Form 1120 - Reducing Certain Expenses

Per IRS Instructions for Form 1120, page 11:

Reducing certain expenses for which credits are allowable.

If the corporation claims certain credits, it may need to reduce the otherwise allowable deductions for expenses used to figure the credit. This applies to credits such as the following.

  • Work opportunity credit (Form 5884).
  • Employee retention credit (Form 5884-A).
  • Credit for increasing research activities (Form 6765).
  • Orphan drug credit (Form 8820).
  • Disabled access credit (Form 8826).
  • Empowerment zone employment credit (Form 8844).
  • Indian employment credit (Form 8845).
  • Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846).
  • Credit for small employer pension plan start-up costs (Form 8881).
  • Credit for employer-provided childcare facilities and services (Form 8882).
  • Low sulfur diesel fuel production credit (Form 8896).
  • Mine rescue team training credit (Form 8923).
  • Credit for employer differential wage payments (Form 8932).
  • Credit for small employer health insurance premiums (Form 8941).
  • Employer credit for paid family and medical leave (Form 8994).

If the corporation has any of the credits listed above, figure the current year credit before figuring the deduction for expenses on which the credit is based. If the corporation capitalized any costs on which it figured the credit, it may need to reduce the amount capitalized by the credit attributable to these costs. See the instructions for the form used to figure the applicable credit for more details.

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