Schedule 4255

This article explains what Illinois Schedule 4255 is and provides complete, step-by-step instructions to accurately complete and file it for the recapture of investment tax credits.

Schedule 4255, officially titled “Recapture of Investment Tax Credits”, is a tax form used by the Illinois Department of Revenue to report and recover investment tax credits previously claimed when the qualifying property later becomes disqualified. It applies to taxpayers who have claimed credits under various Illinois programs, such as the Enterprise Zone Investment Credit, River Edge Redevelopment Zone Credit, High Impact Business Investment Credit, REV Illinois Investment Credit, Replacement Tax Investment Credit, and MICRO Investment Credit.

In simpler terms, Schedule 4255 ensures that if property or equipment that earned a state tax credit is no longer qualified — for example, because it was sold, moved out of Illinois, or otherwise fails to meet the credit requirements — the taxpayer must “recapture” or pay back the portion of credit they no longer deserve. This form attaches to your Illinois tax return (Form IL-1040, IL-1120, IL-1065, IL-1120-ST, IL-1041, or IL-990-T). It’s a legal requirement under the Illinois Income Tax Act, and failure to provide accurate information can result in penalties.

How To File Schedule 4255

You must attach Schedule 4255 to your corresponding Illinois income tax return for the year in which the property became disqualified. The form should be completed carefully using accurate dates, descriptions, and calculations.

Include your:

  • Full name (exactly as on your tax return),
  • Social Security Number (SSN) or Federal Employer Identification Number (FEIN),
  • Tax year ending month and year for which the property was placed in service.

You will then complete Steps 1 through 7, which determine how much of the tax credit must be recaptured and reported.

How To Complete Schedule 4255

How To Complete Schedule 4255

Step 1: Figure Your Enterprise Zone or River Edge Redevelopment Zone Investment Credit Recapture

(See Page 1 of the form)

Columns A–H:

  • A: Enter the month and year when the property was originally placed in service in Illinois.
  • B: Enter the month and year when the property became disqualified.
  • C: Describe the qualified property (e.g., “manufacturing equipment,” “warehouse machinery”).
  • D: Specify the reason for disqualification — such as sale, relocation, or failure to meet zone requirements.
  • E: Enter the original basis (cost) of the property.
  • F: Enter the name of the Enterprise Zone or River Edge Redevelopment Zone.
  • G: Enter the credit rate applicable to your zone.
  • H: Multiply Column E by Column G to calculate the disqualified credit amount.

Add up all amounts in Column H for Lines 1a–1f and enter the total on Line 2 and Line 13, Column A.

Step 2: Figure Your High Impact Business Investment Credit Recapture

(Also on Page 1)

Columns A–H:

  • Complete the same information as in Step 1, but for property qualified under the High Impact Business Program.
  • The credit rate for these entries is 0.5% (0.005).
  • Multiply the original basis (Column E) by 0.005 and enter in Column H.
    Add Column H, Lines 3a–3f, and place the total on Line 4 and Line 13, Column B.

Step 3: Figure Your REV Illinois Investment Credit Recapture

(End of Page 1)

Columns A–H:

  • Record property details qualifying under the REV Illinois Program.
  • Credit rate remains 0.5% (0.005).
  • Include location of the REV Illinois project in Column F.
    Add Column H, Lines 5a–5f, and enter the total on Line 6 and Line 13, Column C.

Step 4: Figure Your Replacement Tax Investment Credit Recapture

(Page 2)

Columns A–G:

  • Use this section for property tied to the Replacement Tax Investment Credit.
  • Provide the same details as earlier steps — dates, descriptions, reasons, and cost.
  • Enter your applicable credit rate in Column F, then multiply the basis by that rate for Column G.
    Add Column G, Lines 7a–7f, and enter the total on Line 8 and Line 13, Column D.

Step 5: Figure Your MICRO Investment Credit Recapture

(Page 2)

Columns A–H:

  • Record information about your MICRO Illinois Project.
  • Credit rate = 0.5% (0.005) for each property line.
  • Enter the project location in Column F and calculate the disqualified credit (Column E × 0.005).
    Add Column H, Lines 9a–9f, and enter the total on Line 10 and Line 13, Column E.

Step 6: Figure Your Total Recapture Amount

(Page 2–3)

This step summarizes all credits from Steps 1–5.

Columns A–E:
Each column corresponds to one credit type:

  • A: Enterprise Zone/River Edge
  • B: High Impact Business
  • C: REV Illinois
  • D: Replacement Tax
  • E: MICRO

Line-by-Line:

  • Line 11: Enter the total basis of all your property (see instructions).
  • Line 12: Enter the amount of your original credit.
  • Line 13: Enter total disqualified credit amounts from Steps 1–5.
  • Line 14: Subtract Line 13 from Line 12 to find your adjusted credit.
  • Line 15: Enter your original tax amount.
  • Line 16: Enter the lesser of Line 12 or Line 15 — this is the credit you previously used.
  • Line 17: Subtract Line 14 from Line 16. If negative, enter zero.

Step 6 (Continued): Combine All Recapture Sources

(Page 3)

Line-by-Line:

  • Line 18: Enter recapture from any other Schedule 4255 filed this year.
  • Line 19: Enter distributive share of recapture from partnerships and S corporations (Schedule K-1-P).
  • Line 20: Add Lines 17–19 for total interim recapture.
  • Line 21: Partnerships and S corporations — report the portion passed through to partners/shareholders.
  • Line 22: Subtract Line 21 from Line 20 to find total recapture for all investment credits.

Step 7: Figure Your Additional Income Tax Credit Recapture Amount

(Page 3)

This section applies only if you attach multiple Schedules 4255 or have other income tax credits to recapture.

Line-by-Line:

  • Line 23: Angel Investment Credit recapture.
  • Line 24: EDGE Credit recapture.
  • Line 25: New Construction EDGE Credit recapture.
  • Line 26: Historic Preservation Credit recapture.
  • Line 27: New Markets Development Credit recapture.
  • Line 28: REV Illinois Credit recapture.
  • Line 29: REV Construction Jobs Credit recapture.
  • Line 30: MICRO Illinois Credit recapture.
  • Line 31: MICRO Construction Jobs Credit recapture.
  • Line 32: Distributive share of additional credit recapture from partnerships/S corporations (K-1-P).
  • Line 33: Add Lines 23–32 to determine total additional income tax credit recapture.

Filing and Submission Tips

  • Attach Schedule 4255 to your Illinois tax return when required.
  • Double-check all property descriptions and dates.
  • Retain supporting documentation (purchase invoices, zone certification, etc.).
  • If multiple schedules apply, only complete Step 7 on the final Schedule 4255.
  • Ensure figures in each column correspond exactly to the property and program type.
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