If you use certain types of property, called listed property, in your home, special rules apply. Listed property includes computers and related equipment and any property of a type generally used for entertainment, recreation, and amusement (including photographic, phonographic, communication, and video recording equipment).
Exception for certain use of computers.
Computers and related equipment used exclusively in a qualifying office in your home
are not listed property. If you qualify to deduct expenses for the business use of your
home (see Qualifying for a Deduction) and you use your computer
exclusively in your qualifying office in the home, do not use the listed property rules
discussed below. Instead, follow the rules discussed under
Property Bought for Business Use.
More-than-50%-use test.
If you bought listed property and placed it in service during the year, you must use
it more than 50% for business (including work as an employee) to claim a section 179
deduction or an accelerated depreciation deduction.
If your business use of listed property is 50% or less, you cannot take a section 179 deduction and you must depreciate the property using the Alternate Depreciation System (ADS) (straight line method). For more information on ADS, see chapter 4 in Publication 946 (pdf).
Listed property meets the more-than-50%-use test for any year if its qualified business use is more than 50% of its total use. You must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. You cannot use the percentage of investment use as part of the percentage of qualified business use to meet the more-than-50%-use test. However, you do use the combined total of business and investment use to figure your depreciation deduction for the property.
Example 1.
Sarah does not qualify to claim a deduction for the business use of her home, but she uses
her home computer 40% of the time for a business she operates out of her home. She also
uses the computer 50% of the time to manage her investments. Sarah's home computer is
listed property because it is not used in a qualified office in her home. She does not
use the computer more than 50% for business, so she cannot elect a section 179 deduction.
She can use her combined business/investment use (90%) to figure her depreciation deduction
using ADS.
Example 2.
If Sarah uses her computer 60% of the time for her business and 30% for managing her
investments, her computer meets the more-than-50%-use test. She can elect a section
179 deduction. She can use her combined business/investment use (90%) to figure her
depreciation deduction using the General Depreciation System (GDS).
Employee.
If you use your own listed property (or listed property you rent) in your work as an
employee, the property is business-use property only if you meet the following requirements.
The use is for your employer's convenience.
The use is required as a condition of your employment.
The use of property as a condition of your employment means that it is necessary for you to properly perform your work. Whether the use of the property is required for this purpose depends on all the facts and circumstances. Your employer does not have to tell you specifically to use the property. Nor is a statement by your employer to that effect sufficient.
Years following the year placed in service.
If, in a year after you place an item of listed property in service, you fail to meet
the more-than-50%-use test for that item of property, you may be required to do the following.
Figure depreciation, beginning with the year you no longer use the property more than 50% for business, using the straight line method.
Figure any excess depreciation (include any section 179 deduction on the property in figuring excess depreciation) and add it to:
Your gross income, and
The adjusted basis of your property.
For more information, see "Recapture of Excess Depreciation" under "What Is the Business-Use Requirement" in Publication 946 (pdf).
Reporting and recordkeeping requirements.
If you use listed property in your business, you must file
Form 4562 (pdf) to claim
a depreciation or section 179 deduction. Begin with Part V, Section A, of that form.
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You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or sufficient evidence to support your own statements. |
To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that is sufficient to establish business/investment use. For more information on what records to keep, see "What Records Must Be Kept" in chapter 5 of Publication 946 (pdf).
Business Furniture and Equipment
Listed Property
Property Bought for Business Use
Personal Property Converted to Business Use
Information courtesy of the Internal Revenue Service.
