Mid-Quarter Convention

The Mid‑Quarter Convention is a depreciation rule under MACRS that assumes personal property is placed in service in the middle of the quarter it was purchased, rather than on the actual purchase date. This affects the amount of depreciation allowed in the first year.

📅 When Is It Used?

You must use the Mid‑Quarter Convention if both of the following are true:

• More than 40% of the total cost of depreciable personal property placed in service during the year (excluding real estate) was placed in service during the last 3 months of the tax year (October–December), and
• The property is personal property, such as:
  • Computers and office equipment
  • Machinery and tools
  • Furniture
  • Vehicles

❌ The Mid‑Quarter Convention does not apply to real property (buildings).

💡 Why Does It Matter?

Compared to the Half‑Year Convention, the Mid‑Quarter Convention often reduces first‑year depreciation, especially for assets purchased late in the year.

This rule prevents taxpayers from front‑loading year‑end purchases solely to maximize first‑year depreciation deductions.

🧮 How It Works

• Assets are treated as placed in service at the midpoint of the quarter they were purchased:
  • Q1 → February 15
  • Q2 → May 15
  • Q3 → August 15
  • Q4 → November 15
• Depreciation is calculated from that assumed date, not the actual purchase date.

🧾 Example

A business buys office equipment during the year:

• Total assets placed in service: $10,000
• Placed in service in Oct–Dec: $5,000

Because 50% of the assets were placed in service in the last quarter, the Mid‑Quarter Convention applies.

✅ Instead of assuming all assets were placed in service halfway through the year, each asset is depreciated as if it were placed in service halfway through its quarter of purchase, reducing first‑year depreciation for Q4 assets.

📊 Depreciation Convention Comparison