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15019: 4562 - Half-Year, Mid-Month, and Mid-Quarter Conventions


Federal Returns

What is the difference between Half-Year, Mid-Month and Mid-Quarter conventions? Can I change this convention?

 

When you enter an asset on the 4562 screen the software will automatically select the convention for that asset based off of the Date Acquired and the Method chosen for that asset.

 Each convention is defined in the 4562 instructions as: 

  • "Half-Year (HY)- This convention applies to all property reported on lines 19a through 19g, unless the mid-quarter convention applies. It does not apply to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any tax year as placed in service (or disposed of) on the midpoint of that tax year.
  • Mid-Quarter (MQ)- If the total depreciable bases (before any special depreciation allowance) of MACRS property placed in service during the last 3 months of your tax year exceed 40% of the total depreciable bases of MACRS property placed in service during the entire tax year, the mid-quarter, instead of the half-year, convention generally applies. 

    In determining whether the mid-quarter convention applies, do not take into account the following:

    • Property that is being depreciated under a method other than MACRS.
    • Any residential rental property, nonresidential real property, or railroad gradings and tunnel bores.
    • Property that is placed in service and disposed of within the same tax year.

    The mid-quarter convention treats all property placed in service (or disposed of) during any quarter as placed in service (or disposed of) on the midpoint of that quarter.  however, no depreciation is allowed under this convention for property that is placed in service and disposed of within the same tax year. ​

  • ​Mid-Month (MM)- This convention applies only to residential rental property (line 19h), nonresidential real property (line 19i), and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as places in service (or disposed of) on the midpoint of that month."

Although the software automatically selects the convention, you can force either Mid-Quarter (MQ) or Half-Year (HY) by going to the bottom left corner of the 4562 screen and making an entry in the Force Convention drop-down.

Note: You cannot force Mid-Month (MM) as a convention in the software since it only applies to the methods Accelerated Residental Rental (ARR), and Accelerated Real Property (ARP). If one of these methods is selected, Mid-Month (MM) will automatically be applied to that asset.

When you view the return you can see a listing of all depreciable assets on the worksheet titled FED DEPR Schedule. Near the middle of this worksheet the Method is displayed.



For those properties that have the applicable methods, Mid-Month (MM) will be displayed there as well. 



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