Building Your Business Business Taxes What Is Personal Property of a Business? By Jean Murray Updated on September 19, 2022 Fact checked by Daniel Rathburn Fact checked by Daniel Rathburn Daniel Rathburn is an associate editor at The Balance. He has over three years of experience working in print and digital media as a fact-checker and editor. Daniel holds a bachelor's degree in English and political science from Michigan State University. learn about our editorial policies In This Article View All In This Article How Does Personal Property Work in a Business? Types of Personal Property Personal Property and Business Loans Personal Property and Business Taxes Keeping Records on Personal Property Frequently Asked Questions (FAQs) Photo: Kelvin Murray / Getty Images Definition Personal property for an individual or business is property owned by that person or business which is movable and is not attached to or associated with the land. Key Takeaways Personal property of a business is everything of value that isn’t real property (land and buildings). Your business can take a tax deduction for the costs of buying and maintaining personal property. The cost of some types of personal property can be deducted in the year you buy it, but the cost of other types must be depreciated over time. You can use your equity (ownership) in personal property as security for a business loan. How Does Personal Property Work in a Business? Business property can be used to provide security for a business loan. Either real property (land and buildings) or personal property can be used as collateral for a loan. The allocation of the security on property allows the lender to take back or sell the property if the business defaults on the loan. One good example of a secured loan is getting a loan to buy a car for business use. The loan is a business loan, not a personal one, and the interest on the loan is deductible as a business expense. Because of the mobile nature of personal property, and because personal property decreases in value over time, it is more difficult for a creditor to use personal property to secure a loan. For example, if a bank loans money on a building, it can be sure that the building will not be moved. But if a bank loans money on the car, the car can be driven away and it depreciates over time. Example of Personal Property for a Business Personal property for a business would include everything from the smallest stapler or calculator to a company-owned car or large piece of machinery. It includes manufacturing equipment, office furniture and equipment, computers, tablets, cell phones, and vehicles purchased and used by the business, and, basically, everything that isn't "nailed down." In other words, personal property is movable, while real property is not. The types of property that a business owns are slightly different from that of an individual, and the tax issues involved with business property are also different. Types of Personal Property Tangible personal property is personal property that can be felt or touched. Tangible personal property in general (not just for businesses) includes furniture, equipment, vehicles, household goods, collectibles, and jewelry. Intangible personal property is personal property that cannot be felt or touched. This type of personal property includes securities, bonds, CD's, and other intangible assets. Intellectual property—patents, copyrights, trademarks/service marks—is considered personal property because these types of property can be bought and sold or licensed. Listed property is a specific type of personal property. It consists of property that can be used for either business or personal reasons. The most common type of listed property is a busines car; it includes trucks and vans that have been modified for business use. If you want to deduct the cost of listed property, it must be used more than 50% of the time for qualified business purposes, and follow other IRS regulations for this type of property. Note The IRS uses the term “property, while the accounting profession uses the term “assets.” They mean the same thing. Personal Property and Business Loans Business property can be used to provide security for a business loan. Either real property (land and buildings) or personal property can be used as collateral for a loan. The allocation of the security on property allows the lender to take back or sell the property if the business defaults on the loan. One good example is getting a loan to purchase a car for business use. The loan is a business loan, not a personal one, and the interest on the loan is deductible as a business expense. Because of the mobile nature of personal property, and because personal property decreases in value over time, it is more difficult for a creditor to use personal property to secure a loan. For example, if a bank loans money on a building, it can be sure that the building will not be moved. But if a bank loans money on the car, the car can be driven away and it depreciates over time. Personal Property and Business Taxes The cost to buy personal property is a deductible business expense if it is “ordinary and necessary” Ordinary means that the expense is common and accepted in your industry. A necessary expense is helpful and appropriate for your trade or business type . In some cases, the purchase price can be listed as a business expense in the first year of purchase. To take this deduction, the cost of the property must be less than $5,000 per item or per invoice, and meet some other qualifications. In most cases, however, the cost of the item of personal property must be spread out over the useful life of the item. This process of spreading out an expense over time is called either depreciation for tangible property or amortization for intangible property. Each item of property or type of property must be depreciated or amortized based on a schedule. Listed property, for example, usually must be depreciated using a special alternative depreciation method. This method, which increases the number of years over which property may be depreciated, and this decreases the yearly depreciation expense you can take. Note The calculations for depreciation and amortization are complicated, and it’s best to get the help of a licensed tax professional for these tasks. Keeping Records on Personal Property Whether you have one computer for your solo business or a roomful of vehicles for a delivery company, you need to keep good records on business property. From the time of purchase, you need to keep good records on each item of business personal property, including the cost of the item, all costs associated with buying it and maintaining it, and any depreciation taken on the item. The records are for your own use, and to back up any deductions, for the IRS. Frequently Asked Questions (FAQs) What is “real property” and what is “personal property”? Real property is a term used for tax purposes to mean land and anything built or attached to it, a building, for example. In other words, it’s real estate. Personal property is basically everything else owned by a business that has value. These kinds of property are also considered business assets for accounting purposes, items of value that a business owns and uses. What is listed personal property? Listed property is property that can be used for both personal and business purposes. Some examples are company-owned assets, like passenger vehicles, property used for entertainment (like a video camera), and certain computers. If you want to claim deductions and special depreciation allowances for costs of this property on your business tax return, you must use it more than 50% of the time for business use. Keep records to show your business use, and get help from a licensed tax professional to claim these deductions. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. IRS. "How To Depreciate Property," Page 52. IRS. "Publication 535 Business Expenses," Page 4.