Intro to Corporate Taxes:

Corporate Taxes - Your Tax Credits

As is the case with individuals as well as corporations, tax credits are still better for you than tax deductions. The allowable amounts on tax credits always remain the same regardless of the income level and tax bracket of your corporation. With deductions, however, the amount of money you are actually saving by claiming a deduction depends highly on the income level and tax bracket of your company. One company with the same amount of type of deduction as your corporation may end up with a larger, or smaller for that matter, deduction than your corporation gets because of the tax bracket the individual businesses happen to fall into. In addition, a tax credit will reduce your taxes more than a same sized tax deduction. For these reasons, tax credits are almost always more beneficial to you. You get what you expect to get.

Some credits that many be available to your corporation are as follows:

  • Foreign tax credit - Form 1118- Foreign Tax Credit - All corporations electing to claim the benefits of a foreign tax credit must file this form with a corporation tax return. The credit for foreign tax may be taken for income or profits taxes imposed by a foreign country or a US possession upon a domestic corporation.
  • Credit for federal tax on fuels used for certain purposes- IRS Publication 379 - Fuel Tax Credits and Refunds - This credit may be taken when you have paid tax on nontaxable forms of aviation fuel or gasoline, diesel fuel, gasohol, gasoline, kerosene, and liquefied petroleum gas.
  • Possessions tax credit - Form 5735 or Schedule P - This form must be filed when a possessions corporation uses the profit split method or the cost sharing method of computing taxable income for a product.
  • Qualified electric vehicle credit- Form 8834 or Publication 535 - Electric Vehicle Credit - You can choose to claim a tax credit for a qualified electric vehicle you place in service during the year. You can make this choice regardless of whether the property is used in a trade or a business.
  • Credit for prior year minimum tax - Form 8827 - Credit for Prior Year Minimum Tax - This credit is used by corporations to figure the minimum tax credit if any for AMT incurred in prior tax years and to figure any minimum tax credit carry forward.
  • General business credit - Some of the general business credits that you may be able to take are as follows:
Credit IRS Form Description
Alcohol Fuels 6478 - Alcohol Fuel Credit Applies to alcohol sold or used as a fuel
Contributions to selected community development corporations 8847 - Credit for Contributions to Certain Community Development Corporations Applies to part of each qualified cash contribution to a community housing development corporation selected by the federal Department of Housing and Urban Development
Disabled Access 8826 - Disabled Access Credit A nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to people with disabilities
Enhanced oil recovery 8830 - Enhanced Oil Recovery Credit Applies to qualified enhanced oil recovery costs for the tax year
Orphan drug 8820 - Orphan Drug Credit Applies to qualified expenses incurred in testing certain drugs for rare diseases and conditions
Research 6765 - Credit for Increasing Research Activities Encourages businesses to increase spending on research and experimental activities. The credit is usually 20 percent of the amount by which research expenses for the year exceed the base amount.
Welfare to work 8850 - Pre-Screening Credit Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits Employers can take this credit for wages paid to qualified long term family assistance recipients who began work after Dec 31, 1997 and before July 1, 1999.
Taxes paid on certain employee tips 8846 - Credit for Employer Social Security Taxes Paid on Certain Employee Cash Tips Equals the employer-s portion of Social Security and Medicare taxes paid on tips received on employees
Empowerment zone employment 8844 - Empowerment Zone Employee Credit Available to businesses that hire from and do business in areas designated as empowerment zones.
Investment 3468 - Investment Credit Applies to part of the expenses incurred each year for property used to grow tress for sale or use in timber products, expenses incurred to rehabilitate certain buildings and certain expenses for solar or geothermal energy property placed in use.
Work opportunity 5884 - Work Opportunity Credit Credit for wages paid to certain workers from a particular group with a high unemployment rate or with special employment needs hired before July 1, 1999.
Low-income housing 8586 - Low-Income Housing Credit Applies to low-income housing buildings put into use after 1986.
Renewable electricity production 8835 - Renewable Electricity Production Credit Applies to electricity produced by qualified energy resources