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Official form guide
Form 8874: New Markets Credit
IRS Form 8874 is used to claim the New Markets Credit, a general business credit for qualified equity investments in qualified community development entities. Credit rate is “5” for years 1‑3 of the 7‑year period.
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IRS Form 8874 - New Markets Credit
IRS Form 8874 is used to claim the New Markets Credit, a general business credit for qualified equity investments in qualified community development entities. Credit rate is “5” for years 1‑3 of the 7‑year period.
Risk Radar
Scan points- 1Failing to attach Form 8874 to the tax return can cause the New Markets Credit to be denied.
- 2Omitting the qualified community development entity’s name and address (line a).
- 3Leaving the CDE’s employer identification number blank (line c).
- 4Not entering the correct date of initial investment (line d).
- 5Reporting an incorrect amount of qualified equity investment (line e).
Plain English
Form 8874 lets you claim a tax credit for money you invested in a qualified community development entity. You list the investment details, calculate the credit, and attach the form to your tax return. Partnerships and S corporations report the credit on Schedule K; other taxpayers report it on Form 3800. The credit reduces your tax liability and your basis in the investment.
Submission Date
- Filing date: 2021-11-01 22:10:23
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when claiming the new markets credit for a qualified equity investment in a qualified community development entity.
- Do not use it when the taxpayer is not a partnership or S corporation and the only credit source is from those pass‑through entities.
- Check Form 3800 instead when the taxpayer is not a partnership or S corporation and the credit comes solely from those entities.
Form selector
Use this form or another form?
Individual filing Form 1040
Credit amount must appear on line 17a of Schedule 2
✓ Verify the credit is entered on Schedule 2, line 17a
Corporation filing Form 1120
Credit amount must appear on line 9g of Schedule J
✓ Verify the credit is entered on Schedule J, line 9g
Partnership or S corporation filing
Credit is reported on Schedule K as instructed
✓ Verify the credit total is listed on Schedule K
Deadline or filing window
Not stated in the official source.
Checklist
What you need before filling it out
Name and address of the qualified community development entity (CDE) (line a)
CDE’s legal name and mailing address · CDE formation documents or IRS records
Employer identification number of CDE (line b)
CDE’s EIN · CDE’s IRS EIN confirmation letter
Date of initial investment (line d)
Date from the investment agreement or closing statement · Investment purchase documents
Credit rate (line e)
Year of the credit period for the investment · Allocation agreement indicating credit year
Credit amount (line f)
Calculation of (Date of investment amount) × (Credit rate) · Spreadsheet or manual calculation based on lines d and e
Reporting location for non‑partnership/S corporation filers
Form 3800, Part III, line 1i · Tax return worksheets for the general business credit
Before you submit
- 1Enter the taxpayer’s name as shown on the return in column (a)
- 2Enter the qualified community development entity’s name and address in column (b)
- 3Enter the CDE’s employer identification number in column (c)
- 4Enter the date of the initial investment in column (d)
- 5Enter the amount of the qualified equity investment in column (e)
- 6Enter the correct credit rate – 5 for years 1‑3, 6 for later years – in column (e)
- 7Calculate the credit by multiplying the investment amount by the credit rate and place the result in column (f)
- 8Add lines 1 and 2 and report the total on the appropriate schedule or Form 3800
- 9Sign the completed form before attaching it to the tax return
How to file this form
- 1Complete all required fields on Form 8874 — retain a completed copy as proof
- 2Attach Form 8874 to the tax return where the credit is claimed — the attached form serves as proof
- 3File the tax return (including Form 8874) by the applicable deadline — the IRS filing receipt confirms submission
- 4Keep the IRS acknowledgment or a copy of the filed return — provides proof of filing
Known limitations
- 1Taxpayers who are not partnerships or S corporations and whose only credit source is those entities do not need to file this form.
- 2The credit cannot be claimed for any allowance date that occurs after the investment has been sold or otherwise disposed of.
- 3Basis reduction for the investment does not apply to qualified small business stock under section 1202.
- 4Basis reduction does not apply to certain DC zone assets under section 1400B or qualified community assets under section 1400F, both of which were repealed on March 23 2018.
Field map
Compact field-by-field guide
Entity Info
1 items
Name and taxpayer ID of the entity claiming the credit.
Credit Info
1 items
Type of credit or incentive being claimed.
Calculation
2 items
The base amount used to calculate the credit.
Calculated credit amount after applying formulas and limitations.
Certification
1 items
Detailed breakdown supporting the credit calculation.
Signatures
1 items
Sign and date the form.
Almost done reviewing the fields?
Fillable formOpen in Editor->Form 8874 is the November 2021 revision. The form directs filers to www.irs.gov/Form8874 for the latest information, and the credit allocation has been extended through calendar year 2025.
What changed or needs a fresh check
- Edition date — confirm it reads November 2021
- Fee — not stated in the official source
- Mailing address — not stated in the official source
- Signature — confirm the form is signed before filing
- OMB control number — confirm OMB No. 1545-1804 is present
Quick Facts
Downloads
After you file
- 1Retain Form 8874 and all supporting documentation for as long as they may become material to tax administration.
- 2Monitor the investment for any disposition events that could affect credit eligibility.
- 3If a recapture event occurs, ensure the CDE provides Form 8874‑B and report the adjustment accordingly.
- 4If an error is discovered, file an amended return with a corrected Form 8874.
- 5Confirm that the credit appears on the designated schedule or Form 3800 in the subsequent year’s return.
Sources
- SRCForm p.1 — revision date reads November 2021
- SRCForm p.1 — OMB control number 1545-1804 appears
- SRCForm p.2 — latest information URL www.irs.gov/Form8874
- SRCForm p.2 — credit allocation extended through calendar years 2025
- SRCForm p.2 — purpose: claim new markets credit for qualified equity investments in qualified CDEs
- SRCForm p.2 — taxpayers not partnerships/S corporations whose only credit source is those entities may report on Form 3800, Part III, line 1i
- SRCForm p.2 — partnerships and S corporations report credit on Schedule K
- SRCForm p.3 — credit rate entry: 5 for years 1‑3, 6 for later years
- SRCForm p.3 — individual 2021 Form 1040 credit reported on Schedule 2 line 17a
- SRCForm p.3 — corporation 2021 Form 1120 credit reported on Schedule J line 9g
Common confusion points
Do I need to file Form 8874 as an individual?
The form is required only when the credit is not solely from partnership or S‑corporation pass‑throughs.
→ Verify whether any credit source is a partnership/S‑corp; if not, use Form 3800.
What credit rate should I enter for year 4?
Years 1‑3 use a rate of 5, while later years use a rate of 6.
→ Check the year of the credit allowance and enter 6 for any year beyond the third.
Where do I report the credit for a partnership?
Partnerships report the credit on Schedule K, not on Form 3800.
→ Ensure the total from Form 8874 is entered on Schedule K.
Can I claim the credit after I sell the investment?
The credit is not allowed for allowance dates after a disposition.
→ Confirm the disposition date and do not claim credit for periods after that date.
Do I have to reduce my basis for all credits?
Basis reduction is required except for qualified small business stock, DC zone assets, or qualified community assets under repealed sections.
→ Review the asset type and apply basis reduction only when applicable.
Is there a separate form for recapture events?
CDEs must provide Form 8874‑B when a recapture event occurs.
→ Obtain Form 8874‑B from the CDE and attach it to the amended return.
Workflow map
Related forms and next steps
Before
Current
After
Often used with
⚠ If something goes wrong
- Form 8874‑B — CDE must supply this form for recapture events
Questions about IRS Form 8874
What is IRS Form 8874 used for?
Form 8874 lets you claim a tax credit for money you invested in a qualified community development entity. You list the investment details, calculate the credit, and attach the form to your tax return. Partnerships and S corporations report the credit on Schedule K; other taxpayers report it on Form 3800. The credit reduces your tax liability and your basis in the investment.
Who must file IRS Form 8874?
Partnerships and S corporations, and other taxpayers whose New Markets Credit is not solely from those pass‑through entities, must file IRS Form 8874.
What information does IRS Form 8874 require?
The form collects the CDE’s name and address, its employer identification number, the date of the initial investment, the amount invested, the applicable credit rate, and the calculated credit amount.
Where do I file IRS Form 8874?
Attach Form 8874 to the taxpayer’s tax return and file it together with that return.
How do I complete IRS Form 8874?
Enter the CDE’s name, address, and EIN, then provide the investment date, amount, and credit rate (enter “5” for years 1‑3 or “6” thereafter). Compute the credit by multiplying the amount by the rate and record it on line 1. Add any partnership or S‑corporation credit on line 2 and report the total on Schedule K (or on Form 3800, Part III, line 1i for other filers). Attach the completed Form 8874 to the tax return.
What happens if IRS Form 8874 is filed incorrectly?
Claiming the credit for a year after the investment has been disposed of is prohibited, which can cause the credit to be denied.
Do I need to file Form 8874 as an individual?
The form is required only when the credit is not solely from partnership or S‑corporation pass‑throughs. Verify whether any credit source is a partnership/S‑corp; if not, use Form 3800.
What credit rate should I enter for year 4?
Years 1‑3 use a rate of 5, while later years use a rate of 6. Check the year of the credit allowance and enter 6 for any year beyond the third.
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