What Is a Listed Property?
The term listed property refers to a certain type of depreciable property that may be used primarily for business purposes. To be considered listed property, an item must be used for more than 50% for a company's business. That means assets may be used for personal purposes for the remainder of the time. Listed property is subject to a special set of tax rules for the taxpayer.
- Listed property is any depreciable asset subject to a special set of tax rules if it is used predominantly for business purposes.
- In order to be considered listed property, an asset must be used for business purposes no less than 50% of the time.
- Listed property may also be used for personal use for the remainder of the time.
- Examples of listed property include vehicles, computers, and recording equipment.
Understanding Listed Property
Listed property is any asset that a company uses for business purposes for more than 50% of the time. These assets also depreciate in value over time and can be used for personal purposes when not in use for the day-to-day operations of the business. In simple terms, a company's listed property is any asset used for both business and personal purposes that loses value over time, as long as it is predominantly used to run the business.
- Automobiles weighing less than 6,000 pounds, excluding ambulances, hearses, and trucks or vans qualified nonpersonal use vehicles.
- Other property used for transportation purposes including trucks, buses, boats, airplanes, motorcycles, and other vehicles used to transport persons or goods.
- Properties used for entertainment, recreation or amusement.
- Computers and related peripheral equipment placed in service before January 1, 2018, unless used only at a regular business establishment, and owned or leased by the person operating the establishment.
The listed property rules were introduced as part of the United States tax code to keep people from claiming tax deductions for the personal use of property under the guise that it was used in a business or trade. For instance, companies are required to keep detailed records of all the assets they use as listed property. This includes the amount paid for each piece of property including the original cost, any repairs involved, insurance, and any other related expenses.
Listed property—also referred to at times as mixed-use property—used primarily for business reasons is subject to the statutory percentage depreciation method, as it will be considered a business asset. Listed property used for business only half the time at most—and passes the predominant use test—can still have depreciation based on the business use percentage claimed on it. In this case, though, it must be depreciated under the straight-line method. Cars used solely to carry passengers are also subject to additional depreciation limitations. Listed property that does not meet the predominant use test is not eligible for Section 179 depreciation—the maximum amount of depreciation allowed—or other accelerated depreciation methods.
Costs associated with the use of listed property are not deductible as business expenses. In other words, a tax-paying entity must substantiate the business use of a property if it is to depreciate this property or deduct expenses. The predominant use test must be applied to every item of listed property. This test stipulates that the business usage of the listed property must be more than 50%. This must be done for every asset a business claims as listed property in order to:
- Claim a bonus depreciation
- Claim an expensing election
- To depreciate the property under the modified accelerated cost recovery system (MACRS) depreciation system
A recaptured depreciation may be added back to income in any year after the first year of use that the listed property business usage drops below 50%. That is, the taxpayer may have to pay back some of the excess depreciation claimed. The amount of depreciation recaptured is the accelerated depreciation allowed for the years preceding the recapture year, including any Section 179 expense, minus the MACRS alternative depreciation system (ADS) depreciation amount that would have been allowed for the same period of time.
Examples of Listed Property
Here's a list of assets that generally qualify as listed property:
- Passenger vehicles, airplanes, boats and other vehicles used for transportation
- Computers and other office-related equipment
- Recording equipment such as cameras and audio equipment
As of Jan. 1, 2010, cell phones cannot be claimed as listed property under the U.S. tax code.
Cell phones were once included as a category of listed property. But changes were made to prevent taxpayers from abusing the system and to cut down on people claiming their personal communications devices as commercial-use equipment. As such, the Small Business Jobs Act removed cell phones and other similar personal telecommunications devices from the list of acceptable listed property as of Jan. 1, 2010. Cell phones and other devices, however, may still be claimed for tax years prior to 2010.