{“content”:"# Maximize Your Business Benefits: Understanding Listed Property for Optimized Tax Deductions
Listed property consists of tangible assets that can serve both business and personal purposes. According to the IRS, this category includes "passenger automobiles; any other property used for transportation; and property commonly used for entertainment, recreation, or amusement." Assets utilized for business purposes more than 50% of the time qualify for special tax deductions and depreciation rules.
Key Insights
- Definition: Listed property is a tangible asset usable for both business and personal activities. Examples include various vehicles and entertainment devices.
- Tax Advantages: Listed property employed more than 50% for business use qualifies for favorable tax treatment, including Section 179 deductions.
- Depreciation Rules: Business-related listed property can also be depreciated according to specific IRS guidelines.
The Intricacies of Listed Property
What Is Listed Property?
Listed property encompasses tangible assets owned by a business that can serve dual roles: business and personal use. Assets qualifying under the "more than 50%" rule can enjoy special tax deductions or depreciation. The interpretation of "more than 50%" can be through time, mileage, or another relevant measure.
Record-Keeping
To deter misuse of tax deductions for personal property, the IRS mandates "adequate records." This includes details like purchase price and maintenance costs, plus evidence supporting its business use.
Real-World Listed Property Examples
According to IRS Publication 946 on depreciating property, examples of listed property include:
- Passenger Automobiles: Defined as any four-wheeled vehicle primarily used on public roads, weighing 6,000 pounds or less when unloaded.
- Transport Property: This includes all transportation assets except "qualified nonpersonal use vehicles" like police cars, fire trucks, ambulances, hearses, and school buses.
- Entertainment and Recreational Equipment: Items generally used for entertainment or recreation, such as photographic, phonographic, communication, and video recording equipment.
Note: As of 2010, cell phones and similar devices are no longer classified as listed properties. They can still be categorized as business expenses but with simpler record-keeping requirements.
Writing Off Listed Property: Methods and Opportunities
Section 179 Deduction
Under Section 179, listed property used more than 50% for business can be written off within the year it is placed into service. However, limits are imposed on such deductions. For tax years beginning in 2023, the cap is set at $1.16 million. For specific property, like SUVs, the maximum deduction is limited to $28,900.
Example
May Oak bought a listed property worth $11,000 and used it 80% for business. The business expense becomes $8,800 (80% x $11,000).
Depreciation Methods
General Depreciation System (GDS)
Eligible listed property under the "more than 50%" rule can use the GDS, allowing quicker asset write-offs through larger early deductions.
Alternative Depreciation System (ADS)
For business usage of 50% or less, the ADS applies, generally spreading deductions more evenly over time.
Bonus Depreciation
For qualified property purchased between Sep 27, 2017, and Jan 1, 2023, an additional bonus depreciation allows further early write-offs, starting at 100% in 2022 and decreasing by 20% annually until 2027.
Special Considerations for Employees
Employees can claim depreciation on listed property strictly for business uses if the employerDeems it necessary.
Understanding Mixed-Use Property
The term "mixed-use" beyond listed property often refers to real estate with both commercial and residential functionalities.
Navigating Recaptured Depreciation
Recapturing depreciation involves the IRS reclaiming deducted amounts if assets are sold for more than their depreciated value. Specific rules apply if listed property falls below the 50% business use criterion.
Conclusion: Maximize Business Benefits through Strategic Property Management
Managing listed property diligently by understanding the IRS requirements and tax benefits can significantly favor your business’s financial position.
Keep meticulous records to substantiate business uses and navigate IRS guidelines efficiently for optimal benefits.
Related Terms: tax deductions, business expenses, Section 179, depreciation, IRS compliance, business assets
References
- Cornell Law School Legal Information Institute. “Listed Property”.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 107.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 53.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Pages 61-62.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Pages 51-52.
- Internal Revenue Service Media Relations Office. “IRS Issues Guidance on Tax Treatment of Cell Phones; Provides Small Business Recordkeeping Relief”.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 14.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 2
- Internal Revenue Service. “Topic No. 704, Depreciation”.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 17.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 16.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Pages 33-35.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Pages 23-24.
- Thomson Reuters. “Bonus Depreciation”.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 52.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 22.
- Internal Revenue Service. “Publication 946: How to Depreciate Property”, Page 97.
