General Business Credits

The general business credit is a cumulative total of several credits and calculations that provide an available tax credit to businesses engaged in various activities. To determine the total general business credit that may be applied you have to begin by calculating the individual credits separately on their own form and then applying the credit to the total appropriately on Form 3800. Form 3800 lists the types of credits that are available along with particular stipulations that apply to how much of a credit is allowed under various circumstances. It is important to keep in mind, the general business credits may not be used against the CAMT or corporate alternative minimum tax.

Each credit has a certain objective but the overall purpose of these credits are to help promote and develop alternative energy use and to assist in the protection of the environment. Below is a list that includes some of the more common credits that are often used.

General Business Credits:

• Home accessories and appliances that are energy efficient and friendly to the environment

• Access for disabled individuals or special accommodations

• Employer portion of tax on employee tips

• Retirement plans initial setup costs for small employers

• Health insurance costs/premiums

• Employee benefits and perks such as childcare or employer provided services

• Low-income home rehab cost credits

• Automobiles that use alternative energy sources

• Electric cars or vehicles

• Certain types of investment in alternative energy programs and projects or community programs

The general business credit can add up to a substantial amount of money although it is a nonrefundable credit. Additionally, you may only claim it after the other available nonrefundable credits have been used. With regards to the both the carryforward as well as the carryback provisions, FIFO is applied (also known as first-in and first-out). Typically, the older credits will be applied which reduces the chance of credit expiration moving forward.

Credit Limitations

There are certain limitations that apply to the general business credit. Your net income tax owed minus twenty-five percent or the tentative minimum tax above twenty-five thousand dollars. The twenty-five thousand dollar figure applies to married taxpayers and if filing separately the amount may be reduced to $12,500 in many cases but specific stipulations apply.

Other nonrefundable credits may be found on Form 1040 in the section marked “Tax and Credits”. Examples of other available nonrefundable credits are the credits for child or dependent care costs as well as educational credits. The general business credit serves a valuable purpose as it helps support environmental causes providing a better and more sustainable living environment for all.

Additionally, it helps support programs for developing alternative sources of energy which in the long-term will reduce costs for everyone. Last but certainly not the least important, it can provide small businesses savings on their tax bill that can be a big number. With the growing number of regulations, requirements and increased market competition, small businesses need to use every advantage provided to them under the law. The general business credit is one of those advantages that should not be overlooked.

Small Business Accounting:

The General Business Credit

Some tax credits are listed under the general business credit, which is figured out using the credit from this year plus the carry forward from previous years. You need to file form 3800 for general business credit if you have more than one credit to report and you have carry forward or carry back from previous years. In addition, all the credits must have been incurred from passive activity (form 8582-CR). The empowerment zone employment credit shouldn’t be counted here for any of the credits and should be reported using a separate form 8844.

Following is a list of general business credits:

  • Alcohol used as fuel credit (Form 6478).
  • Contributions to selected community development corporations credit (Form 8847).
  • Disabled access credit (Form 8826).
  • Employer social security and Medicare taxes paid on certain employee tips credit (Form 8846).
  • Enhanced oil recovery credit (Form 8830).
  • Indian employment credit (Form 8845).
  • Investment credit (Form 3468).
  • Low-income housing credit (Form 8586).
  • Orphan drug credit (Form 8820)
  • Renewable electricity production credit (Form 8835).
  • Research credit (Form 6765).
  • Work opportunity credit (Form 5884).
  • Welfare-to-work credit (Form 8861).

So basically when you sit down to identify your tax credits, see if you have more than one of the credits listed above. If that is the case then file form 3800. For example, if you have work opportunity credit and disabled access credit, then you need to file form 3800. But if you have the work opportunity credit and empowerment zone employment credit, you don’t need to file form 3800. You will have to file separate forms.