Half-Year Convention — Glossary — IRS Depreciation Rules

Half-Year Convention

MACRS averaging convention treating all property placed in service during the year as placed in service at the midpoint. Half a year of depreciation in year 1, half in the year of disposition. Applies to most personal property unless mid-quarter is required.

STATUTE BASIS · IRC §168(d)(1) · Treas. Reg. §1.168(d)-1

In context

The half-year convention is the MACRS default for personal property (3-yr, 5-yr, 7-yr, 10-yr classes). It treats every asset placed in service during the year as if placed in service on July 1 — half the year remaining for depreciation.

Year	Half-year fraction
Year 1 (placed in service)	0.5
Year 2 through year N-1	1.0
Year N (disposition or end of recovery)	0.5

Half-year is suspended in favor of mid-quarter when more than 40% of the year’s depreciable basis (excluding real property and listed property) is placed in service in Q4 — the “40% test” under §168(d)(3). The test is calculated annually and on a property-class basis.

Half-year is not used for real property — the 27.5-yr and 39-yr classes always use mid-month convention regardless of placement timing.