The MACRS Half-Year Convention applies to which type of assets?

The MACRS Half-Year Convention applies to all equipment and most land improvements because it is designed to provide a standardized method for calculating depreciation for assets that typically have a useful life of more than one year. Under this convention, businesses recognize that assets are usually acquired and disposed of during the year rather than at the very beginning or end of it. Consequently, the half-year convention assumes that assets are placed into service and disposed of evenly throughout the year, allowing for a simpler calculation process when determining the depreciation expense.

This convention is commonly used for tangible property such as machinery, vehicles, and equipment that qualifies under MACRS (Modified Accelerated Cost Recovery System). Most land improvements, like sidewalks and fences, also qualify under this convention. This application broadens the scope of assets that can take advantage of accelerated depreciation methods, thereby aiding in tax planning and cash flow management for businesses.

In contrast, residential properties and commercial properties generally fall under different conventions, such as the Mid-Month Convention, and specific types of furniture and fixtures may be subject to their rules depending on their classification.