KREDA: Kentucky Rural Economic Development Act (KREDA) Tax Credit (2025)

Kentucky · Kentucky DOR · Used for tax years 2025

The Kentucky Rural Economic Development Act (KREDA) tax credit package reports approved business tax incentives and calculates the allowable KREDA credit. It also tracks project debt service payments or approved costs, wage assessments, and tax credits.

Who files this form

Use the 2025 KREDA package to report incentives for a business approved for the KREDA credit by the Cabinet for Economic Development. The business must have received preliminary or final approval on or before June 26, 2009.

  • Businesses filing Form 720 or 720U must complete Schedule KREDA and Schedule KREDA-T.
  • Businesses filing Form PTE or 725 must complete Schedule KREDA-SP and Schedule KREDA-T.

Include only one incentive project in each package.

When it's due

For tax year 2025, the package states that preliminary or final KREDA approval must have been received on or before June 26, 2009. This is an eligibility cutoff, not a return filing deadline.

The package does not state a filing due date for the 2025 return.

What you'll need

Have these records and schedules ready:

  • Your business name, federal identification number, Kentucky Corporation/LLET account number, project location and number, and incentive agreement activation date.
  • Your applicable Kentucky return: Form 720, 720U, PTE, or 725.
  • Project income, Kentucky gross receipts and gross profits, and any project net operating loss carried forward.
  • Records of debt service payments or approved costs, employee wage assessments, and prior-year credit balances for Schedule KREDA-T.
  • Schedule L-ECON for the project's LLET calculation, when applicable. Attach a separate schedule for each project's calculation.

Additional attachments may be required:

  • Project income computation schedules if the business has other operations. Corporations with other operations must also attach schedules showing the project's Kentucky gross receipts and gross profits.
  • The Department of Revenue approval letter if you use an approved alternative accounting method or an approved allocation percentage for an expansion project.
  • Required certifications if a corporation is also approved for STICA, MCC, KSBTC, or KSFTC credits.

How to file

  1. Complete Schedule KREDA for a Form 720 or 720U filer, or Schedule KREDA-SP for a Form PTE or 725 filer. The pass-through instructions say to complete Form PTE first to determine income, losses, and deductions from the entity's entire operations.
  2. Update Schedule KREDA-T with the current year's information. Maintain a separate tracking schedule for each project throughout its agreement.
  3. Attach the updated Schedule KREDA-T to Schedule KREDA or KREDA-SP, and attach the package and required supporting schedules to your Kentucky return.
  4. Enter tax credits on Schedule TCS. For corporations, enter the allowable KREDA credit in Part I, Columns E and F.
  5. Also attach a copy of the updated Schedule KREDA-T to the Wage Assessment Report and Annual Reconciliation.

The package does not provide a mailing address or e-file instructions.

Common mistakes

  • Using one package for multiple projects. Only one incentive project belongs in each KREDA package.
  • Claiming incentives outside the agreement term. First-year and last-year incentives must be prorated.
  • Passing KREDA credits or project losses through to owners. These do not pass through to partners, members, or shareholders. Prior-year project net operating losses must be subtracted before calculating the credit.
  • Completing both credit options on KREDA-SP. Enter an amount on line 9(a) or 9(b), never both.
  • Completing LLET lines for a general partnership. General partnerships should leave KREDA-SP lines 5 and 6 uncompleted.
  • Claiming too much credit. Total credits claimed cannot reduce LLET below $175 or income tax below zero.
  • Entering a short account number without leading zeros. The Kentucky Corporation/LLET account number must have nine digits. Add leading zeros if it has six digits.

Questions people ask

What taxes can the KREDA credit offset?

The credit applies against Kentucky income tax and/or LLET attributable to the project. Schedule KREDA is used for corporations, and Schedule KREDA-SP is used for pass-through entities.

What does Schedule KREDA-T track?

It records debt service payments or approved costs, wage assessments, and tax credits throughout the agreement. It determines the annual credit limitation and must be updated each year.

Can a pass-through entity choose an estimated tax payment instead of a credit?

Yes. The approved company may make this election annually by completing Part II of Schedule KREDA-SP. The payment must satisfy owners' tax liabilities and be paid on their behalf. The instructions state that owners are not entitled to claim any portion of this payment against their Kentucky income tax liability.

What if the credit amounts differ for income tax and LLET?

For tracking purposes, record the greater of the credit claimed against LLET or income tax, rather than adding the two amounts together.

Official sources

All versions of KREDA