![]() ![]() *The 50% calculation represents the "half-year convention." The first three years of MACRS depreciation deductions would be: Period Office furniture falls into the 7-year category. Here’s how it works under the normal rules: Say your business bought $2,000 worth of office furniture and started using it May 1. (Exception: if you acquired more than 40% of your assets in the last three months of the year, you would use the "midquarter convention," meaning that all the assets acquired in each quarter would be depreciated starting at the midpoint of that quarter.) MACRS depreciation starts off at 200% of the straight-line depreciation rate and then switches over to the straight-line method for the remaining depreciable balance at the most opportune time to maximize your write-offs. You don’t have to take salvage into account, as you do with straight line, and you generally use what’s called the "half-year convention," which means that the deduction that would otherwise be allowed for the first year is halved, regardless of what month you started using the asset in your business. In the tax world, the most common accelerated method is called MACRS (Modified Accelerated Cost Recovery System). It lets you take a larger deduction in the first few years and a smaller write-off later. This method is the one most commonly used by small businesses. The 50% calculation represents the "half-year convention" for assets not in service the entire year. Under the normal rules, using the straight-line method, you can take the following deductions in the first three years: Period A copy machine is considered 5-year property for tax purposes. ![]() ![]() Assuming the machine has a salvage value of $400, you can depreciate $1,200 of the cost over the life of the copier. ![]() You buy a copy machine for $1,600 at the end of March. It's the simplest method but also the slowest, so it's rarely used. There are three primary methods you can use to depreciate your business assets: Straight-Line Depreciation ![]()
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