Form 4255: Recapture of Investment and Other Credits
Published November 8, 2026
Form 4255 is used to figure the increase in the amount due for certain credit recaptures, excessive payments, excessive credit transfers, and penalty amounts. One reason to file it is that a business credit already claimed must be partly paid back. That is called a recapture.
This post is general information from the IRS form and its instructions. It does not say whether a particular credit must be recaptured, and it does not give tax advice for a particular taxpayer.
What the form covers
The form has three parts. Part I is a summary. It lists each credit or deduction by its source form, such as Form 3468, Part III, Form 7210, or Form 8936, Part V. Part II is the recapture calculation. Part III applies to one specific recapture tied to a clean hydrogen production facility.
The instructions also cover amounts that are not recaptured credits. Part I has columns for excessive payments and excessive credit transfers under the transfer rules, and for penalty amounts tied to prevailing wage and apprenticeship requirements.
Gather the records first
Before you fill in Part I, gather the placed-in-service dates, the credit amounts from each source form, and any amounts from prior years. The instructions tie these amounts to the lines in Part I. One wrong amount can change the totals.
Write down the source of each figure. If a figure comes from a prior year return, keep that return with your records.
When investment credit is recaptured
The instructions list the events that can require a recapture of the investment credit. Read the full list in the instructions. The main examples are these:
- The property is disposed of before the end of the recapture period, which is 5 full years after the property was placed in service.
- The property changes use so that it no longer qualifies as investment credit property before the end of that period.
- The business use of the property decreases so that it no longer qualifies, in whole or in part.
- The property is returned to the lessor before the end of the recapture period, if the credit was claimed on leased property.
The instructions also cover a partnership or S corporation owner whose proportionate interest falls by more than one-third before the end of the recapture period.
Notice to a transferee
If a transfer election under section 6418 was made, the instructions say the taxpayer must notify the transferee of a recapture event. The instructions have a section on notifying the transferee.
Prevailing wage and apprenticeship penalties
Form 4255 can also report penalty amounts for failing to meet prevailing wage and apprenticeship requirements. The instructions say the form may be used to report the penalty for an increased credit or deduction claimed in the current year. They also cover recapture for failures during the 5-year period that begins when a project is placed in service.
How to read the form
Start with the instructions, not the blank lines. Find the line in Part I that matches your credit source form. Then read the Part II section that matches the type of recapture. A recapture of one credit can affect the amount shown in the Part I totals for the year.
Mistakes to avoid
- Filling in Part I without checking the credit source form and its line.
- Missing the 5-year recapture period when the property was placed in service.
- Forgetting the notice to a transferee after a transfer election.
- Using an old revision of the form. The current instructions are dated December 2025.
For a simpler look at a related recapture rule, read Form 8828: When Selling a Federally Subsidized Home Triggers a Recapture Tax.
Keep the placed-in-service dates, the disposition records, and the credit computations for each property.
Sources: Sources: IRS, Form 4255, Certain Credit Recapture, Excessive Payments, and Penalties (Rev. December 2025) (https://www.irs.gov/pub/irs-pdf/f4255.pdf); Instructions for Form 4255 (Rev. December 2025) (https://www.irs.gov/pub/irs-pdf/i4255.pdf) This is general information, not advice about your specific return.
More guides on: Investments, interest and capital gains · Tax credits and deductions
