Illinois Form IL-4562 – Depreciation and Amortization Adjustments (2026)
Last reviewed: 2025-11-07
Use the Illinois Tax Form Calculator Form IL-4562: Depreciation and Amortization Adjustments as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 Illinois state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.
Form IL-4562 reconciles differences between Federal and Illinois depreciation and amortization rules. When Illinois law disallows accelerated methods or bonus depreciation allowed under Federal law, this form adjusts your state income. It applies to individuals, corporations, partnerships, and S-corporations. The resulting adjustment feeds directly into Schedule M for individuals and Schedule M (Corporate) where applicable.
Purpose and Use
Illinois generally requires taxpayers to add back Federal bonus depreciation and Section 179 expenses exceeding state limits, then subtract the difference once these assets are fully depreciated under Illinois rules. This ensures income is not understated at the state level during accelerated write-offs. Form IL-4562 provides both the addition and subtraction computations that flow into Schedule M.
When Form IL-4562 is Required
- You claimed Federal bonus depreciation or Section 179 expenses on property placed in service after 2000.
- You must adjust Illinois income to reflect the state’s disallowance of certain accelerated deductions.
- You sold or disposed of depreciable property previously adjusted under Illinois rules, requiring recapture or subtraction.
Always maintain asset records showing the original cost, accumulated depreciation, and Illinois basis for each property affected. Illinois applies specific limitations under 35 ILCS 5/203 and related regulations (Illinois Income Tax Act §203).
| Step 1 – Additions | ||
| 1a | Bonus depreciation add-back (Federal amount claimed) | |
| 1b | Section 179 expense add-back (amount exceeding Illinois limit) | |
| 2 | Total additions (Lines 1a + 1b) | |
| Step 2 – Subtractions | ||
| 3 | Illinois depreciation allowed on property previously adjusted | |
| 4 | Federal depreciation claimed on same property | |
| 5 | Subtraction (Line 3 – Line 4 if positive) | |
| Step 3 – Net Adjustment | ||
| 6 | Net adjustment (Additions – Subtractions) → Carry to Schedule M | |
Understanding Form 4562 Line 3 – Illinois Depreciation Allowed on Previously Adjusted Property
Line 3 of Form IL-4562 represents the cumulative Illinois-permitted depreciation on assets that were previously adjusted because Illinois disallowed accelerated or bonus depreciation taken on your federal return. This is not a fixed amount—it's calculated from your own depreciation records and changes each year as you continue to depreciate those assets under Illinois rules.
Why It Exists: Illinois decoupled from federal bonus depreciation to prevent large up-front deductions that reduce early-year tax revenue. By tracking the difference on Form IL-4562, the state ensures that while accelerated federal deductions are added back initially, the same value is eventually allowed back through normal Illinois depreciation, keeping your state taxable income accurate over the asset’s lifetime.
How It’s Calculated: Line 3 is based on:
- The original federal asset cost and placed-in-service date.
- The Illinois depreciation schedule you must use—typically straight-line or MACRS without bonus depreciation.
- The number of years since the add-back occurred.
Example: In Year 1, you added back $100 000 of bonus depreciation Illinois did not allow. In Year 2, Illinois depreciation rules permit $20 000 of standard depreciation on that same asset. Therefore, you enter $20 000 on Line 3 as the portion now allowed under state law. This subtraction prevents double taxation by returning the income you previously added back.
Each subsequent year, you continue to increase your Illinois depreciation until the total equals your federal basis, ensuring both records align by the time the asset is fully depreciated. Keeping consistent Illinois and federal depreciation schedules protects you from audit discrepancies and maintains compliance with Illinois Income Tax Act §203.
Depreciation Differences Explained
Federal vs. Illinois Bonus Depreciation: Federal law permits accelerated write-offs (50%–100%) on qualifying property in the year of purchase. Illinois requires these amounts to be added back to income, then later allows subtraction once the asset is fully depreciated for Illinois purposes.
Section 179 Deduction: Federal Section 179 limits often exceed Illinois limits. Any excess Federal Section 179 deduction must be added back to Illinois income using this form. Once Illinois depreciation catches up, you may claim a subtraction adjustment.
Recordkeeping and Documentation
Maintain detailed depreciation schedules for both Federal and Illinois purposes, identifying each asset’s placed-in-service date, Federal depreciation method, and Illinois adjustment. Proper tracking prevents errors in Schedule M adjustments and ensures accurate reporting upon asset sale or disposal.
For additional detail, review official Department of Revenue resources: Form IL-4562 Instructions (2026).
Last reviewed: 2025-11-07: If you believe this form requires an update, please contact us.
Background and Legislative History
The Illinois add-back for bonus depreciation was introduced in 2001 after the Federal Job Creation and Worker Assistance Act of 2002 expanded immediate expensing allowances. Illinois, like many states, decoupled from Federal bonus depreciation to preserve tax neutrality and steady revenue. Adjustments continued through subsequent Federal Tax Acts, including the Tax Cuts and Jobs Act of 2017, which allowed 100% expensing. Illinois retained its original decoupling structure, meaning IL-4562 remains necessary annually.
Example: A small business purchases $100,000 of qualifying equipment and claims $100,000 of Federal bonus depreciation. Illinois requires adding $100,000 back to income in Year 1. Over the following years, standard Illinois depreciation rules gradually offset the earlier addition until full recovery occurs.
Why It Matters: Properly filing IL-4562 ensures your Illinois taxable income reflects accurate depreciation timing. Omitting the form can lead to audit adjustments or denied subtractions later. For most small businesses, it directly affects the Schedule M adjustment lines and the computation of Illinois base income.
Related Forms
- Form IL-1040 – Individual Income Tax Return
- Schedule M – Additions & Subtractions
- Form IL-1120 – Corporation Income Tax Return
- Schedule M (Corporate Adjustments)
Quick Access Tools
Frequently Asked Questions
Mortgage vs take-home planning
Try the Mortgage Calculator and revisit this IL page.
Where do I mail the completed IL-1040-V and payment?
Mail the completed voucher and payment to the address printed on the voucher (Illinois Department of Revenue, Springfield IL 62726-0001) unless told otherwise during filing.
Do charitable gifts affect IL tax?
IL doesn’t mirror federal itemized deductions; charitable gifts matter federally, not typically for IL base.
Why don’t my payroll brackets match?
Employer systems use rounding/timing and supplemental methods; small variances are normal.
Does Illinois tax Social Security or pension income?
No. Illinois exempts most retirement income—including Social Security, pensions, and IRA withdrawals—from state income tax. These subtractions are reported on Schedule M.
Important Notes
All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.