Introduction

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 limits and special rules.

• Limit 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 limits and rules. If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction and any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) must be figured using the straight-line method over the ADS recovery period. In addition, you may 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) for 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 depreciation deduction limits and other special rules 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.

For information on the limits on depreciation deductions for listed property placed in service before 1987, see Publication 534.

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