Listed property is a term for vehicles that are specifically listed out on Form 4562 when you file your tax return. Generally speaking, specific assets are not required to be reported – you just include the depreciation into broad categories like depreciation on property placed into service in a prior year, or new 5-year property. The categories are broad, but you need to keep a backup schedule showing how each asset goes into those broad categories.
The IRS thought that was not good enough for a few types of vehicles and so they are called listed property. On page 2 of the Form 4562 each listed property vehicle is entered with a description, date placed in service, the cost, and the depreciation for the year. Some of the other information required includes the business and personal miles driven for the year on each vehicle. There are also some specific questions for each vehicle and then questions in general about the listed property.
Listed property generally includes automobiles weighing 6,000 pounds or less, other automobiles or property that is used for personal use (motorcycles, SUVs, pickups) and any property that is used for entertainment or recreational purposes. Practically speaking, it’s all the vehicles that are owned by the business and driven by officers, shareholders, or employees.
Keeping track of the business and personal miles is very important for businesses since the IRS loves to audit the personal use of business vehicles. The driver should keep a daily log of which miles are for business and which miles are for personal. Driving from your house to the office is commuting and that is considered personal miles. Without a daily log, tracking appointments on your calendar can be a good way to keep tabs on the business miles. The IRS is not going to assume the auto is 100% business; you will need to prove that you have the documentation to support that 100% business deduction.
When reporting the mileage on the Form 4562, that serves as a good reminder that if the vehicle is not used 100% for business use there must be a personal use calculation. If the car is used 75% for business, then either the business can only take 75% of the expenses or the personal use needs to be calculated and added to the income of the individual who was driving the car. Generally it makes sense that if the company lets a shareholder drive a car for business use, the company cannot deduct the miles when the shareholder drives to the grocery store or on a family vacation. Either the business can’t deduct those expenses or if the business does deduct it, then it needs to be added to the income of the shareholder. The mechanics of the personal use calculation are not difficult – perhaps for another blog someday. The important thing is just remembering to do the calculation.