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PrintThe Investment Tax Credit
The investment tax credit is a credit against your federal income tax. Currently, it's made up of three components: the rehabilitation credit, the energy credit, and the reforestation credit. The investment tax credit is itself one of the components of the general business credit and is subject to the limitations, carryback and carryforward rules, etc. that apply to all the other components of that "umbrella" credit. The investment credit is claimed on Form 3468, Investment Credit.
Basis adjustment. When you claim an investment tax credit for a business asset, you must generally reduce the depreciable tax basis of the property. The basis reduction would be equal to 100 percent of the rehabilitation credit you claimed, and 50 percent of the reforestation and energy credits.
Recapture of investment tax credits. If you stop using in your business any assets on which you've already claimed an investment tax credit, you may have to "pay back" to the IRS some or all of the credit you've received. In tax-speak, the credit is "recaptured." This is done by adding a percentage of the credit back to your current year's tax liability. Most commonly, recapture will occur if you sell the property, convert it to personal use, give it away, or lose it through a casualty or theft, within five years of claiming the credit.
