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Taxmap/pubs/p535-042.htm#TXMP2593f7b5 Chapter 9 Amortization

Amortization

Taxmap/pubs/p535-042.htm#TXMP7ee638c0 What's New

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Start-up and organizational costs.

You can elect to deduct a limited amount of start-up and organizational costs paid or incurred after October 22, 2004. The remaining costs can be amortized ratably over a 180-month period. See Going Into Business, later.

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Sports franchise acquisitions.

Intangible assets acquired after October 22, 2004, in connection with acquiring a professional sports franchise (including player contracts) can be amortized ratably over a 15-year period. See Section 197 Intangibles, later.

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Safe harbor for creative property costs.

You may be able to amortize certain creative property costs ratably over a 15-year period. See Safe Harbor for Creative Property Costs, later.

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Reforestation costs.

You can elect to deduct a limited amount of reforestation costs paid or incurred after October 22, 2004. The remaining costs can be amortized over an 84-month period. See Reforestation Costs, later.

Introduction

Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. It is similar to the straight line method of depreciation.

The various amortizable costs covered in this chapter are included in the list below. However, this chapter does not discuss amortization of bond premium. For information on that topic, see chapter 3 of Publication 550.

Useful items

You may want to see:

See chapter 14 for information about getting publications and forms.

Taxmap/pubs/p535-042.htm#TXMP25018a8b How To Deduct Amortization

Amortization

You deduct amortization that begins during the current year by completing Part VI of Form 4562 and attaching it to your current year's return.

For a later year, do not report your deduction for amortization on Form 4562 unless you begin to amortize a different amortizable item in that year. In that case, list on the Form 4562 not only the item you are beginning to amortize in the later year, but any items you had previously begun to amortize and are still amortizing. For example, you began amortizing one lease in 2003, and a second lease in 2004. You would show the second lease on line 42 of the 2004 Form 4562, and the first on line 43.

If you do not have to report amortization on Form 4562 for years after the year the amortization begins, deduct amortization directly on the "Other expenses" line of Schedule C or F (Form 1040) or the "Other deductions" line of Form 1065, 1120, 1120-A, or 1120-S. However, if you are amortizing reforestation costs, see Where to report under Reforestation Costs, later.

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