Last Updated : January 14, 2009
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3468

Form 3468

Investment Credit

PURPOSE OF THE FORM:

Use form 3468 to claim the investment credit. The investment credit consists of the rehabilitation, energy, Qualifying advanced coal project, and Qualifying gasification project credits.

INVESTMENT CREDIT PROPERTY:


Investment credit property is any depreciable or amortizable property that qualifies for the rehabilitation credit , energy credit, Qualifying advanced coal project credit, or Qualifying gasification project credits.

You cannot claim a credit fro property that is:

  • Used mainly outside the United States (except for property described in section 168(g)(4);

  • Used by a governmental unit or foreign person or entity (except for a qualified rehabilitated building leased to that unit, person, or entity; and property used under a lease with a term of less than 6 months);

  • Used by a tax exempt organization (other than a section 521 farmer's co-operative) unless the property is used mainly in an unrelated trade or business or is a Qualified rehabilitated building leased by the organization.

  • Used for lodging or in the furnishing of lodging (see section 50(b)(2) for exceptions); or

  • That is energy property used in a facility that qualifies for a credit under section 45.

Line 1: Rehabilitation Credit:

The taxpayer is allowed a credit for Qualified Rehabilitation expenditures made for any qualified rehabilitated building. The taxpayer must reduce his depreciable basis by the amount of the credit.If the adjusted basis of the building is determined in whole or in part by reference to the adjusted basis of a person other than the taxpayer.

To be Qualified Rehabilitated building, the building must fulfill certain criteria for which refer the instructions of form 3468.

To be Qualified Rehabilitation expenditures, the expenditure must meet the below requirements:

  • The expenditures must be for (a)Nonresidential Rental Property (b) Residential rental property (but only if a certified historic structure - refer regulations) (c) Real property that has a class life of more than 12 years.

  • The expenditures must be incurred in connection with the rehabilitation of a Qualified rehabilitated Building.

  • The expenditures must be capitalized and depreciated using the straight line method.

  • The expenditures cannot include the costs of acquiring or enlarging any building.

  • If the expenditures are in connection with the rehabilitation of a certified historic structure or a building in a registered historic district, the rehabilitation must be certified by the secretary of the Interior as being consistent with the historic character of the property or district in which the property is located.

  • The expenditures cannot include any costs allocable to the part of the property that is (or may be reasonably expect to be) tax exempt use property.

Line 1a:
Check the checkbox if you are electing under section 47(d)(5) to take the rehabilitation expenditures into account for the tax year in which paid (or, for self rehabilitated property, when capitalized). for more details refer instructions.

If the taxpayer checks the checkbox, it applies to the current year and all later tax years and may not be revoked without IRS consent.

Line 1b:
Enter on this line the date on which the 24 or 26 month measuring period begins and ends. If the taxpayer is rehabilitating the building in phases under a written architectural plan and specifications that were completed before the rehabilitation began substitute 60 month period for 24 month period. If the building is in one of the designated countries or parishes in the GO zone, Rita GO zone, or Wilma GO zone, the 24 month period and the 60 month period is extended by 12 months.

Line 1c:
Enter the adjusted basis of the building as of the beginning date above (or the first day of your holding period, if later)

Line 1d:
Enter the amount of the Qualified rehabilitation expenditures incurred , or treated as incurred, during the period on Line 1b. Enter the amount of Qualified Rehabilitation Expenditures.

Line 1e:
Enter your pre- 1936 buildings located in the GO zone amount in line 1e inner box 1.

The amount on line 1e inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Pre 1936 buildings located in the GO zone as well as if line 1e inner box 1 is entered then the program does the total of amount from Schedules attached and line 1e inner box 1 and enters the result on this line.

on line 1e outer the program does the calculation by multiplying the amount on line 1e inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 1f:
Enter the other Pre- 1936 buildings amount located in other than GO zone in line 1f inner box 1.

The amount on line 1f inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Other Pre 1936 building as well as if line 1f inner box 1 is entered then the program does the total of the amount from schedules attached and line 1f inner box 1 and enters the result on this line.

On line 1f outer the program does the calculation by multiplying the amount on line 1f inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Check the checkbox if the above building is one of the historic structure for which details are provided.

Line 1g:
Enter your certified historic structures located in the GO zone amount in line 1g inner box 1.

The amount on line 1g inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Certified historic structures located in the GO zone as well as if line 1g inner box 1 is entered then the program does the total of amount from Schedules attached and line 1g inner box 1 and enters the result on this line.

on line 1g outer the program does the calculation by multiplying the amount on line 1g inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 1h:
Enter the other Certified historic structures amount located in other than GO zone in line 1h inner box 1.

The amount on line 1h inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Other certified Historic Structures as well as if line 1h inner box 1 is entered then the program does the total of the amount from schedules attached and line 1h inner box 1 and enters the result on this line.

On line 1h outer the program does the calculation by multiplying the amount on line 1h inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 1i:
If the tax payer is claiming a credit for a certified Historic Structure on line 1g or line 1h, enter the assigned NPS project number on line 1i.

If the Qualified rehabilitation expenditures are from an S corporation, Partnership, Estate, or trust, enter on line 1i the employer identification number of the pass through entity instead of the assigned NPS Project number and leave line 1j blank.

Line 1j:
Enter the date of the final certification of completed work received from the secretary of the interior on line 1j. If the final certification has not been received by the time the tax return is filed for a year in which the credit is claimed.

One copy of the final certification of completed work must be retained as long as its contents may be needed for the administration of any provision of the Internal Revenue Code.

If the final certification is denied by the department of Interior, the credit is disallowed for any tax year in which it was claimed, and the taxpayer must file the amended return if necessary.

Line 1k:
The amount on this line comes from schedule K-1P/S line named Qualified rehabilitation expenditures related to rental real estate.

Line 2:
To qualify, energy property must be constructed, reconstructed, or erected by the taxpayer. If acquired by the taxpayer, the original use of such property must begin with the taxpayer. The property must meet the performance and Quality standards, if any, that have been prescribed by regulations and are in effect at the time the property is acquired. Energy property does not include any property that is public utility property as defined by section 46(if)(5).

The taxpayer must reduce the depreciable basis by 50% of the energy credit determined.
The taxpayer must reduce the basis of energy property by any amount attributable to Qualified Rehabilitation expenditures.

Line 2a:
Enter the basis of the property using the geothermal energy placed in service during the tax year on line 2a inner box 1.
Geothermal energy property is equipment that uses geothermal energy to produce, distribute, or use energy derived from a Geothermal Deposit.

The amount on line 2a inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Basis of Property Using Geothermal energy as well as if line 2a inner box 1 is entered then the program does the total of the amount from schedules attached and line 2a inner box 1 and enters the result on this line.

On line 2a outer the program does the calculation by multiplying the amount on line 2a inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 2b:
Enter the basis of the property using the solar energy placed in service during the tax year on line 2b inner box 1.
There are 2 types of solar energy property:
(1) Equipment that uses solar energy to illuminate the inside of a structure using the fiber optic distributed sunlight.
(2) Equipment that uses solar energy to :

  • Generate electricity,

  • Heat or Cool (or provide hot water for use in) a structure, or

  • Provide solar process heat (but not to heat a swimming pool).

The amount on line 2b inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Basis of Property Using solar energy as well as if line 2b inner box 1 is entered then the program does the total of the amount from schedules attached and line 2b inner box 1 and enters the result on this line.


On line 2b outer the program does the calculation by multiplying the amount on line 2b inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 2c:
Enter the basis of the Qualified fuel cell property placed in service during the tax year on line 2c inner box 1.

Qualified Fuel Cell property is a fuel cell power plant that generates at least 0.5 kilowatt of electricity using an electrochemical process and has electricity only generation efficiency greater than 30%.

The amount on line 2c inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Basis of fuel cell Property as well as if line 2c inner box 1 is entered then the program does the total of the amount from schedules attached and line 2c inner box 1 and enters the result on this line.

On line 2c outer the program does the calculation by multiplying the amount on line 2c inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 2d:
Enter the kilowatt capacity of the property entered on line 2c in line 2d inner box 1.

The amount on line 2d inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Kilowatt capacity of fuel cell Property as well as if line 2d inner box 1 is entered then the program does the total of the amount from schedules attached and line 2d inner box 1 and enters the result on this line.

On line 2d outer the program does the calculation by multiplying the amount on line 2d inner box 2 by the rate mentioned for taking credit of expenditures and enters the result on this line.

Line 2e:
The program calculates the lower of line 2c or line 2d and enters the result on this line.

Line 2f:
Enter the basis of any Qualified Micro turbine property placed in service during the tax year on line 2f inner box 1.
Qualified Micro turbine Property is a stationery micro turbine power plant which generates less than 2000 Kilowatts and has an electricity- only generation efficiency of not less than 26% at International Standard Organization conditions.

The amount on line 2f inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Basis of fuel cell Property as well as if line 2f inner box 1 is entered then the program does the total of the amount from schedules attached and line 2f inner box 1 and enters the result on this line.

On line 2f outer the program does the calculation by multiplying the amount on line 2f inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 2g:
Enter the kilowatt capacity of the property entered on line 2f in line 2g inner box 1.

The amount on line 2g inner box 2 comes from schedule K-1P/S and schedule K-1ET line named Kilowatt capacity of fuel cell Property as well as if line 2g inner box 1 is entered then the program does the total of the amount from schedules attached and line 2g inner box 1 and enters the result on this line.

On line 2g outer the program does the calculation by multiplying the amount on line 2g inner box 2 by the rate mentioned for taking credit of expenditures and enters the result on this line.

Line 2h:
The program calculates the lower of line 2f or line 2g and enters the result on this line.

Line 2i:
The program adds lines 2a, line 2b , line 2e and line 2h and enters the result on this line.

Line 3:
Qualified investment for any tax year is the basis of eligible property placed in service by the taxpayer during the tax year which is part of the Qualifying project. Eligible Property is limited to property for which depreciation or amortization is available and the construction, reconstruction, or erection of which is completed by the taxpayer, or which is acquired by the taxpayer if the original use of property commences with the taxpayer.

Line 3a:
Enter the basis of any Qualifying investment in integrated gasification combined cycle property placed in service during the tax year on line 3a inner box 1. Eligible property is any property which is part of a Qualifying advanced coal project using an integrated gasification combined cycle and is necessary for the gasification of coal handling and gas separation equipment.

The amount on line 3a inner box 2 comes from schedule K-1P/S and schedule K-1ET line named basis ob investment in Gasification combined cycle as well as if line 3a inner box 1 is entered then the program does the total of the amount from schedules attached and line 3a inner box 1 and enters the result on this line.

On line 3a inner box 3 the program does the calculation by multiplying the amount on line 3a inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 3b:
Enter the basis of any qualified investment in property other than the amount entered on line 3a that was placed in service during the tax year on line 3b inner box 1. Eligible property is any property which is part of a Qualifying advanced coal project not using an integrated gasification combined cycle.

The amount on line 3b inner box 2 comes from schedule K-1P/S and schedule K-1ET line named basis ob investment in Gasification combined cycle as well as if line 3b inner box 1 is entered then the program does the total of the amount from schedules attached and line 3b inner box 1 and enters the result on this line.
On line 3b inner box 3 the program does the calculation by multiplying the amount on line 3b inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 3c:
The program adds line 3a and line 3b and enters the result on this line.

Line 4:
Enter the basis of the qualified investment in Qualifying gasification project property placed in service during the tax year on line 4 inner box 1. for the purposes of the credit, eligible property includes any property that is part of a Qualifying gasification project and necessary for the gasification technology of such project.
A Qualifying gasification project credit is not allowed for any qualified investment for which a Qualifying advanced coal project credit is allowed.
The amount on line 4 inner box 2 comes from schedule K-1P/S and schedule K-1ET line named basis of investment in Gasification project property as well as if line 4 inner box 1 is entered then the program does the total of the amount from schedules attached and line 4 inner box 1 and enters the result on this line.
On line 4 inner box 3 the program does the calculation by multiplying the amount on line 4 inner box 2 by the % mentioned for taking credit of expenditures and enters the result on this line.

Line 5:
Enter the unused investment credit from co-operatives on this line 5 inner box.
The amount on line 5 outer comes from schedule K-1P/S and schedule K-1ET line named credit from co-operatives as well as if line 5 inner box is entered then the program does the total of the amount from schedules attached and line 5 inner box and enters the result on this line.

Line 6:
The program adds line 1e through line 1h , line 1k, line 2i , line 3c, line 4 and line 5 and enters the result on this line and it is also reported on FORM 1040 page -02 Line 55.

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