Form 5471 line 14, depreciation not deducted elsewhere.

Schedule C deductions block, lines 11 to 18

What the line is

Schedule C of Form 5471 is the income statement of the foreign corporation. It starts with gross receipts or sales and works through income on lines 1 to 10, then lists deductions on lines 11 to 18, with line 14 labelled “Depreciation not deducted elsewhere.” The words “not deducted elsewhere” suggest that depreciation already deducted in another part of the statement, such as within cost of goods sold on line 2, is not repeated on line 14. That is a reading of the printed label; the IRS gives no further explanation.

The rules that surround every Schedule C line

The form carries one important instruction at the top of the schedule: report all information in functional currency in accordance with U.S. generally accepted accounting principles (GAAP), and also report each amount in U.S. dollars translated from functional currency using GAAP translation rules. If the functional currency is the U.S. dollar, complete only the U.S. Dollars column. The instructions repeat that Schedule C is to be prepared “in accordance with U.S. GAAP and translate using U.S. GAAP translation principles.” The functional currency is determined under section 985, and the form asks for it as a three-character ISO 4217 code.

If the foreign corporation uses the dollar approximate separate transactions method (DASTM) under Regulations section 1.985-3, the functional currency column shows local hyperinflationary currency amounts computed under U.S. GAAP, and the U.S. dollar column shows those amounts translated under U.S. GAAP. Differences between that GAAP column and the dollar income or loss figured for tax purposes under Regulations section 1.985-3(c) are accounted for on Schedule H.

Book depreciation versus earnings and profits

The depreciation on line 14 is book depreciation under U.S. GAAP. That is not the figure the IRS uses for current earnings and profits. Schedule H (Form 5471) starts with “Current year net income or (loss) per foreign books of account” on line 1, and its line 2b is “Depreciation and amortization,” one of the net adjustments used to reach current earnings and profits. The Form 5471 instructions for lines 2b and 2c say that depreciation, depletion, and amortization allowances must generally be based on the historical cost of the underlying asset, and depreciation must be figured according to section 167. If 20% or more of the foreign corporation’s gross income is from U.S. sources, depreciation must be figured on a straight-line basis under Regulations section 1.312-15.

If the corporation’s books are kept in functional currency under U.S. GAAP, the instructions say to enter on Schedule H line 1 the functional currency GAAP income or (loss) from line 22 of Schedule C, and then show GAAP-to-tax adjustments on lines 2a through 2i. A depreciation difference between line 14 of Schedule C and the tax method shows up there.

How line 14 flows to the bottom of the statement

Line 18 adds lines 11 through 17. Line 19 subtracts line 18 from total income on line 10, giving net income or (loss) before unusual or infrequently occurring items and income tax expense. Line 20 takes unusual items, which are defined by U.S. GAAP. Lines 21a and 21b record current and deferred income tax expense or benefit, and line 22 combines lines 19 through 21b into current year net income or (loss) per books. Because depreciation is within line 18, every dollar on line 14 lowers line 19 and line 22 by the same amount.

Made-up example. A foreign corporation has total income of $500,000 on line 10, compensation of $200,000, rents of $30,000, interest of $10,000, depreciation of $40,000, taxes of $20,000 and other deductions of $50,000. Line 18 is $350,000, and line 19 is $150,000. If depreciation were $60,000, lines 18, 19 and 22 would move by $20,000. These figures are invented; the IRS gives no dollar example.

Practical limits

Because the instructions have no line 14 paragraph, the amount should tie to the depreciation expense in the foreign corporation’s financial statements prepared under U.S. GAAP. Keep the workpapers that tie to those statements, and confirm the filer category and required schedules with a preparer who handles international information returns.

More line pages in this set

Related: Form 1116 Line 12, which covers the 10% foreign tax reduction for not filing Form 5471.

Sources

• Instructions for Form 5471 (Rev. December 2025): the Schedule C and Schedule H instructions cited on this page. Read November 2, 2026.
• Form 5471 (Rev. 12-2025), Schedule C Income Statement, page 3: the printed line wording and arithmetic on the form. Read November 2, 2026.
• Schedule H (Form 5471) (Rev. 12-2021), Current Earnings and Profits: the line 2b wording and line 1 starting point. Read November 2, 2026.

Instructions for Form 5471, Rev. December 2025. The line labels were read from the Form 5471 (Rev. 12-2025) PDF and Schedule H (Rev. 12-2021) the IRS had posted on the date read. The IRS instructions for Schedule C contain no separate paragraph for line 14, so this page describes the surrounding rules rather than inventing one. Line numbers can shift between revisions, so check them against the form for your year.