Depreciation Convention

To calculate depreciation, certain assumptions or rules are necessary. For example, to simplify depreciation calculations, depreciation is not calculated on a daily basis for years when property is bought or sold. Instead, certain rules, called conventions, are used. For furniture and equipment (personal property), a midyear convention is generally used. This results in taxpayers getting one-half year of depreciation despite the time of year it is bought or sold. Depreciation writeoffs for real estate are calculated using a midmonth convention so that one-half month of depreciation is claimed no matter which day of the month the property was purchased or sold.