Half-Year Convention

The Half‑Year Convention is a depreciation rule that assumes most business property is placed in service halfway through the year, no matter when it was actually purchased.

Because of this rule, you generally get only half of a year’s depreciation in the first year and half of a year’s depreciation in the final year.

📅 When Is It Used?

The Half‑Year Convention is:

• ✅ The default method for depreciating personal property under MACRS
• ✅ Used unless the Mid‑Quarter Convention applies
• ❌ Replaced by the Mid‑Quarter Convention if more than 40% of personal property is placed in service in the last 3 months of the year

🖥️ What Property Does It Apply To?

The Half‑Year Convention applies to personal property, such as:

• Computers and electronics
• Office furniture and equipment
• Machinery and tools
• Vehicles used for business

💡 Why It Matters

The Half‑Year Convention:

• Simplifies depreciation calculations
• Limits your first‑year depreciation to ½ of the normal annual amount
• Also limits depreciation to ½ year in the final year, extending depreciation by one extra year

🛠️ Example

A taxpayer buys a business computer on March 1.

• Even though it was purchased early in the year, the IRS treats it as placed in service on July 1
• The taxpayer gets half a year’s depreciation for the first year

✅ The actual purchase date doesn’t matter—as long as the Half‑Year Convention applies.

📊 Depreciation Convention Comparison

💡 Tips

• If depreciation seems lower than expected, check whether the Mid‑Quarter Convention was triggered
• Remember:
  ✅ Half‑Year = default for personal property
  ❌ Never used for buildings
• Disposal year also gets ½ year of depreciation under the Half‑Year Convention