Virginia Tax Credits for Individual and Corporate Taxpayers

Posted on 01.22.19

Virginia Tax Credits for Individual and Corporate Taxpayers

By Terry Barrett, CPA, Tax Senior Manager | State and Local Tax Team Leader

Now that it’s tax season, it’s time to think about potential credits that may reduce your Virginia tax liabilities. We have included a listing of Virginia tax credits available to individual or corporate taxpayers with a brief explanation of each credit. It is important to note that many of the credits may not be claimed on a tax return until a taxpayer has submitted an application and been notified in writing that they are allowed to claim the credit.  There are specific due dates to submit applications, most without extension, so please pay close attention and reference the Department of Taxation’s website for additional information and requirements for claiming the credits. 

Virginia Tax Credits

Category Tax Credit  Indiv    Corp Description

Agriculture

Agricultural Best Management Practices Tax CreditXTax credit for those engaged in agricultural production for market that have a soil conservation plan in place to help improve water quality in Virginia's waters. Credit is 25% of the first $70,000 spent on approved agricultural best management programs.  Maximum credit is $17,500 or the total amount of tax imposed, whichever is less. Beginning 7/1/2018, credit is fully refundable for individuals and corporations.
AgricultureConservation Tillage Equipment Tax CreditXXTax credit for investment in conservation tillage equipment for farming. Tax credit is 25% of conservation tillage equipment expenditures up to a maximum credit of $4,000. Credit cannot exceed tax liability.
AgricultureFarm Wineries and Vineyards Tax CreditXXFor eligible vineyards and winery qualified expenditures such as equipment & supplies used in winemaking.  Credit is 25% of all qualified expenditures.  Must apply for credit by April 1 to Dept. of Taxation (TAX).
AgricultureFood Crop Donation Tax CreditXXTax credit for the donation of food crops grown by a Virginia farmer to a nonprofit food bank. Credit amount is 30% of the fair market value of the food crops donated during the taxable year but cannot exceed an aggregate credit of $5,000 for all such donations made in the year. Must apply by Feb. 1 to TAX to claim credit.
AgriculturePrecision Fertilizer and Pesticide Application Equipment Tax CreditXXTax credit for the purchase of certified equipment used to provide a more precise application of pesticide. Credit amount is 25% of the purchase price of the equipment or $3,750, whichever is less.
AgricultureRiparian Waterway Buffer Tax CreditXXTax credit allowed for owners of land abutting a waterway on which timber is harvested who forbear harvesting timber on certain portions of the land near the waterway. Credit is 25% of the value of the timber on the area designated as a buffer for a waterway, not to exceed $17,500 or the total amount of tax liability, whichever is less.
Business DevelopmentMajor Research and Development Expenses Tax CreditXXTaxpayers with Virginia qualified R&D expenses for the taxable year in excess of $5 million are allowed a nonrefundable tax credit in an amount equal to 10% of the difference between the VA qualified R&D expenses paid or incurred during the taxable year and 50% of the average VA qualified R&D expenses paid or incurred for the 3 prior taxable years preceding the taxable year for which the credit is being determined.  If no R&D expenses were in incurred in any 1 of the 3 taxable years, the tax credit is limited to 5% of the VA qualified R&D expenses paid during the relevant taxable year.  Credit cannot exceed 75% of the total tax liability for the taxable year. Must apply by submitting Form MRD to TAX by July 1 of the calendar year following the close of the taxable year in which the expenses were paid or incurred.
Business DevelopmentMotion Picture Production Tax CreditXXTax credit for qualifying expenses from eligible production expenses incurred in motion picture production.  The credit is equal to 15% of qualifying expenses with additional incentives for Virginia resident payroll and production in economically distressed areas. Applications for and approval of the credit is done by the Virginia Film Office. Credit is refundable.
Business DevelopmentQualified Equity and Subordinated Debt Investments Tax CreditXXCredit for equity or subordinated debt investment in qualified small businesses engaged in technology-related fields.  Credit is equal to 50% of qualified investments during the taxable year but may not exceed the tax liability or $50,000 whichever is less.  Businesses must apply to TAX by filing Form QBA by December 31 of the year for which qualification is sought. Investors must file Form EDC with TAX by April 1 of the year following the investment to apply for the credit.
Business DevelopmentResearch and Development Expenses Tax CreditXXTax credit for qualified R&D expenses.  Credit is equal to 15% of the first $300,000 of expenses or 20% if conducted with Virginia colleges/universities. Credit may be computed as 10% of the difference of expenses and 50% of the previous 3-year average.  Applications, Form RDC, must be submitted by July 1 and must be approved before claiming credit on return.
Business DevelopmentTelework Expenses Tax CreditXXTax credit for eligible expenses incurred in connection with teleworking employees. Credit is equal to up to $1,200 per teleworking employee or $20,000 for conducting a telework assessment. Maximum credit allowed per year is $50,000.  Must apply between Sept. 1 and Oct. 31 of the year preceding the taxable year for which the tax credit is to be earned to reserve credits. Must also file by April 1 of the year following the calendar year that the eligible expenses were incurred.
Business DevelopmentWorker Retraining Tax CreditXXTax credit for worker retraining costs or direct costs of providing manufacturing training to middle/high school students.  Worker retraining credit:  30% of all classroom training costs but limited to $200 per student/year if in a private school, or $300 per qualified employees retrained in STEM or STEAM discipline. Manufacturing training credit is 35% of direct costs associated with training, not to exceed $2,000 credit per year. Must apply for certification.
Coal IndustryCoalfield Employment EnhancementXXTax credit for those who have an economic ownership interest in metallurgical coal mined in Virginia. Credit is based upon  a per ton or per million BTU rate and an employment factor.
Coal IndustryVirginia Coal Employment and Production Incentive Tax CreditXXTax credit for Virginia coal that is both purchased and consumed by a Virginia electricity generator. Credit equals $3.00 per ton used.
EducationEducation Improvement Scholarships Tax CreditXXTax credit for donations to an approved scholarship foundation. The donation must be approved by the VA Dept. of Eduction before given to the foundation. The credit is equal to 65% of the donation. Individuals must donate at least $500 (cash or securities) to qualify for the credit. This minimum donation does not apply to businesses, including sole proprietorships.  
EnvironmentBiodiesel and Green Diesel FuelsXXFor biodiesel and green diesel fuel producers making up to 2 million gallons of fuel per year. Credit amount is $0.01 per gallon but capped at $5,000 annually.  Amount of credit cannot exceed tax liability for year.  Must apply for credit after VA Dept. of Mines, Minerals, and Energy has certified requirements met.
EnvironmentGreen Jobs Creation Tax CreditXXTax credit for creating “green jobs” during the year.  Credit is $500 per green full-time job created that pays at least $50,000 in wages per year. Form GJC must be sent to TAX at least 90 days prior to due date of return.
EnvironmentLand Preservation Tax CreditXXTax credit equal to 40% of the fair market value of land at the time of donation to a public or private nonprofit group for approved uses.  Value must be determined by qualified appraiser.  Credit can be up to $20,000 per year (for 2018) and must be approved by TAX.  Must apply by Dec. 31 of the year following the year when donation was recorded.
EnvironmentRecyclable Materials Processing Equipment Tax CreditXXCredit for qualifying purchases of equipment to produce items from recyclable materials. Credit is 20% of the purchase price of the recycling equiment but the credit cannot exceed 40% of the tax liability. Must apply to VA Dept. of Environmental Qualify on or before March 1 for certification of equipment. To apply for tax credit those with certification must file with TAX on or before June 1.
EnvironmentVehicle Emissions Testing Equipment, Clean-Fuel Vehicle, and Certain Refueling Property CreditXXCredit is 20% of the purchase or lease of equipment certified by the Dept. of Environmental Quality for vehicle emissions testing.
EnvironmentWaste Motor Oil Burning Equipment Tax CreditXXTax credit for businesses that operate a facility in VA that accepts waste motor oil from the public. Credit amount is equal to 50% of the purchase price paid for equipment used exclusively to burn waste motor oil. Credit may not exceed $5,000 per taxable year. Equipment must be certified by DEQ before claiming credit.
Housing and Community DevelopmentEnterprise Zone ActXXBusinesses that qualified prior to July 1, 1995 may be able to claim a general tax credit against the tax due on taxable income within the zone. Businesses qualified between July 1, 1995 and June 30, 2005 may take a credit against the tax due on the zone's taxable income and may be eligible for a real property improvement tax credit or the investment tax credit.  Effective July 1, 2005, this credit was replaced with a grant program administered by the VA Department of Housing and Community Development (DHCH). Certain businesses that signed agreements with DHCD prior to the expiration of the credit may continue to claim the business tax credit and the real property improvement credit. Learn more.
Housing and Community DevelopmentCommunity of Opportunity Tax CreditXXTax credit claimed by landlords with qualified housing units located in census tracts with poverty rates of less than 10% in the Richmond Metropolitan Statistical Area who participate in the Housing Choice Voucher program.  The amount of credit is based on 10% of the annual fair market rent for the units. Must apply to DHCH to be eligible for credit.
Housing and Community DevelopmentHistoric Rehabilitation Tax CreditXXTax credit equal to 25% of the eligible expenses in rehabilitating a certified historic structure. To qualify for the credit, the cost of the rehabilitation must be at least 50% of the assessed value of the structure prior to the rehabilitation or 25% if you live in the structure. Credit claimed may be up to $5 million but may not exceed the tax liability.
Housing and Community DevelopmentLivable Home Tax Credit (formerly Home Accessibility Features for the Disabled)XXIndividuals and licensed contractors who are corporations may be eligible for a tax credit of $5,000 for the purchase of a new accessible residence and 50% of the cost of retrofitting activities, not to exceed $5,000.  Applications must be filed with the Dept. of Housing and Community Development by Feb. 28 of the year following the year in which the purchase or retro-fitting was completed.
Housing and Community DevelopmentNeighborhood Assistance Act Tax CreditXXTax credits provided for donations of certain items/services directly to an approved Neighborhood Assistance nonprofit organization.  Tax credit is allowed up to 65% of the donation's value.  
Individuals - Misc.Foreign Source Retirement Income Tax CreditX Virginia residents may claim a credit for income taxes paid to a foreign country on pension or retirement income derived from employment in a foreign couunty.  The retirement income must be included in VA taxable income on the return to which the credit is applied.  The credit is nonrefundable and excess credits cannot be carried forward.
Individuals-Misc.Trust Beneficiary Accumulation Distribution Tax CreditX This credit may be claimed by beneficiaries of a trust whose VA taxable income includes all or part of an accumulation distribution by the trust. For the years in which income was accumulated, the distributing trust would have reported the income on its own fiduciary return and paid taxes. This credit prevents double taxation of the distribution to the beneficiary.
MiscellaneousCredit for Taxes paid to Other StatesXS-CorpsFor taxpayers that have Virginia taxable income that is also taxed by another state. See https://tax.virginia.gov/credit-for-taxes-paid-to-another-state 
Ports and TradeBarge and Rail UsageXXFor facilities engaged in port-related activities using barge & rail instead of motor vehicle transportation. Credit is awarded based on amount of increased cargo shipped by barge & rail over previous tax year.  Must apply to TAX by April 1 for credit.
Ports and TradeInternational Trade Facility Tax CreditXXFor international trade facilities making capital investments or increasing jobs.  Must demonstrate at least 5% increase in VA port shipments. Employee credit is equal to $3,500 per job. Capital investment credit is 2% of capital investment.  Tax credit can not exceed 50% of the tax imposed for the taxable year.
Ports and TradePort Volume Increase Tax CreditXXTax credit for qualified agricultural, manufacturing, or mining entities that use Virginia port facilities and increase cargo volume by at least 5%. Credit is $50 per 20-foot equivalent unit.  Must apply to the Virginia Port Authority by March 1st of the calendar year after the calendar year in which the increase in port cargo volume occurs.

 

The following credits have expired or been repealed, however, taxpayers with carryover amounts may still claim the credits until exhausted or otherwise provided by law.

  Tax Credit  Indiv   Corp  Description
Expired Clean-Fuel Vehicle and Advanced Cellulosic Biofuels Job Creation Tax Credit   X An income tax credit equal to $700 for each job a corporation created that was related to the manufacture and production of clean fuel and advanced cellulosic biofuel vehicles. The credit is allowed in the taxable year in which the job is created and in each of the two succeeding years. Expired on Dec. 31, 2014.
Expired Day Care Facility Investment Credit X X A tax credit for employers for expenditures incurred in establishing a day-care facility for the children of employees. Expired on Dec. 31, 2013.
Expired Credit for Purchase of Long-Term Care Insurance X   A tax credit equal to 15% of the amount paid by the individual during the taxable year in long-term care insurance premiums for long-term care insurance coverage for himself, but the total credits for any policy may not exceed 15% of the amount of premiums paid for the first 12 months of coverage. Credit expired on Dec. 31, 2013.
Expired Low Income Housing Credit X X A tax credit for Virginia taxpayers who claimed a low-income housing tax credit on their federal income tax return for housing units placed in service in Virginia on or after January 1, 1998. Credit expired on Dec. 31, 2010.
Expired Rent Reduction Program Credit X X A tax credit for owners of rental property who provided a rent reduction to certain low income tenants.  Credit expired on Dec. 31, 2010.

 

Questions on whether you or your business qualify for Virginia Tax Credits? Contact us. We can help. Keiter Representative | Email | 804.747.0000

Additional Resources:

The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Posted by: Terry Barrett, CPA

Terry Barrett specializes in state and local tax concerns for her clients. She has over 30 years of experience working in the public and private accounting sector. She is a graduate of Virginia Commonwealth University. You can read more of Terry’s state and local tax insights here.

Was this article helpful?

Fill out my online form.