If you have made significant investments into improving a property that you own, you may qualify for a few tax credits from the federal government under IRS Form 3468. This investment credit is generally claimed by businesses and specifically address improvement projects in:
- Advanced coal
- Gasification
- Advanced energy
- Rehabilitation
- Energy
This credit may also extend to individuals who lease the property but use it in a way that qualifies for one of these credits.
How do I qualify for the Commercial Investment Credit?
The criteria for these credits are based on the project. Part II of the form will be used for qualifying:
- Advanced coal projects generating electricity from using coal and reducing the emission of carbon dioxide.
- Advanced energy projects involving renewable-source energy; transmission or storage of renewable energy; plug-in electric motor vehicles; clean-energy technology; and greenhouse gas emissions reduction.
Part III of the form claims either energy properties or rehabilitation credit based on:
- Rehabilitation work for restoration, preservation, or the upgrade of buildings deemed historic or older.
- Energy investment in properties used for solar, wind, or geothermal energy; alternative energy; recycling; shale oil production; and specific natural gas production.
How do I claim the Investment Credit within the program?
It is important to review the requirements each year, as they may change. The first step is understanding what qualifies as an investment credit property:
An investment credit property is any depreciable or amortizable property qualifying for the credits based on the categories of advanced coal, gasification, advanced energy, rehabilitation, and energy. Credits cannot be claimed for properties that fall under these restrictions:
- Used mainly outside of U.S.
- Used by a governmental unit or foreign entity or person (with exceptions)
- Used by a tax-exempt organization unless the property is primarily used in an unrelated trade or business or is a qualified rehabilitated building leased by the organization (with restrictions)
- Used for lodging or to furnish the dwelling.
- Specific MACRS business property to the extent it has been expensed under section 179.
There are additional guidelines and specific criteria to meet in order to qualify. Read the guidelines very carefully. If you are unsure whether you qualify, or have questions during completion, speaking to a tax professional is advised.
