Under the Modified Accelerated Cost Recovery System (MACRS) of depreciation, there are three types of depreciation conventions: Half-year, Mid-quarter, and Mid-month. The convention determines the portion of the tax year for which depreciation is allowable during a year property is either placed in service or disposed of.

• HALF-YEAR CONVENTION treats all property placed in service (or disposed of) during any tax year as placed in service (or disposed of) on the midpoint of that tax year.
• MID-QUARTER CONVENTION generally is used if the total depreciable basis (before any special depreciation allowance) of MACRS property placed in service during the last three months of the tax year exceeds 40% of the total depreciable basis of MACRS property placed in service during the entire tax year.
  • In determining whether the mid-quarter convention applies, do not take into account property that is being depreciated under a method other than MACRS, any residential rental property, nonresidential real property, or property that is placed in service and disposed of within the same tax year.
  • The mid-quarter convention treats all property placed in service (or disposed of) during any quarter as placed in service (or disposed of) on the midpoint of that quarter. However, no depreciation is allowed under this convention for property that is placed in service and disposed of within the same tax year.
• MID-MONTH CONVENTION applies to residential rental property and nonresidential real property. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

For more information, go to IRS Instructions for Form 4562 or IRS Publication 946 How To Depreciate Property, under the section Which Convention Applies?

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