Mid Month Convention for Depreciation
The mid month convention treats all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of.
To figure the deprecation deduction for the year using the mid month convention, multiply the depreciation for a full year by a fraction.
The numerator (top number) of the fraction is the number of full months in the year that the property is in service plus 1/2 (or 0.5). The denominator (bottom number) is 12.
Mid month convention example 1: You use the calendar year and place nonresidential real property in service in August. The property is in service for 4 months (September, October, November, and December). Your numerator is 4.5 (4 months plus 0.5). You multiply the depreciation for a full year by 4.5/12, or 0.375.
If you do not use the asset 100% for business, then each year you must multiply the asset’s total tax basis by the business percentage for that year, and then multiply the result by the fraction found in the MACRS depreciation tables.
Mid month convention example 2: In 2014, you purchased office furniture in the amount of $2,600. You use the office furniture only 50% for your business. Furniture is a 7-year property. The depreciation percentage is taken from the MACRS half year convention table which is 14.29%. The amount that you could depreciate the first year would be $185.77 [($2,600 x 50%) x 14.29%].
Visit the IRS website for more information about the Mid Month Convention.