What is a Listed Property
Listed property is a specific class of depreciable property that is subject to a special set of tax rules if it is used for business no more than 50% of the time. It includes such items as vehicles and computer equipment. 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.
As of January 1, 2010, cell phones and other similar personal telecommunications devices are no longer considered to be listed property.
BREAKING DOWN Listed Property
Listed property is all the vehicles owned by the business that are driven by officers, employees, and/or shareholders. In simple terms, it is property used for both business and personal purposes. 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 that are 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; and
- 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
Costs associated with the use of listed property are not deductible as business expenses unless the taxpayer has sufficient evidence to prove the amount of the expense and its use in the business. 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 stipulates that in order to claim a bonus depreciation; an expensing election, or; to depreciate the property under the Modified Accelerated Cost Recovery System (MACRS) depreciation system, the business usage of the listed property must be more than 50%.
If 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 in this case. Listed property that is 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 limitations on their depreciation. 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.