Employees and "Listed Property" Rules
There are specific IRS regulations for how "listed property" is treated when it is owned by employees of a company. Find details below.
Computers and peripheral equipment are removed from the ranks of listed property, effective for property put into service in 2018 and later. Effective 2018 through 2025, the TCJA suspends miscellaneous itemized deductions that are subject to the 2% of AGI reduction. Thus, employee business expenses are not deductible during this period.
When an employee uses his/her own listed property in the course of his/her employment, special rules apply. Such property must be used FOR THE CONVENIENCE OF THE EMPLOYER and must be REQUIRED AS A CONDITION OF EMPLOYMENT. The use of the property must actually be necessary for the employee to properly perform the duties of the job.
Rev Rul 86-129
Addressed the issue in the use of a computer by an employee. The employee was allowed no deduction (not even straight-line depreciation) for the job-related use of his own computer, even though he had a statement from his employer stating the computer was required.
The IRS ruled that the computer was not necessary for the proper performance of the employee’s duties. Though the ruling only addressed the issue of employee use of a computer, it would seem that other types of listed property (i.e., autos, etc.) might have a similar fate under the same circumstances.
“ Example - Qualified Employee Use of Listed Property - David works as a delivery person for D-Best Courier Service, where he uses his own car in delivering packages for D-Best. The courier service actually requires all its delivery people to own a car for use in their delivery responsibilities and reimburses these employees for their car expenses. Under these circumstances, the “convenience of the employer” test has been met. ”
- Qualified Employee Use of Listed Property -
“ Example – Nonqualified Employee Use of Listed Property - Faith is an inspector for Fieldstone Construction in Fontana. Fieldstone requires Faith to visit their various construction sites in the area. She uses her own vehicle, even though the company has a car available for her to use. Faith does receive reimbursement for the use of her own car. Faith’s use of her automobile is not considered for the convenience of the employer and is not required as a condition of employment. ”
- Nonqualified Employee Use of Listed Property
Cadwallader, TC Memo 1989-356
This case offers some good news to employees hoping to deduct the cost of home computers used for business use. Mr. Cadwallader was a professor at a university in the Midwest and his job required a large amount of research at home. He didn’t have access to a computer at the college. Mrs. Cadwallader also used a computer for extensive number crunching in her job as a transportation planner for the state. However, her employer didn’t have a computer nor require her to purchase one in order to keep her job. The Court concluded that the condition of employment test was met by both taxpayers:
(1) The computer enhanced Mr. Cadwallader’s job capability by giving him the ability to gather and store his vast research data.
(2) Mrs. Cadwallader’s employer had budget restrictions, which prevented the state from providing her with the computer required for her to properly perform her duties.
In addition, the convenience of employer test was met by both taxpayers because the employer was spared the cost of providing computer equipment for their employees.