A December closing gets the full bonus percentage, not 1/12 of it. Unlike regular MACRS depreciation, which uses averaging conventions to prorate the first year, bonus depreciation under IRC section 168(k) is an all-at-once deduction. The only question is whether the property and its qualified components were placed in service by December 31.
Placed in service is the whole game
IRS Pub 946 defines placed in service as the date property is ready and available for its specific intended use, whether or not it is actually being used. For a rental, that means the property is habitable, functional, and genuinely held out for rent: listed, advertised, or otherwise available to guests or tenants. A signed closing statement is not enough. A cabin you close on December 5 but gut through February was not placed in service in December. A cabin you close on December 5, furnish, and list on a booking platform by December 20 was, even if the first guest arrives in January.
What about the mid-quarter convention?
Pub 946 requires the mid-quarter convention when more than 40% of the year's personal property additions are placed in service in the fourth quarter, which is common with December purchases. That convention only affects the regular MACRS depreciation on basis that bonus did not already deduct. With a 100% bonus rate on property acquired after January 19, 2025 under OBBBA, the eligible 5-year, 7-year, and 15-year assets are fully deducted anyway, so the convention barely matters for them. The building portion itself uses the mid-month convention regardless.
Worked example
A fund closes on an $800,000 mountain cabin on December 5, 2026, with $160,000 allocated to land. It furnishes the property and lists it on December 20. An engineering-based cost segregation study allocates $160,000 of the $640,000 depreciable basis to 5-year contents and 15-year site improvements. The fund deducts the full $160,000 as bonus depreciation on its 2026 return, plus a small sliver of December-only depreciation on the building portion. Nothing about the deduction is prorated for owning the property only 26 days.
The short-term rental trap in a stub year
If the plan is to use losses against nonpassive income through the short-term rental loophole, 2 separate tests still apply in that short December window. The average guest stay must be 7 days or less under Reg 1.469-1T(e)(3), measured from the stays that actually occur, and you must materially participate under Reg 1.469-5T, for example by being substantially the only people working on the property during the year. With 0 or 1 December bookings and a property manager involved, both tests get hard. Buying in December gets you the deduction; it does not automatically get you the loss treatment.
Amadae's Tax Strategy Projector includes a short-term rental plus cost segregation dial to model exactly this year-end scenario, and Amadae prepares the return once the study supports the allocation.