skip navigation

Search Help
Navigation Help

Tax Map Index
ABCDEFGHI
JKLMNOPQR
STUVWXYZ#

International
Tax Topic Index

Affordable Care Act
Tax Topic Index

Forms
Publications

Comments
About Tax Map

IRS.gov Website
Publication 225
taxmap/pubs/p225-035.htm#en_us_publink1000218308

Amortization(p46)

rule
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 amortizable costs discussed in this section include the start-up costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles. See chapter 8 in Publication 535 for more information on these topics.
taxmap/pubs/p225-035.htm#en_us_publink1000218309

Business Start-Up Costs(p46)

rule
When you go into business, treat all costs you incur to get your business started as capital expenses. Capital expenses are a part of your basis in the business. Generally, you recover costs for particular assets through depreciation deductions. However, you generally cannot recover other costs until you sell the business or otherwise go out of business.
Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. Start-up costs include any amounts paid or incurred in connection with any activity engaged in for profit and for the production of income before the trade or business begins, in anticipation of the activity becoming an active trade or business.
You can elect to currently deduct a limited amount of business start-up costs paid or incurred after October 22, 2004. See Capital Expenses in chapter 4. If this election is made, any costs that are not currently deducted can be amortized.
taxmap/pubs/p225-035.htm#en_us_publink1000218310

Amortization period.(p46)

rule
The amortization period for business start-up costs paid or incurred before October 23, 2004, is 60 months or more. For start-up costs paid or incurred after October 22, 2004, the amortization period is 180 months. The period starts with the month your active trade or business begins.
taxmap/pubs/p225-035.htm#en_us_publink1000218311

Reporting requirements.(p46)

rule
To amortize your start-up costs that are not currently deductible under the election to deduct, complete Part VI of Form 4562 and attach a statement containing any required information. See the Instructions for Form 4562.
For more information, see Starting a Business in chapter 8 of Publication 535.
taxmap/pubs/p225-035.htm#en_us_publink1000218312

Reforestation Costs(p46)

rule
You can elect to currently deduct a limited amount of qualifying reforestation costs for each qualified timber property. See Capital Expenses in chapter 4. You can elect to amortize over 84 months any amount not deducted. There is no annual limit on the amount you can elect to amortize. Reforestation costs are the direct costs of planting or seeding for forestation or reforestation.
taxmap/pubs/p225-035.htm#en_us_publink1000218313

Qualifying costs.(p46)

rule
Qualifying costs include only those costs you must otherwise capitalize and include in the adjusted basis of the property. They include costs for the following items.
If the government reimburses you for reforestation costs under a cost-sharing program, you can amortize these costs only if you include the reimbursement in your income.
taxmap/pubs/p225-035.htm#en_us_publink1000218314

Qualified timber property.(p46)

rule
Qualified timber property is property that contains trees in significant commercial quantities. It can be a woodlot or other site that you own or lease. The property qualifies only if it meets all the following requirements.
Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees.
taxmap/pubs/p225-035.htm#en_us_publink1000218315

Amortization period.(p46)

rule
The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period.
taxmap/pubs/p225-035.htm#en_us_publink1000218316

How to make the election.(p46)

rule
To elect to amortize qualifying reforestation costs, enter your deduction in Part VI of Form 4562. Attach a statement containing any required information. See the Instructions for Form 4562.
Generally, you must make the election on a timely filed return (including extensions) for the year in which you incurred the costs. However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Attach Form 4562 and the statement to the amended return and write "Filed pursuant to section 301.9100-2" on Form 4562. File the amended return at the same address you filed the original return.
For additional information on reforestation costs, see chapter 8 of Publication 535.
taxmap/pubs/p225-035.htm#en_us_publink1000218323

Section 197 Intangibles(p46)

rule
You must generally amortize over 15 years the capitalized costs of section 197 intangibles you acquired after August 10, 1993. You must amortize these costs if you hold the section 197 intangible in connection with your farming business or in an activity engaged in for the production of income. Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible.
Section 197 intangibles include the following assets.See chapter 8 in Publication 535 for more information, including a complete list of assets that are section 197 intangibles and special rules.