There are a number of methods for depreciating business related assets to recover the cost of those assets. The Modified Accelerated Cost Recovery System (MACRS) is often favored for tangible, depreciable assets used for a trade or business or held for the production of income, as it recovers costs faster than some of the other acceptable methods. MACRS calculates depreciation using percentage rates published by the IRS. The Internal Revenue Code stipulates that, in some cases, a mid-quarter convention is required for the calculation of depreciation using MACRS.

Determine whether the asset in question qualifies for the use of MACRS depreciation. Buildings, land improvements and equipment all qualify if used in a trade or business as long as they have a determinable life. Land, intangible assets and assets for personal use do not qualify.

Subtract the Section 179 election from the original basis of the asset to calculate the depreciable base. This is the amount of the cost that will be recovered over the life of the asset.

Determine whether the asset is personal property—essentially anything not attached to or associated with land. The mid-quarter convention applies to personal property.

Choose a recovery period available under MACRS that is appropriate for the asset in question; three-, five-, seven-,10-, 15- and 20-year periods are available. Personal property most commonly falls in the three-, five- or seven-year class of recovery periods.

Use IRS-published MACRS percentage tables to compute the depreciation deduction for a given quarter.


The IRS requires use of the mid-quarter convention for all personal property that had more than 40 percent of its depreciable basis placed in service during the last three months of the tax year.