# Understanding Listed Property: Tax Deductions and Depreciation Rules

## What Is Listed Property?

Listed property refers to tangible assets that can be used for both business and personal purposes, as defined by the [Internal Revenue Service (IRS)](https://www.investopedia.com/terms/i/irs.asp). Examples include passenger automobiles, other transportation vehicles, and property commonly used for entertainment, recreation, or amusement.

To qualify for special tax deductions and accelerated depreciation benefits, the property must be used more than 50% for business purposes. These rules exist to ensure that tax advantages apply primarily to legitimate business use and to prevent the misuse of personal property for tax benefits.

### Key Takeaways

*   Listed property includes assets used for both business and personal purposes, like vehicles and entertainment equipment, and requires careful record-keeping to qualify for tax deductions.
*   Assets used more than 50% for business purposes can benefit from special tax deductions, such as Section 179, providing significant financial incentives for businesses.
*   Depreciation of listed property varies based on its usage, with business use over 50% eligible for more favorable depreciation methods under the general depreciation system.
*   Accurate and extensive records are essential to substantiate business use of listed property; failure to do so may impact the eligibility for deductions and require depreciation recapture.  
    

## How Listed Property Affects Taxes and Depreciation

A business can own listed property used for both business and personal purposes. If it is used more than 50% for business, it qualifies for special tax deduction or [depreciation](https://www.investopedia.com/terms/d/depreciation.asp) rules. "More than 50%" refers to time, vehicle mileage, or other relevant metrics.

The listed property rules were introduced to prevent people from claiming [tax deductions](https://www.investopedia.com/terms/t/tax-deduction.asp) for personal property under the pretense that it was being used in a business or trade. Businesses must maintain "adequate records" of their listed property as per IRS requirements. This includes its purchase price and any repair or maintenance costs, as well as evidence to substantiate its business use.

## Types of Listed Property As Defined by the IRS

In its annually updated Publication 946: How to Depreciate Property, the IRS provides a long list of items that it classifies as listed property. Examples include:

*   Passenger automobiles, defined as "any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans)."
*   Any other property that is used for transportation, except for what the rules refer to as "qualified nonpersonal use vehicles" or "excepted vehicles." Those are vehicles that are unlikely to be used much, if at all, for personal purposes and include police and fire vehicles, ambulances, hearses, school buses, moving vans, and various types of trucks and tractors.
*   Property that the IRS says is "generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment)."

Cell phones and similar personal telecommunications devices were once considered listed property. But Congress changed that in 2010. They can still be written off as a business expense to the extent that they are used for business, but they are no longer subject to the stricter record-keeping requirements of listed property.

## Efficient Strategies for Writing Off Listed Property

During annual tax filing, businesses can write off tangible property costs through deductions or depreciation methods. 

### Section 179 Deduction

Listed property that meets the requirement of more than 50% business use is eligible for a [Section 179](https://www.investopedia.com/terms/s/section-179.asp) tax deduction.

Instead of depreciating over time, Section 179 lets businesses write off most or all of the cost in the service year. " Often that will mean the same year as it was purchased.

The IRS sets limits on how large a Section 179 deduction businesses can take in any given year. For tax years beginning in 2023, the deduction maxes out at $1.16 million. For tax years beginning in 2024, the maximum section 179 expense deduction is $1,220,000. In addition, certain types of property may be subject to their own maximums. For example, the maximum Section 179 deduction for sport utility vehicles is $28,900, again for tax years beginning in 2023.

In addition, a Section 179 deduction cannot exceed your taxable business income for the year. Any remaining amount after the deduction can still be depreciated.

You can't, of course, write off the entire cost of an asset if you use it for business only a portion of the time. Instead, that use must be prorated as a percentage. The IRS offers this simple example:

"May Oak bought and placed in service an item of section 179 property costing $11,000. May used the property 80% for business and 20% for personal purposes. The business part of the cost of the property is $8,800 (80% (0.80) × $11,000)."

> **Tip**
>
> Businesses can claim a Section 179 deduction using IRS Form 4562.

## Leveraging Depreciation Benefits for Listed Property

Listed property can also be depreciated over time. Property that meets the "more than 50%" test is eligible for the [general depreciation system (GDS)](https://www.investopedia.com/terms/g/generaldepreciationsystem.asp), an accounting method that allows it to be written off more quickly, with larger deductions in the early years. If used 50% or less for business, the property can be written off using [ADS](https://www.investopedia.com/terms/a/alternative-depreciation-system.asp), which takes longer and evenly spreads deductions.

Listed property that is used more than 50% for business can also be eligible for the special depreciation allowance, sometimes referred to as [bonus depreciation](https://www.investopedia.com/terms/b/bonusdepreciation.asp). It allows taxpayers to write off an even greater amount during the first year. This allowance applies only to "qualified property" that was purchased and placed in service after Sept. 27, 2017 and before Jan. 1, 2023. The allowance started at 100% in 2022 and is declining by 20% each year until it reaches 0% in 2027. Listed property that is used 50% or less for business is considered "excepted property" and not eligible.

## Determining Business Use for Listed Property: Criteria and Exceptions

You can claim the Section 179 deduction if the property meets the business-use requirement. To qualify, the listed property must be used mostly (over 50%) for business purposes. If the property does not meet this requirement, it will not qualify for the deduction and straight-line under MACRS must be used.

There is an exception for [leased property](https://www.investopedia.com/terms/l/lease.asp): the business-use requirement does not apply to listed property leased or held for leasing by someone regularly engaged in the business of leasing listed property. To be considered regularly engaged in leasing, you have to enter into leasing contracts frequently over a continuous period, so it has to reflect the normal nature of your business. Occasional or incidental leasing does not qualify.

For example, leasing just one passenger automobile in a tax year does not constitute being regularly engaged in the business of leasing automobiles. However, rotating leases that span a fleet of vehicles may. Similarly, an employer charging an employee for the personal use of the employer's property is not considered regularly engaged in leasing the property.

## Calculating Business Use Percentage for Listed Property

To determine if something meets the business-use requirement, you need to divide its use among different purposes during the year. For cars and other transportation, use mileage to figure this out. Find the percentage of business use by dividing the miles driven for business by the total miles driven during the year.

For other items, use the actual time the property is used, not just available. For example, calculate the business use percentage by dividing the hours used for business by the total hours used during the year. Only count activities like entertainment or amusement as business use if you can deduct the expenses as necessary business costs.

Remember that commuting or traveling to work does not count as business use, even if you work during the trip. A business call made during commuting or on a personal trip does not change the trip to [business travel](https://www.investopedia.com/corporate-business-travel-8413980). If someone else uses your car, it’s not business use unless it’s directly connected with your business, reported as income, or you are paid fair rent. Employee use of property is considered business use only if it is required for the job and the employer's convenience.

## Can Employees Deduct Listed Property?

According to the IRS, employees "can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use." In addition, the use must be for the employer's convenience and required as a condition of employment.  

## What Is Mixed-Use Property?

The term "mixed-use" property is sometimes used as a synonym for listed property. However, it is more common in the field of real estate, often referring to a building with both commercial and residential tenants.

## Can I Deduct Commuting Mileage?

No, commuting mileage, which is the distance traveled from home to work and back, is not deductible. Business mileage only includes trips made for business purposes other than commuting.

## What Are the Record-Keeping Requirements for Listed Property?

The IRS requires detailed records, such as mileage logs for vehicles or usage logs for other items, to substantiate the business use of listed property. These records should include the date, purpose, and amount of business use.

## What Is Recaptured Depreciation?

Recapture is a process through which the IRS gets back some of the money it previously allowed the taxpayer to deduct through depreciation. For example, when a taxpayer takes depreciation deductions for an asset, that reduces their [cost basis](https://www.investopedia.com/terms/c/costbasis.asp) in the asset. If they later sell the asset for more than its cost basis, they can owe tax on that profit.

In the case of listed property, if the taxpayer claimed a Section 179 deduction for a particular asset, they may be subject to recapture if their business use of it falls to 50% or less at any time during that asset's recovery period. The recovery period is the number of years over which an asset would normally be depreciated under IRS rules. An automobile, for example, has a recovery period of five years under the general depreciation system.

## The Bottom Line

Listed property includes tangible assets used for both business and personal purposes, subject to specific IRS rules. To qualify for favorable tax treatment, including Section 179 deductions and bonus depreciation, the property must be used more than 50% for business.

Maintaining accurate records to document business use is essential to meet IRS requirements. By understanding these guidelines and tracking usage carefully, businesses can maximize deductions, manage depreciation effectively, and get the most financial benefit from their assets.

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