 Most of this information comes from publication 946, how to depreciate property tax year 2022. You can find it at the IRS website, irs.gov, irs.gov. Looking at the income tax formula, we're focused online, one income. Remember on the first half of the income tax formula is an essence and income statement, but just to outline a scaffolding, other forms and schedules flowing into it. One of those, the Schedule C, business income, minus business expenses, gives us the net business income. The Schedule C then flowing into line one of income on the income tax formula. First page of the form 1040, remembering the Schedule C flows into the Schedule 1, which flows into the first page of 1040, line number eight, as we see here. Schedule C profit or loss from business income statement format, income minus the expenses. We're focused on the expenses side of things and more particularly focused on the depreciation, noting that even if you're on a cash based method, you're gonna have to do an accrual thing, oftentimes of the depreciation, putting the property planting equipment on the books as an asset, allocating the cost over the useful life. However, the depreciation standards for the tax code might be different and they might have different objectives than on the business side of things. So we have to be following the tax code. Sometimes they might try to accelerate the depreciation in the first half of the year, or first part of the depreciation period. Why would they do that? Normally for political type of reasons to try to stimulate the economy or whatever they're trying to do. So that's basically what we have here. We're talking now about the electing the section 179 deduction. So note, we're talking depreciation. The first thing you wanna think about is, we're putting it on the books as an asset, allocating the cost over the useful life. That's the normal accounting structure as to why you would be doing that. For depreciation, the first one to think about is straight line depreciation. That would be the easiest thing to conceptually visualize. You're just gonna have an even amount allocated over the useful life of the thing that is being depreciated, allocating the cost evenly over the time frames that you're using it. Then you might have accelerated depreciation methods like double declining balance, front loading the first side of the depreciation, which could be useful and correct in terms of equipment, which you might be getting more use out of in the first years than the latter years, which is the accounting defense for like a double declining balance. But for taxes, the double declining balance is usually good because we want the depreciation upfront because deductions are good for taxes, right? So we'd whether to have the deduction sooner. And then we can go deviate completely from bookkeeping thought process. And that would be like having a front loaded 179 deduction, for example, which basically means we're gonna be able to get this big deduction upfront. Similarly, like a special deduction. These are things that are basically usually politically related, trying to stimulate the economy or something like that. That's where we're are now. So electing the 179 deduction introduction. So you can elect to recover all or part of the cost of certain qualified property up to a limit by deducting it in the year you place the property in service. So it's gonna be important that you have to think about this election when you place the property in service because that's the point in time when you could take the election or not. Normally, if you could take the election, usually we would want to because that would allow us to deduct sooner and the typical tax planning strategies would be, I'd rather have the deduction sooner than later because of the time, value and money and the possibility that the tax code could change. But that's not always the case because it might be the case that in future years, I think my revenue is gonna be higher than in the current year, in which case my progressive tax rates might be higher in future years as well. So in that case, you could imagine a scenario where you wouldn't want the 179 deduction in a low income tax year and would rather take it in future years where you think the income level might be higher. So this is the section 179 deduction. You can elect the 179 deduction instead of recovering the cost by taking depreciation deductions. So it's kind of like an accelerated depreciation or you're basically depreciating it all up front. Okay, purpose of form 4562. This table describes the purpose of the various parts of form 4562 for more information. See form 4562. So part one, what's the purpose electing the section 179 deduction figuring the maximum section 179 deduction for the current year, figuring any section 179 deduction carryover to the next year. Part number two, form 4562, reporting the special depreciation allowance for property other than listed property placed in service during the tax year, reporting depreciation deductions on property being depreciated under any method other than makers. Part three, reporting makers depreciation deduction for property placed in service before this year. Makers is like the normal thing that usually comes to mind for depreciation methods for tax code, which is kind of a double declining balance usually with a half year convention, for example, reporting makers depreciation deduction for property other than listed property placed in service during the tax year. Part four summarizing other parts. Part five, reporting the special depreciation allowance for automobiles and other listed property. Automobiles having its own special rules because of the problems related to automobiles and whatnot, reporting makers depreciation on automobiles and other listed property, reporting section 179 cost elected for automobiles and other listed property, reporting information on the use of automobiles and other transportation vehicles. And then we've got part number six, reporting amortization deductions. Okay, useful items. You may want to see publications. So you can dive into these publications if you want to get into more detail. 537 installment sales. So if you have that particular situation, 544 sales and other disposition of assets when you're disposing of the assets, form and instructions for form 4562 depreciation amortization. You can find these on the IRS website of course, iris.gov and form 4797 sales of business property. Okay, so what property qualifies? We're talking 179 deduction here. To qualify for the section 179 deduction, your property must meet all of the following requirements. It must be eligible property. It must be acquired for business use. This is a business type of thing here, not a personal deduction. It must have been acquired by purchase. So you purchased it as opposed to just finding it or gifting it or something like that. You bought the thing. It must not be property described later under what property does not qualify. So we'll talk about that shortly.