This chapter discusses the deduction limits and other special rules that apply to certain listed property. Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers and cellular phones.

Deductions for listed property (other than certain leased property) are subject to the following special rules and limits.

• Deduction for employees. If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee.
• Business-use requirement. If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. You may also have to recapture (include in income) any excess depreciation claimed in previous years. A similar inclusion amount applies to certain leased property.
• Passenger automobile limits and rules. Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period.

This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return.

See chapter 6 for information about getting publications and forms.

Listed property is any of the following.

• Passenger automobiles weighing 6,000 pounds or less.
• Any other property used for transportation, unless it is an excepted vehicle.
• Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment).
• Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587.
• Cellular telephones (or similar telecommunication equipment).

An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method.

A passenger automobile is 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). It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile.

The following vehicles are not considered passenger automobiles for these purposes.

• An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business.
• A vehicle used directly in the trade or business of transporting persons or property for pay or hire.
• A truck or van that is a qualified nonpersonal use vehicle.

Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation, next. They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name.

For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  
Publication 463.

Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods.

Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles).

• Clearly marked police and fire vehicles.
• Unmarked vehicles used by law enforcement officers if the use is officially authorized.
• Ambulances used as such and hearses used as such.
• Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo.
• Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks.
• Combines, cranes and derricks, and forklifts.
• Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat.
• Qualified moving vans.
• Qualified specialized utility repair trucks.
• School buses used in transporting students and employees of schools.
• Other buses with a capacity of at least 20 passengers that are used as passenger buses.
• Tractors and other special purpose farm vehicles.

A clearly marked police or fire vehicle is a vehicle that meets all the following requirements.

• It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit.
• It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times.
• It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency.
• It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. A marking on a license plate is not a clear marking for these purposes.

A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met.

• No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another.
• Personal use for travel to and from a move site happens no more than five times a month on average.
• Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location.

A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply.

• The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts.
• Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes.
• The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services.

A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities.

Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer.

The following are neither computers nor related peripheral equipment.

• Any equipment that is an integral part of other property that is not a computer.
• Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment.
• Equipment of a kind used primarily for the user's amusement or entertainment, such as video games.