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. 

Example:  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.

Example: In 2007, 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%].

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