Business Deductions

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The General Business Credit

The General Business Credit (GBC) is made up of a number of separate credits specifically included by law in what is called the General Business Credit. In other words, the general business credit may be only one or more than one credit of the available credits. Each separate credit is computed on its own form and is subject to the limitation on such form.

Form 3800

If you qualify for more than one of the credits making up the general business credit, you must file Form 3800, General Business Credit.

If you claim only one credit, Form 3800 is not required, and the credit is considered your general business credit. Keep track of each separate credit you claim because they are considered used up in a certain order. See the instruction on Form 3800.

Things to Keep in Mind About the General Business Credit

1. Each credit is generally computed on a tax form for that particular credit.

2. If you claim only one credit:

  • Form 3800 is not required.
  • The one credit you're claiming is your general business credit.
  • The credit claimed is subject to a limitation based on your tax liability that is figured on the form used to compute that particular credit.
  • You enter the allowable credit as your general business credit on Form 1040, Line 54.

3. If you claim more than one credit:

  • Form 3800 must be filed.
  • Each credit is computed first on its own particular tax form before completing Form 3800.
  • The combined credit is subject to a limitation based on your tax liability.
  • To figure the limit you must compute tentative alternative minimum tax (AMT) on Form 6251 even if the computation on Form 6251 shows you do not have an actual AMT liability for the year.
  • Your limit for the general business credit on Form 3800 is your regular tax liability (after tax credits other than the general business credit), plus actual AMT liability from Form 6251 (if any), minus whichever of the following is larger:
    • the tentative AMT from Form 6251
    • 25% of your regular income tax liability (after other credits) over $25,000.

4. Credits are considered to be used up in a specific order (see the instructions to Form 3800).

5. Carrybacks and carryforwards:

If you cannot claim your full credit in the current tax year because of the tax liability limitation you may be able to carry back the excess one year, starting with the earliest year.

After the carryback, any remaining credit may be carried forward 20 years until used up.

For credits arising before 1998 the carryforward period is 15 years.

The carrybacks and carryforwards are listed on Form 3800.

6. Your limit for the general business credit on Form 3800 is:

  • Your regular tax liability (after taking into account other tax credits other than the general business credit), plus
  • Actual alternative minimum Tax from Form 6251 (if any), minus
  • Whichever of the following is large:
    • (1) The tentative AMT from Form 6251 or
    • (2) 25% of your regular income tax liability (after other credits) over $25,000.

7. Passive activities:

If you have business credits from a passive activity you must figure the credits on Form 8582-CR.

Generally, the credits are limited to the tax liability from passive activities.