What Is Listed Property?
Listed property is a specific class of depreciable property subject to a special set of tax rules if it is used predominantly for business purposes. To be considered listed property, an item must be used for more than 50% for a company's business. That means the remainder of the time, assets may be also be used for personal purposes.
Examples of listed property include passenger vehicles and others used for transportation, and cameras and other recording equipment. As of January 1, 2010, cell phones and other similar personal telecommunications devices are no longer considered to be listed property.
Listed-property rules limit the amount of deductions and depreciation that can be taken if the asset isn't predominantly used in a business or trade.
[Important: In order to qualify, listed property must be allocated for more than one purpose during the tax year.]
Understanding Listed Property
A company's listed property is everything it owns that is used for business purposes more than 50% of the time and depreciates in value. In simple terms, it is property used for both business and personal purposes such as the vehicles owned by the business that is driven by officers, employees, and/or shareholders.
The listed property rules were introduced in the 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.
According to the Internal Revenue Service (IRS), listed property includes:
- Automobiles weighing less than 6,000 pounds, excluding ambulances, hearses, and trucks or vans qualified non-personal use vehicles.
- Other property used for transportation purposes including trucks, buses, boats, airplanes, motorcycles, and any 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.
Listed Property and Predominant Use Test
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 of listed property to:
- Claim a bonus depreciation
- Claim an expensing election
- To depreciate the property under the Modified Accelerated Cost Recovery System (MACRS) depreciation system
Companies are also required to keep detailed records of all the assets used as listed property. This includes the amount for each piece of property including the original cost, any repairs involved, insurance, and any other related expenses.
- Listed property is depreciable property 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. It may also be used for personal use.
- Examples of listed property include vehicles, other property used in transport, and computers.
Depreciation of Listed Property
If a listed property is used primarily for business reasons, then it 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, but it must be depreciated under the straight-line method.
Cars used solely to carry passengers are also subject to additional depreciation limitations. A listed property which does not meet the predominant use test is not eligible for Section 179 depreciation or other accelerated depreciation methods.
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.