U.S. · Tax forms
Form 4562 convention codes: HY, MQ, MM.
Which code goes in column (e), and the 40% test that switches HY to MQ.
HY (half-year) applies to property on lines 19a through 19h unless the mid-quarter convention applies. MQ (mid-quarter) applies if the depreciable bases of MACRS property placed in service in the last 3 months of your tax year exceed 40% of the total for the year. MM (mid-month) applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. Enter the code in column (e) of Part III.
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Convention codes
| Item | Meaning | Where it goes (per the IRS instructions) |
|---|---|---|
| HY | Half-year convention | All property on lines 19a through 19h unless MQ applies. Treats property placed in service or disposed of in the year as placed in service or disposed of at the midpoint of the year. Factor 0.5 in the first or disposal year. |
| MQ | Mid-quarter convention | Applies instead of HY if the last-3-months test is met (more than 40%). Treats property as placed in service or disposed of at the midpoint of its quarter. No depreciation for property placed in service and disposed of in the same year. |
| MM | Mid-month convention | Only residential rental property (line 19i), nonresidential real property (line 19j), and railroad gradings and tunnel bores. Midpoint of the month. |
The 40% test
If the total depreciable bases, before any special depreciation allowance, of MACRS property placed in service during the last 3 months of the tax year exceed 40% of the total depreciable bases of MACRS property placed in service during the entire year, the mid-quarter convention generally applies. When running the test, do not count property depreciated under a method other than MACRS; residential rental property, nonresidential real property and railroad gradings and tunnel bores; or property placed in service and disposed of in the same year.
First-year and disposal factors in the instructions
For property placed in service or disposed of during the year, the instructions multiply the full-year result by a decimal amount. HY is 0.5. For MQ, the placed-in-service factors are 0.875 (1st quarter), 0.625 (2nd), 0.375 (3rd) and 0.125 (4th); the disposal factors are 0.125, 0.375, 0.625 and 0.875. For MM, the first month is 0.9583 placed in service and 0.0417 disposed of, then 0.8750 and 0.1250, 0.7917 and 0.2083, and so on down to 0.0417 placed in service and 0.9583 disposed of in the 12th month.
Worked example
Sam has a calendar tax year. He places $40,000 of equipment in service in March and $50,000 of furniture in service in November, both depreciable MACRS property. Last-3-months property is $50,000 of a $90,000 total, or 55.6%, which is more than 40%. He uses MQ in column (e) for both, and the November furniture gets the fourth-quarter factor of 0.125 in the first year.
Same convention under ADS
For the Alternative Depreciation System, the instructions say the conventions are the same as under the General Depreciation System.
More IRS form line pages
Other pages in this set: Form 8949 Boxes A-L, Form 5329 Part III, Form 4562 Line 14, Form 4562 Line 12, Form 5329 Line 52, Form 4562 Line 19, Form 4562 Line 42, Form 6251 Line 2i, Form 6251 Line 2c, Form 6251 Line 2l. The 1099-R box 7 lookup and W-2 box 12 lookup cover the same kind of question for those forms.
Sources
- Instructions for Form 4562 (2025): the sections for the lines and boxes on this page. Read November 2, 2026.
IRS page last reviewed April 30, 2026. Tax year 2025 edition. Line numbers, dollar limits and dates are those printed in the 2025 instructions and can change. Names in worked examples are made up.
Frequently asked questions
What does HY mean on Form 4562?
Half-year convention. It treats property placed in service or disposed of during the year as placed in service or disposed of at the midpoint of the year.
When does the mid-quarter convention apply?
When the depreciable basis of MACRS property placed in service in the last 3 months of your tax year is more than 40% of the total depreciable basis placed in service during the year, with the exclusions in the instructions.
What does MM mean on Form 4562?
Mid-month convention, used only for residential rental property, nonresidential real property, and railroad gradings and tunnel bores.
Does real property count in the 40% test?
No. The instructions say not to count residential rental property, nonresidential real property or railroad gradings and tunnel bores when deciding whether mid-quarter applies.
Is there any depreciation for property bought and sold in the same year?
Under the mid-quarter convention, no. The instructions say no depreciation is allowed for property placed in service and disposed of in the same year.
Not tax advice
This page summarizes IRS instructions, mostly written for the people who prepare the form, and is not tax, legal or financial advice. The payer, a CPA or an enrolled agent can confirm what a box or code means for your return. Everything runs in your browser; nothing you enter is sent anywhere.