Listed property has special business-use and recordkeeping rules. Learn which assets qualify, the 50% test, depreciation limits, and recapture.
Listed property is a tax category for certain assets that can be used for both business and personal purposes and therefore carry heightened substantiation and depreciation rules. Passenger automobiles and certain other transportation property are common examples. "Listed" does not mean the IRS maintains a registry of the taxpayer's assets, and it is not a depreciation method.
The classification matters because qualified business use, detailed records, Section 179 eligibility, accelerated depreciation, annual vehicle limits, and possible recapture can depend on it. An asset can be ordinary equipment for bookkeeping purposes and listed property for federal tax purposes at the same time.
Listed property generally includes passenger automobiles and other property used for transportation, such as certain trucks, vans, boats, and aircraft. Property used as a means of transportation is not necessarily listed property when an exception applies, such as certain vehicles unlikely to be used personally because of their design.
Computers and peripheral equipment were removed from the federal listed-property category for property placed in service after 2017. They still require business-purpose and expense support; removal from the category did not convert personal computer use into a business deduction. Entertainment property has also changed under federal law, so current Publication 946 and Form 4562 instructions should control rather than an old checklist.
To use Section 179 or an accelerated depreciation method for listed property, qualified business use generally must exceed 50% of total use in the year the property is placed in service. Exactly 50% is not more than 50%. Investment use may be deductible under other rules but generally does not count as qualified business use for satisfying this test.
Suppose a business buys a vehicle for $30,000 and drives it 10,000 total miles: 6,000 documented client and supply miles, 2,500 commuting miles, and 1,500 other personal miles. Qualified business use is 60%:
6,000 ÷ 10,000 = 60%
The business-use portion of basis is $18,000 before other limits. The commuting miles remain personal even if calls are made during the drive or the vehicle carries advertising.
The taxpayer should keep adequate records made at or near the time of use. For a vehicle, a mileage log should show the date, destination, business purpose, and business miles, plus total annual mileage. Receipts, invoices, lease documents, odometer readings, calendars, client records, and evidence of the asset's cost and placed-in-service date should support the return.
A year-end estimate such as "about 80% business" is weak evidence. Credit-card statements can prove that fuel was purchased but generally do not establish where the vehicle traveled or why. Records must also support personal and investment allocations when an item has multiple uses.
The depreciable basis is generally limited to the business-use portion. Passenger automobiles can also be subject to annual dollar caps, even when Section 179 or bonus depreciation would otherwise produce a larger deduction. Heavy SUVs and other vehicles may fall under different rules, including a separate Section 179 cap; vehicle weight alone does not settle every eligibility question.
When qualified business use is 50% or less in the placed-in-service year, Section 179 and accelerated MACRS generally are unavailable for the listed property, and straight-line depreciation under ADS may be required. The personal portion is not depreciable as a business cost.
If qualified business use exceeded 50% when property was placed in service but falls to 50% or less in a later year, the taxpayer may have to recapture excess depreciation, including part of a Section 179 or bonus deduction. The recapture amount is generally reported as income under the applicable rules, and the asset's remaining basis and depreciation method must be updated.
For example, if a vehicle is 60% qualified business use in year one but only 40% in year three, the business cannot simply depreciate 40% going forward without testing recapture. Form 4797 and Form 4562 instructions help calculate and report the adjustment.
Use by a more-than-5% owner or related person can face additional qualified-business-use restrictions. Employer-provided vehicles also create fringe-benefit and payroll questions when personal use is permitted. Treating the vehicle as a company asset does not make an owner's commuting or weekend driving business use.
For sole proprietors and single-member LLCs, vehicle deductions commonly flow through Schedule C. Partnerships and S corporations should maintain entity records and properly handle reimbursements or taxable personal use rather than mixing owner expenses into a generic auto account.
California depreciation can differ from federal depreciation because the state has different Section 179 limits and does not conform to federal bonus depreciation. The underlying business-use evidence remains essential. Track cost, use percentages, depreciation, and recapture separately when federal and California basis diverge.
Use the correct FTB depreciation form for the taxpayer and entity. A federal vehicle deduction copied directly to California without reviewing state adjustments can distort both current deductions and gain or loss when the vehicle is disposed of.
Heath Income Tax can help separate business and personal use, reconcile vehicle records, and calculate federal and California depreciation adjustments.
Is a cell phone listed property?
Generally no under current federal listed-property rules, but only the substantiated business portion may be deductible.
Does a vehicle over 6,000 pounds avoid all limits?
No. Different Section 179, bonus, eligibility, and business-use rules may apply. Weight is one fact, not a universal exemption.
Is a mileage log required if actual vehicle expenses are claimed?
The taxpayer still needs records establishing business versus personal use. Receipts for actual costs do not replace evidence of mileage and business purpose.
The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.
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