J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

42.8 150% Rate Election

Instead of using the 200% declining balance rate for property in the three-, five-, seven-, and 10-year classes, you may elect a 150% declining balance rate. You may prefer the 150% rate when you are subject to the alternative minimum tax (AMT). For AMT purposes, you must use the 150% rate and adjust your taxable income if the 200% rate was used for regular tax purposes (23.2). If for regular tax purposes you elect to apply the 150% rate, use the same recovery period (42.4) you would have used if you had claimed the 200% declining balance rate. Thus, the recovery period is five years for cars and computers and seven years for office furniture and fixtures. If the half-year convention applies, the first-year rate for the five-year class is 15%, and 10.71% for the seven-year class; see the table below. Apply the rate from the table to your original basis, minus any first-year expensing deduction and bonus depreciation claimed. If you are subject to the mid-quarter convention, see IRS Publication 946 for the tables showing mid-quarter convention rates.

The election to use the 150% rate must be made for all property within a given class placed in service in the same year. The election is irrevocable.

Table 42-2 Half-Year Convention—150% Rate

Year—	Recovery Period
	5-Year—	7-Year—
1	15.00%	10.71%
2	25.50	19.13
3	17.85	15.03
4	16.66	12.25
5	16.66	12.25
6	8.33	12.25
7	12.25
8	6.13