FREQUENTLY ASKED QUESTIONS
What is a tax credit?
A tax credit is an amount of money that taxpayers can subtract from taxes owed to their government. Unlike deductions and exemptions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax owed. The value of a tax credit depends on the nature of the credit; certain types of tax credits are granted to individuals or businesses in specific locations, classifications, or industries.
Can I sell my tax credit?
Pennsylvania allows certain tax credits to be transferred/sold to another PA tax payer. The KIZ, R&D, NAP and NAPEZP, Film, Video Game, Entertainment, COAL, Historic Preservation, REAP, and CRA/MUD credits can all be sold using the appropriate Sale/Assignment application. EITC Credits are eligible to be passed through to owners, but not sold to other entities.
What is my PA tax liability?
Your PA Tax Liability is the amount of tax due to PA on your annual filed tax return. For a corporation, this would be PA Corporate Net Income Tax. For an individual, this would be your PA Personal Income Tax.
Do I have to use my credit before I sell it?
Prior to selling a Pennsylvania tax credit, you must file your PA tax return for the tax period in which the credit was issued. For example, a calendar year tax filer who received a credit in December 2019, would need to file a 2019 PA tax return. If there is any PA liability on the corporate level, you must use the credit to cover that portion of tax and then sell any remaining credits. You have the option to pass through credits for owners to use, but it is not required.
Do my tax credits carry forward and can I lose my credits?
Each Tax Credit program has a specified amount of time that the credits must be used within. Credits can only be carried forward at the corporate level, so if credits were passed through and unused, they will be lost.