J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

42.6 Half-Year Convention for MACRS

The half-year convention treats all business equipment placed in service during a tax year as placed in service in the midpoint of that tax year. The same rule applies in the year in which the property is disposed of. The effect of this rule is as follows: A half-year of depreciation is allowed in the first year property is placed in service, regardless of when the property is placed in service during the tax year. For each of the remaining years of the recovery period, a full year of depreciation is claimed. If you hold the property for the entire recovery period, a half-year of depreciation is claimed for the year following the end of the recovery period. If you dispose of the property before the end of the recovery period, a half-year of depreciation is allowable for the year of disposition.

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Planning Reminder

Half-Year Convention

The half-year convention applies unless the total cost basis of depreciable assets placed in service during the last three months of the year exceeds 40% of the total basis of all property placed in service during the year.

Under the half-year convention, all assets placed in service during the year are treated as placed in service at the midpoint of the year.

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See the Table of MACRS Depreciation Rates (42.5) for year-by-year rates under the half-year convention. Apply ...