rules for making a late election, Column (d) — Recovery period. On depreciation), or depreciation on other or withdrawing the election, to use ADS line 20a, enter the property's class life. listed property, you must provide the for tax years ending in 2018, 2019, and Column (e) — Convention. Under information requested in Part V, 2020. ADS, the applicable conventions are the regardless of the tax year the property was placed in service. However, if you Column (a) — Classification of prop- same as those used under GDS. See the instructions for line 19, column (e). file Form 2106, report this information erty. Use the following rules to on that form and not in Part V. Also, if determine the classification of the Column (g) — Depreciation deduc- you file Schedule C (Form 1040) and property under ADS. tion. Figure the depreciation deduction are claiming the standard mileage rate Under ADS, the depreciation in the same manner as under GDS, or actual vehicle expenses (except deduction for most property is based on except use the straight line method over depreciation), and you are not required the property's class life. See section the ADS recovery period and use the to file Form 4562 for any other reason, 168(g)(3) for special rules for applicable convention. report vehicle information in Part IV of determining the class life for certain MACRS recapture. If you later dispose Schedule C and not on Form 4562. property. See Pub. 946 for information of property you depreciated using on recovery periods for ADS and the

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Section A However, it does not include any of the Column (c) — Business/investment following. use percentage. Enter the percentage The section 179 expense • Investment use. deduction should be computed of business/investment use. For ! • Leasing the property to a 5% owner automobiles and other vehicles, CAUTION before calculating any special or related person. depreciation allowance and/or regular determine this percentage by dividing • The use of the property as the number of miles the vehicle is driven depreciation deduction. See the compensation for services performed by instructions for line 26, column (i). for trade or business purposes or for the a 5% owner or related person. production of income during the year • The use of the property as (not to include any commuting mileage) Listed property used 50% or less in a compensation for services performed by qualified business use (as defined in the by the total number of miles the vehicle any person (who is not a 5% owner or is driven for all purposes. Treat vehicles instructions for lines 26 and 27 below) related person), unless an amount is does not qualify for the section 179 used by employees as being used included in that person's income for the 100% for business/investment purposes expense deduction or special use of the property and, if required, depreciation allowance. if the value of personal use is included income tax was withheld on that in the employees' gross income, or the Line 25 amount. employees reimburse the employer for If you placed in service certain qualified Excluding these uses above from the the personal use. For more information, listed property during the tax year, you numerator, determine your percentage see Pub. 463. may be able to deduct the special of qualified business use similar to the For other listed property (such as depreciation allowance. This property method used to figure the business/ computers placed in service before includes certain aircraft acquired before investment use percentage in column 2018 or video equipment), allocate the September 28, 2017, and placed in (c). Your percentage of qualified use based on the most appropriate unit service before January 1, 2021, and business use may be smaller than the of time the property is actually used certain qualified property acquired after business/investment use percentage. (rather than merely being available for September 27, 2017, and placed in use). For more information, including the service before January 1, 2027 (before If during the tax year you convert January 1, 2028, for certain aircraft). definition of a 5% owner and related person and exceptions, see Pub. 946. property used solely for personal See the instructions for line 14 for the purposes to business/investment use definition of qualified property and how Listed property recapture. If you (or vice versa), figure the percentage of to figure the deduction. This special used listed property more than 50% in a business/investment use only for the depreciation allowance is included in qualified business use in the year you number of months you use the property the overall limit on depreciation and placed the property in service, and used in your business or for the production of section 179 expense deduction for it 50% or less in a later year, you may income. Multiply that percentage by the passenger automobiles. See the tables have to include as income part of the number of months you use the property for limitations on passenger vehicles depreciation, including the special in your business or for the production of and trucks and vans, later. Enter on depreciation allowance, deducted in income, and divide the result by 12. line 25 your total special depreciation prior years. Use Form 4797, Sales of allowance for all qualified listed Business Property, to figure the Column (d) — Cost or other basis. property. recapture amount. Enter the property's actual cost (including sales tax) or other basis Lines 26 and 27 Column (a) — Type of property. List (unadjusted for prior years' Use line 26 to figure depreciation for on a property-by-property basis all your depreciation). If you traded in old property used more than 50% in a listed property in the following order. property, see Property acquired in a qualified business use. Use line 27 to 1. Automobiles and other vehicles. like-kind exchange or involuntary figure the depreciation for property used 2. Other listed property (computers conversion, earlier. 50% or less in a qualified business use. and peripheral equipment placed in For a vehicle, reduce your basis by Also, see Limits for passenger service before 2018, etc.). any qualified electric vehicle credit you automobiles, later. claimed for property placed in service In column (a), list the make and If you acquired the property before January 1, 2007, or by any model of automobiles, and give a alternative motor vehicle credit allowed. through a trade-in, special rules general description of other listed apply for determining the basis, property. If you converted the property from recovery period, depreciation method, personal use to business/investment and convention. For more details, see If you have more than five vehicles use, your basis for depreciation is the Property acquired in a like-kind used 100% for business/investment smaller of the property's adjusted basis exchange or involuntary conversion, purposes, you may group them by tax or its fair market value on the date of earlier. Also, see Regulations section year. Otherwise, list each vehicle conversion. 1.168(i)-6(d)(3). separately. Column (e) — Basis for depreciation Column (b) — Date placed in serv- Qualified business use. To determine (business/investment use only). ice. Enter the date the property was Multiply column (d) by the percentage in whether to use line 26 or line 27 to placed in service. If property held for report your listed property, you must first column (c). From that result, subtract personal use is converted to business/ any section 179 expense deduction, any determine the percentage of qualified investment use, treat the property as business use for each property. special depreciation allowance, any placed in service on the date of credit for employer-provided childcare Generally, a qualified business use is conversion. any use in your trade or business. facilities and services, and half of any investment credit taken before 1986

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(unless you claimed the reduced credit). For property placed in service before vehicle not likely to be used more than a For automobiles and other listed 1987 that was disposed of during the de minimis amount for personal property placed in service after 1985 year, enter zero. purposes. (that is, transition property), reduce the Limits for passenger automobiles. depreciable basis by the entire Exception for leasehold property. The depreciation deduction, including investment credit. The business use requirement and the the section 179 expense deduction and limits for passenger automobiles Column (f) — Recovery period. Enter special depreciation allowance, for generally do not apply to passenger the recovery period. For property placed passenger automobiles is limited. For automobiles leased or held by anyone in service after 1986 and used more any passenger automobile (including an regularly engaged in the business of than 50% in a qualified business use, electric passenger automobile) you list leasing passenger automobiles. use the table in the instructions for on line 26 or line 27, the total of columns For a detailed discussion on line 19, column (d). For property placed (h) and (i) on line 26 or 27 and column passenger automobiles, including in service after 1986 and used 50% or (h) on line 25 for that automobile cannot leased automobiles, see Pub. 463. less in a qualified business use, exceed the applicable limit shown in depreciate the property using the Table 1, 2, 3, or 4. If the business/ Table 1—Limits for Passenger straight line method over its ADS investment use percentage in column recovery period. The ADS recovery (c) for the automobile is less than 100%, Automobiles (including trucks and period is 5 years for automobiles and you must reduce the applicable limit to vans) Acquired Before September computers. an amount equal to the limit multiplied 28, 2017, and Placed in Service by that percentage. For example, for an Column (g) — Method/convention. before 2020 automobile (including a truck or van) Enter the method and convention used placed in service in 2020 (for which you AND the to figure your depreciation deduction. THEN the elect not to claim any special number of tax See the instructions for line 19, columns IF you placed limit on your depreciation allowance that is used 60% years in which your depreciation (e) and (f). Write “200 DB,” “150 DB,” or this for business/investment, the limit is automobile in and section “S/L” for the depreciation method, and automobile $6,060 ($10,100 x 60% (0.60)). service: 179 expense “HY,” “MM,” or “MQ” for half-year, has been deduction is: mid-month, or mid-quarter conventions, For purposes of the limits for in service is: respectively. For property placed in passenger automobiles, the following Jan. 1–Dec. 31, 3 $9,600 service before 1987, write “PRE” if you apply. 2018 4 $5,760 used the prescribed percentages under • Passenger automobiles are ACRS. If you elected an alternate 4-wheeled vehicles manufactured Jan. 1–Dec. 31, 2 $16,100 2019 percentage or if you are required to primarily for use on public roads that are 3 $9,700 depreciate the property using the rated at 6,000 pounds unloaded gross straight line method, enter “S/L.” vehicle weight or less (for a truck or van, Table 2—Limits for Passenger gross vehicle weight is substituted for Column (h) — Depreciation deduc- unloaded gross vehicle weight). Automobiles (including trucks and tion. See Limits for passenger • Electric passenger automobiles are vans) Acquired After September automobiles, later, before entering an vehicles produced by an original 27, 2017, and Placed in Service amount in column (h). equipment manufacturer and designed before 2021 For property used more than 50% in to run primarily on electricity, placed in a qualified business use (line 26) and service after August 5, 1997, and before AND the placed in service after 1986, figure January 1, 2007. number of THEN the column (h) by following the instructions tax years in limit on your for line 19, column (g). If placed in Exception. The following vehicles which this depreciation service before 1987, multiply column (e) are not considered passenger IF you placed automobile and section by the applicable percentage given in automobiles. your automobile has been in 179 expense in service: service is: deduction is: Pub. 534 for ACRS property. If the • An ambulance, hearse, or recovery period for an automobile combination ambulance-hearse used in Jan. 1–Dec. 31, 3 $9,600 your trade or business. ended before your tax year beginning in 2018 4 $5,760 2020, enter your unrecovered basis, if • A vehicle used in your trade or Jan. 1–Dec. 31, 2 $16,100 any, in column (h). business of transporting persons or property for compensation or hire. 2019 3 $9,700 For property used 50% or less in a • Any truck or van placed in service Jan. 1–Dec. 31, 1 $10,100* qualified business use (line 27) and after July 6, 2003, that is a qualified 2020 2 $16,100 placed in service after 1986, figure nonpersonal use vehicle. A truck or van column (h) by dividing the amount in is a qualified nonpersonal use vehicle *If you take the special depreciation allowance for qualified passenger automobiles acquired after column (e) by the amount in column (f). only if it has been specially modified Use the same conventions as discussed September 27, 2017, and placed in service in 2020, the with the result that it is not likely to be limit is $18,100. in the instructions for line 19, column used more than a de minimis amount for (e). The amount in column (h) cannot personal purposes. For example, a van exceed the property's unrecovered that has only a front bench for seating, basis. If the recovery period for an in which permanent shelving has been automobile ended before your tax year installed, that constantly carries beginning in 2020, enter your merchandise or equipment, and that unrecovered basis, if any, in column (h). has been specially painted with advertising or the company's name, is a

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Table 3—Limits for Passenger roads, or highways, that is rated at more Line 37 Automobiles Placed in Service than 6,000 pounds gross vehicle weight A policy statement that prohibits and not more than 14,000 pounds gross personal use (including commuting) After 2003 and Before 2018 vehicle weight. However, the $25,900 (excluding trucks and vans placed in must meet all of the following limit does not apply to any vehicle: conditions. service after 2002 and electric • Designed to seat more than nine • The employer owns or leases the passenger automobiles placed in persons behind the driver's seat; vehicle and provides it to one or more service before January 1, 2007) • Equipped with a cargo area (either employees for use in the employer's open or enclosed by a cap) of at least 6 trade or business. feet in interior length that is not readily AND the • When the vehicle is not used in the THEN the accessible directly from the passenger number of employer's trade or business, it is kept limit on your IF you placed tax years in compartment; or depreciation on the employer's business premises, your automobile which this • That has an integral enclosure fully and section unless it is temporarily located in service: automobile 179 expense enclosing the driver compartment and has been in elsewhere (for example, for deduction is: load carrying device, does not have service is: maintenance or because of a seating rearward of the driver's seat, mechanical failure). Jan. 1, 2004–Dec. $1,675 4 or more and has no body section protruding 31, 2005 • No employee using the vehicle lives more than 30 inches ahead of the at the employer's business premises. Jan. 1, 2006–Dec. $1,775 4 or more leading edge of the windshield. 31, 2011 • No employee may use the vehicle for Recapture of section 179 expense personal purposes, other than de Jan. 1, 2012–Dec. 4 or more $1,875 deduction. If you used listed property minimis personal use (for example, a 31, 2016 more than 50% in a qualified business stop for lunch between two business 3 $3,050 Jan. 1–Dec. 31, use in the year you placed the property deliveries). 2017 4 $1,875 in service and used it 50% or less in a • Except for de minimis use, the later year, you may have to recapture in employer reasonably believes that no Table 4—Limits for Trucks and the later year part of the section 179 employee uses the vehicle for any Vans Placed in Service After 2002 expense deduction. Use Form 4797 to personal purpose. figure the recapture amount. and Before 2018 Line 38 Section B A policy statement that prohibits AND the THEN the Except as noted below, you must personal use (except for commuting) is number of limit on your complete lines 30 through 36 for each not available if the commuting employee IF you placed tax years in depreciation vehicle identified in Section A. is an officer, director, or 1% or more your truck or van which this and section in service: truck or van Employees must provide their owner. This policy must meet all of the 179 expense has been in employers with the information following conditions. deduction is: service is: requested on lines 30 through 36 for • The employer owns or leases the Jan. 1, 2004–Dec. each automobile or vehicle provided for vehicle and provides it to one or more 4 or more $1,875 31, 2008 their use. employees for use in the employer's trade or business, and it is used in the Jan. 1–Dec. 31, 4 or more $1,775 Exception. Employers are not required employer's trade or business. 2009 to complete lines 30 through 36 for • For bona fide noncompensatory Jan. 1, 2010–Dec. 4 or more $1,875 vehicles used by employees who are business reasons, the employer 31, 2012 not more than 5% owners or related requires the employee to commute to Jan. 1, 2013–Dec. 4 or more $1,975 persons and for which the question on and/or from work in the vehicle. 31, 2015 line 37, 38, 39, 40, or 41 is answered • The employer establishes a written “Yes.” Jan. 1–Dec. 31, 4 or more $2,075 policy under which the employee may 2016 Section C not use the vehicle for personal Jan. 1–Dec. 31, 3 $3,450 purposes, other than commuting or de 2017 Employers providing vehicles to their 4 $2,075 employees satisfy the employer's minimis personal use (for example, a substantiation requirements under stop for a personal errand between a section 274(d) by maintaining a written business delivery and the employee's Column (i) — Elected section 179 policy statement that: home). cost. Enter the amount you elect to • Prohibits personal use including • Except for de minimis use, the expense for section 179 property used commuting, or employer reasonably believes that the more than 50% in a qualified business • Prohibits personal use except for employee does not use the vehicle for use (subject to the limits for passenger commuting. any personal purpose other than automobiles). Refer to the instructions commuting. for Part I to determine if the property An employee does not need to keep • The employer accounts for the qualifies under section 179. a separate set of records for any vehicle commuting use by including an You cannot elect to expense more that satisfies these written policy appropriate amount in the employee's than $25,900 of the cost of any sport statement rules. gross income. utility vehicle (SUV) and certain other For both written policy statements, Line 40 vehicles placed in service during the tax there must be evidence that would An employer that provides more than year. This rule applies to any 4-wheeled enable the IRS to determine whether vehicle primarily designed or used to five vehicles to its employees who are use of the vehicle meets the conditions not 5% owners or related persons need carry passengers over public streets, stated below.

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not complete Section B for such (84 months for certain atmospheric them off over a 10-year period. If you vehicles. Instead, the employer must pollution control facilities placed in elect to amortize these costs, deduct obtain the information from its service after April 11, 2005). See them in equal amounts over 60 months employees and retain the information section 169 and the related regulations or more. For more information, see Pub. received. for details and information required in 535. making the election. See Pub. 535 for Line 41 more information. The cost of acquiring a lease An automobile meets the requirements (section 178). Amortize these costs for qualified demonstration use if the You can deduct a special over the term of the lease. For more employer maintains a written policy depreciation allowance on a information, see Pub. 535. certified pollution control facility statement that: Qualified forestation and • Prohibits its use by individuals other that is qualified property. However, you must reduce the amount on which you reforestation costs (section 194). than full-time automobile salespersons, You can elect to deduct a limited • Prohibits its use for personal vacation figure your amortization deduction by any special depreciation allowance amount of qualifying reforestation costs trips, paid or incurred during the tax year for • Prohibits storage of personal allowed or allowable, whichever is greater. each qualified timber property. You can possessions in the automobile, and elect to amortize the qualifying costs • Limits the total mileage outside the that are not deducted currently over an salesperson's normal working hours. Also, a corporation must reduce its amortizable basis of a pollution control 84-month period. There is no limit on the amount of your amortization deduction Part VI. Amortization facility by 20% before figuring the amortization deduction. for reforestation costs paid or incurred during the tax year. Bond premium (section 171). For If you are otherwise required to file Each year, you can deduct part of individuals reporting amortization of certain capital costs over a fixed period. Form T (Timber), Forest Activities bond premium for taxable bonds Schedule, you can make the election to If you amortize property, the acquired before October 23, 1986, do amortize qualifying reforestation costs ! part you amortize does not not report the deduction here. See the by completing Part IV of the form. See CAUTION qualify for the section 179 instructions for Schedule A (Form the Instructions for Form T (Timber) for expense deduction or for depreciation. 1040), line 16. more information. For taxpayers (other than See Pub. 535 for more information on Attach any information the Code and corporations) claiming a deduction for amortizing reforestation costs. regulations may require to make a valid amortization of bond premium for Partnerships and S corporations, also election. See the applicable Code taxable bonds acquired after October see the instructions for line 44. section, regulations, and Pub. 535 for 22, 1986, but before January 1, 1988, more information. the deduction is treated as interest Optional write-off of certain tax expense and is subject to the preferences over the period Line 42 investment interest limitations. Use specified in section 59(e). You can Complete line 42 only for those costs Form 4952, Investment Interest elect to amortize certain tax preference you amortize for which the amortization Expense Deduction, to compute the items over an optional period. If you period begins during your tax year allowable deduction. make this election, there is no AMT beginning in 2020. For taxable bonds acquired after adjustment for these expenditures. The applicable expenditures and the Column (a) — Description of costs. 1987, you can elect to amortize the optional recovery periods are as follows. Describe the costs you are amortizing. bond premium over the life of the bond. Circulation expenditures (section You can amortize the following. In general, you amortize bond premium • on a bond by offsetting the stated 173) — 3 years. Geological and geophysical interest allocable to a taxable year with • Intangible drilling and development expenditures (section 167(h)). You the bond premium allocable to that costs (section 263(c)) — 60 months. must amortize geological and taxable year and report the net amount • Research and experimental geophysical expenses paid or incurred of stated interest on your return. See expenditures (section 174(a)), mining in connection with the exploration or section 171 and Regulations sections exploration and development costs development of oil and gas within the 1.171-1 through 1.171-5 for more (sections 616(a) and 617(a)) — 10 United States ratably over a 24-month information. Individuals, also see Pub. years. period, beginning on the mid-point of 550, Investment Income and Expenses. For information on making the the tax year in which the expenses were A bond premium carryforward as of the election, see Regulations section paid or incurred. For a major integrated end of a taxpayer’s final accrual period 1.59-1. Also, see Pub. 535. oil company (as defined in section is treated as a deduction. See Certain section 197 intangibles. 167(h)(5)), the costs paid or incurred Regulations section 1.171-2(a)(4)(i)(C). The following costs must be amortized after December 19, 2007, must be For an individual, do not report the over 15 years (180 months) starting with amortized ratably over a 7-year period deduction here. See the instructions for the later of (a) the month the intangibles (a 5-year period for costs paid or Schedule A (Form 1040), line 16. incurred after May 17, 2006, and before were acquired, or (b) the month the December 20, 2007). Research and experimental trade or business or activity engaged in expenditures (section 174). You can for the production of income begins. Pollution control facilities elect to either amortize your research • Goodwill. (section 169). You can elect to and experimental costs, deduct them as • Going concern value. amortize the cost of a certified pollution current business expenses, or write • Workforce in place. control facility over a 60-month period

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• Business books and records, For business start-up and under the rules of Rev. Proc. 2004-36, operating systems, or any other organizational costs paid or incurred 2004-24 I.R.B. 1063. information base. after October 22, 2004, and before Column (b) — Date amortization be- A patent, copyright, formula, process, September 9, 2008, you can elect to • gins. Enter the date the amortization design, pattern, know-how, format, or deduct a limited amount of start-up and period begins under the applicable similar item. organizational costs for the year that Code section. The amortizable amount A customer-based intangible (for your business begins. If the election is • of a pollution control facility is reduced example, composition of market or made, you must attach any statement by any special depreciation allowance market share). required by Regulations sections included on line 14 for that facility. • A supplier-based intangible. 1.195-1(b), 1.248-1(c), and 1.709-1(c), • A license, permit, or other right as in effect before September 9, 2008. Column (c) — Amortizable amount. granted by a governmental unit. Any costs not deducted currently can be Enter the total amount you are • A covenant not to compete entered amortized ratably over a 180-month amortizing. See the applicable Code into in connection with the acquisition of period, beginning with the month you section for limits on the amortizable a business. begin business. amount. • A franchise, trademark, or trade Note. You can apply the provisions of Column (d) — Code section. Enter name (including renewals). the Code section under which you A longer period may apply to section Regulations sections 1.195-1, 1.248-1, and 1.709-1 to all expenses paid or amortize the costs. For examples, see 197 intangibles leased under a lease the Code sections referenced in the agreement entered into after March 12, incurred after October 22, 2004, provided the period of limitations on instructions for line 42, column (a), 2004, to a tax-exempt organization, earlier. governmental unit, or foreign person or assessment has not expired for the year entity (other than a partnership). See of the election. Otherwise, for business Column (f) — Amortization for this section 197(f)(10). start-up and organizational costs paid or year. Compute the amortization incurred after October 22, 2004, and deduction by: A section 197 intangible is before September 9, 2008, the 1. Dividing the amount in column (c) ! treated as depreciable property provisions under Regulations sections by the number of months over which the CAUTION used in your trade or business. 1.195-1(b), 1.248-1(c), and 1.709-1(c), costs are to be amortized and When you dispose of a section 197 as in effect before September 9, 2008, multiplying the result by the number of intangible, any gain on the disposition, will apply. months in the amortization period up to the amount of allowable For business start-up and included in your tax year beginning in amortization, is recaptured as ordinary organizational costs paid or incurred 2020, or income. If multiple section 197 before October 23, 2004, you can elect intangibles are disposed of in a single 2. Multiplying the amount in column an amortization period of 60 months or (c) by the percentage in column (e). transaction or a series of related more. transactions, calculate the recapture as Line 43 if all of the section 197 intangibles were Attach any statements required by a single asset. This rule does not apply the appropriate section and related If you are reporting the amortization of to section 197 intangibles disposed of regulations to Form 4562 by the due costs that began before your 2020 tax for which the adjusted basis exceeds date, including extensions, of your year and you are not required to file the fair market value. return for the year in which the active Form 4562 for any other reason, do not trade or business begins. If you have file Form 4562. Report the amortization For more details on section 197 both start-up and organizational costs, directly on the “Other Deductions” or intangibles, see Pub. 535. attach a separate statement for each “Other Expenses” line of your return. type of cost. If you timely filed your Start-up and organizational costs. return without making the election, you Line 44 You can elect to amortize the following can still make the election on an Report the total amortization, including costs for setting up your business. amended return filed within 6 months of the allowable portion of forestation or • Business start-up costs (section 195). the due date, excluding extensions, of reforestation amortization, on the • Organizational costs for a corporation the return. Write “Filed pursuant to applicable “Other Deductions” or “Other (section 248). section 301.9100-2” on the amended Expenses” line of your return. For more • Organizational costs for a partnership return. See Pub. 535 for more details. details, including limitations that apply, (section 709). see Pub. 535. Partnerships (other than For business start-up and Creative property costs. These electing large partnerships) and S organizational costs paid or incurred are costs paid or incurred to acquire and corporations, report the amortizable after September 8, 2008, you can elect develop screenplays, scripts, story basis of any forestation or reforestation to deduct a limited amount of start-up or outlines, motion picture production expenses for which amortization is organizational costs for the year that rights to books and plays, and other elected and the year in which the your business begins. You are not similar properties for purposes of amortization begins as a separately required to attach a statement to make potential future film development, stated item on Schedules K and K-1 this election. Once made, the election is production, and exploitation. You may (Form 1065 or 1120-S). See the irrevocable. Any cost not deducted be able to amortize creative property instructions for Schedule K (Form 1065 currently must be amortized ratably over costs for properties not set for or 1120-S) for more details on how to a 180-month period. The amortization production within 3 years of the first report. period starts with the month you begin capitalized transaction. These costs are business operations. See Regulations amortized ratably over a 15-year period sections 1.195-1, 1.248-1, and 1.709-1.

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Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return information are confidential, as required by section 6103. The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden for individual taxpayers filing this form is approved under OMB control number 1545-0074 and is included in the estimates shown in the instructions for their individual income tax return. The estimated burden for all other taxpayers who file this form is shown below. Recordkeeping ...... 27 hr., 44 min. Learning about the law or the form ...... 4 hr., 16 min. Preparing and sending the form to the IRS ...... 4 hr., 55 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler, we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

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Table A—General Depreciation System Method: 200% declining balance switching to straight line Convention: Half-year If the recovery period is:

Year 3 years 5 years 7 years 10 years 1 33.33% 20.00% 14.29% 10.00% 2 44.45% 32.00% 24.49% 18.00% 3 14.81% 19.20% 17.49% 14.40% 4 7.41% 11.52% 12.49% 11.52% 5 11.52% 8.93% 9.22% 6 5.76% 8.92% 7.37% 7 8.93% 6.55% 8 4.46% 6.55% 9 6.56% 10 6.55% 11 3.28%

Table B—General Depreciation System Method: 150% declining balance switching to straight line Convention: Half-year

If the recovery period is: Year 5 years 7 years 10 years 12 years 15 years 20 years 1 15.00% 10.71% 7.50% 6.25% 5.00% 3.750% 2 25.50% 19.13% 13.88% 11.72% 9.50% 7.219% 3 17.85% 15.03% 11.79% 10.25% 8.55% 6.677% 4 16.66% 12.25% 10.02% 8.97% 7.70% 6.177% 5 16.66% 12.25% 8.74% 7.85% 6.93% 5.713% 6 8.33% 12.25% 8.74% 7.33% 6.23% 5.285% 7 12.25% 8.74% 7.33% 5.90% 4.888% 8 6.13% 8.74% 7.33% 5.90% 4.522% 9 8.74% 7.33% 5.91% 4.462% 10 8.74% 7.33% 5.90% 4.461% 11 4.37% 7.32% 5.91% 4.462% 12 7.33% 5.90% 4.461% 13 3.66% 5.91% 4.462% 14 5.90% 4.461% 15 5.91% 4.462% 16 2.95% 4.461% 17 4.462% 18 4.461% 19 4.462% 20 4.461% 21 2.231%

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Table C—General Depreciation System Method: Straight line Convention: Mid-month Recovery period: 27.5 years

The month in the 1st recovery year the property is placed in service:

Year 1 2 3 4 5 6 7 8 9 10 11 12 1 3.485% 3.182% 2.879% 2.576% 2.273% 1.970% 1.667% 1.364% 1.061% 0.758% 0.455% 0.152% 2–9 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 10,12,14,16,18, 20, 22, 24, 26 3.637% 3.637% 3.637% 3.637% 3.637% 3.637% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 11,13,15,17,19, 21, 23, 25, 27 3.636% 3.636% 3.636% 3.636% 3.636% 3.636% 3.637% 3.637% 3.637% 3.637% 3.637% 3.637% 28 1.97% 2.273% 2.576% 2.879% 3.182% 3.485% 3.636% 3.636% 3.636% 3.636% 3.636% 3.636%

Table D—General Depreciation System Method: Straight line Convention: Mid-month Recovery period: 31.5 years

The month in the 1st recovery year the property is placed in service: Year 1 2 3 4 5 6 7 8 9 10 11 12 13,15,17,19, 21, 23, 25, 27, 29, 31 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 14,16,18, 20, 22, 24, 26, 28, 30 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174% 32 1.720% 1.984% 2.249% 2.513% 2.778% 3.042% 3.175% 3.174% 3.175% 3.174% 3.175% 3.174%

Table E—General Depreciation System Method: Straight line Convention: Mid-month Recovery period: 39 years

The month in the 1st recovery year the property is placed in service: Year 1 2 3 4 5 6 7 8 9 10 11 12

1 2.461% 2.247% 2.033% 1.819% 1.605% 1.391% 1.177% 0.963% 0.749% 0.535% 0.321% 0.107% 2–39 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 2.564% 40 0.107% 0.321% 0.535% 0.749% 0.963% 1.177% 1.391% 1.605% 1.819% 2.033% 2.247% 2.461%

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Deduction Depreciation or % Table Rate Period Recover y Metho d/ Convention ds.) for Basis eco r Depreciation r your Prior for Years Depreciation (Keep Basis Special and Other Allowance, Reductions Section 179 orksheet W % Use Business/ Investment eciation or Other Basis Cost Dep r in e vi c Date e r S Placed Property of Description

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

Index

Classification of property 8 A D Conventions 9 R Alternative Depreciation Definitions 1 Depreciation deduction 10 Recapture: System: Amortization 2 Determining the Listed property 12, 14 Basis for depreciation 11 Commuting 2 classification 9 MACRS depreciation 11 Classification of Depreciation 1 Placed in service date 9 Section 179 expense property 11 Listed property 2 Recovery period 9 deduction 3, 14 Conventions 11 Listed property - Special depreciation Depreciation deduction 11 Exceptions 2 allowance 6 Placed in service date 11 Section 179 property 1 I Recordkeeping 2 Recovery period 11 Depreciation: Involuntary conversion 8 Alternative minimum tax 2 Accelerated Cost Recovery Amortization 15 System (ACRS) 7 S Amortizable amount 16 Assets placed in service in L Section 179 expense Amortization deduction 16 prior year 7 Like-kind exchange 8 deduction 3 Amortization of costs from General asset accounts 7 Listed property: Carryover of disallowed prior year 16 Income forecast method 7 Basis for depreciation 12 deduction 4 Amortization of costs in Intangible property 7 Convention 13 Election 3 current year 15 Listed property 11 Cost or other basis 12 Limitations: Applicable code section 16 Modified Accelerated Cost Depreciation deduction 13 Maximum deduction 3 Certain bond premiums 15 Recovery System Information on vehicle Sport utility vehicle Cost of acquiring a (MACRS) 7 use 14 (SUV) 14 lease 15 Alternative Depreciation Method 13 Taxable income 4 Creative property costs 16 System 10 Passenger automobile Threshold cost of Date amortization General Depreciation limits 13 property 3 begins 16 System 8 Definitions 13 Listed property 14 Description of costs 15 Involuntary Exception 13 Recapture 3, 14 Forestation and conversion 8 Leasehold property Special depreciation reforestation costs 15 Like-kind exchange 8 exception 13 allowance 5 Geological and geophysical Other 7 Tables 13 Election out 6 expenditures 15 Depreciation methods: Percentage of business or Figuring the allowance 6 Optional section 59(e) Declining balance 10 investment use 12 Listed property 12 write-off 15 Straight line 10 Placed in service date 12 Qualified property 5 Pollution control Depreciation tables 18, 19 Qualified business use 12 Recapture 6 facilities 15 Depreciation worksheet 20 Questions for employers on Research and experimental vehicle use 14 expenditures 15 Recapture of section 179 U Section 197 intangibles 15 E expense deduction 14 Uniform capitalization rules 11 Start-up and organizational Election out: Recovery period 13 Unit-of-production method 6 costs 16 Involuntary conversion 8 Section 179 expense Like-kind exchange 8 deduction 14 Special depreciation Special depreciation W C allowance 6 allowance 12 Where to find additional Conventions: Type of property 12 information 1 Half-year 9 Who must file 1 Mid-month 10 G Mid-quarter 9 General Depreciation System: Basis for depreciation 9

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