J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Mid-Month Convention

This convention applies to real property. You must treat all real property as if it were placed in service or disposed of in the middle of the month. The mid-month convention is taken into account in the depreciation tables from which you can take your deduction. Simply look at the table for the type of realty (residential or nonresidential) you own, and then look in the table for the month in which the property is placed in service.

Depreciation Methods

There are 5 ways to depreciate property: the 200% declining balance rate, the 150% declining balance rate, the straight-line election, the 150% election, and the ADS method. Both 200% and 150% declining balance rates are referred to as accelerated rates.

You may use the 200% rate for 3-, 5-, 7-, and 10-year property over the GDS recovery period. The half-year or mid-quarter convention must be applied. The 200% declining balance method is calculated by dividing 100 by the recovery period and then doubling it. However, as a practical matter you do not have to compute the rates. They are provided for you in Tables 14.2 and 14.3, which take into account the half-year or mid-quarter conventions.

TABLE 14.2 MACRS Rates—Half-Year Convention

TABLE 14.3 MACRS Rates—Mid-Quarter Convention (200% Rate)

If the 200% declining ...