- Individuals
- Form 1099G/1099INT
- Estates
- Probate
- Penalties and Interest
Except where noted, use Schedule CR to claim any of these credits and attach it, with required documentation, to your return.
This credit is available to individuals and corporations that are engaged in agricultural production for market and have a soil conservation plan in place to provide significant improvement to water quality in Virginia's streams, rivers, and bays. To be eligible for the credit, your plan must be certified in advance by your local Soil and Water Conservation District.
The credit is 25% of the first $70,000 you spend for approved agricultural best management programs. The maximum credit is $17,500 or the taxpayers' tax liability, whichever is less. Unused credits may be carried forward for five years.
Individual filers complete Schedule CR, Part XIV, and corporate filers complete Form 500CR, Part XVI to claim this credit. Attach the certificate from the local Soil and Water Conservation District from the locality in which the credit is claimed.
Reference: Virginia Code 58.1-339.3
Reference: Virginia Code 58.1-439.5
Beginning on January 1, 2008 a credit is available for Virginia biodiesel and green diesel fuel producers who produce up to two million gallons of fuel per year. This credit is only available during the first three years of production. Corporate and individual taxpayers may claim a nonrefundable credit against their tax liability for the production of these fuels.
Form BFC is used to apply to the Virginia Department of Taxation (TAX) for a Biodiesel Fuels Credit after the Department of Mines, Minerals, and Energy (DMME) has certified that you have satisfied all the requirements of § 58.1-439.12:02.
The amount of the credit is $0.01 per gallon, not to exceed $5,000 annually. The amount of the credit allowed cannot exceed the tax liability for the tax year the credit is being claimed. Unused credits may be carried forward for 3 years.
The amount of the credit attributable to a partnership, electing small business corporation (S corporation), or limited liability company (LLC) must be allocated to the individual partners, shareholders, or members in proportion to their ownership or interest within the business entity using Form PTE.
The credit may be transferred to another taxpayer. The transfer of the credit must be completed before the end of a tax year in order to use the credit for that tax year.
.
To claim this credit, complete Part XIX of Schedule CR and attach a copy of the certificate from Virginia Department of Taxation to your income tax return.
Reference: Virginia Code 58.1-439.12:02
General provisions -- Section 332 of the Code of Virginia makes out-of-state tax credit provisions for income that is taxed by more than one state. The credit is restricted to certain types of income. The intent of the law is to address double taxation when income is generated in more than one state; however, the credit does not eliminate double taxation in all cases. For example, taxes paid to another state on non-qualifying income would not be subject to the credit provisions. If you are a resident, compute the credit on Schedule OSC. Nonresidents and part-year residents should use Schedule NPY.
Qualifying taxable income -- Generally, Virginia will allow taxpayers filing resident individual income tax returns to claim credit for income tax paid to another state on qualifying income derived from sources outside of Virginia, provided the income is taxed by Virginia as well as the other state. If the income is from one or more of the following states, you should claim the credit on the nonresident income tax return of the other state instead of the Virginia return: Arizona; California; District of Columbia; Oregon.
Dual residency -- When an individual is an actual resident of one state, but is a domiciliary resident of another state, both states will usually require a return. In that case, the domiciliary state will generally allow a credit for taxes paid to the state of actual residence. For example, if a domiciliary resident of Virginia actually lives and works in Oregon for the taxable year, Virginia will allow a credit for taxes paid to Oregon on qualifying income (see PD 97-223).
To claim the credit -- Complete Schedule OSC (residents) or Schedule NPY (nonresidents and part-year residents) and attach a copy to your Virginia return, along with a copy of the other state's income tax return. To claim credit for taxes paid to more than one state, you must complete a separate Schedule OSC or Schedule NPY for each state.
Qualifying income -- The first step in computing the credit is to determine the qualifying taxable income on which the other state's tax is based. To be included in the computation, the income must:
Be earned or business income derived from sources outside Virginia, which is subject to tax by Virginia as well as another state; or
Be a gain from the sale of a principal residence outside Virginia which was included in federal adjusted gross income; or
Be a gain from the sale of any capital asset not used in a trade or business; or
Be corporation income tax paid to another state (one that does not recognize the federal S corporation election), by an individual shareholder of an S corporation. Attach a statement from the S corporation.
In most cases, the net taxable income reported on the other state's return is the amount on which the Virginia credit will be based. In some states, however, the tax is computed on the total taxable income from all sources, then reduced by an allocation percentage. In a case like this, you must multiply the total taxable income shown on the other state's return by the allocation percentage in order to determine the amount of income to use when computing the credit.
Example
A Virginia resident taxpayer files as a nonresident with another state. The other state's tax was computed as follows:
Taxable income from all sources 100,000
Tax liability 4,000
Taxable income from other state's sources 50,000
Allocation percentage (50,000/100,000) 50%
Net tax due (4,000 x 50%) 2,000
Because the taxpayer only paid 50% of the total tax liability to the other state, the Virginia credit cannot be based on 100% of the other state's taxable income. To compute the qualifying income, the taxable income must be multiplied by the allocation percentage. In this case, the qualifying income for Virginia purposes is $50,000 (100,000 x 50%).
In addition to the circumstances described above, S Corporation shareholders may also need to provide a separate computation of qualifying income. The amount of income used for the credit should be the shareholder's share of the income subject to tax by another state.
Form 760PY filers may include only the portion of income taxed by another state that was received while they lived in Virginia.
Virginia taxable income -- Enter the amount of taxable income from your Virginia return. If you filed separately in the other state, but are filing jointly in Virginia, use only the Virginia taxable income attributable to the filer whose income was taxed by the other state.
Qualifying tax paid to the other state -- Enter the actual income tax paid to the other state. Do not use the state income tax withheld, or include any city, local, or other taxes. For states that apply an allocation percentage to the tax, use the net tax amount after allocation.
Virginia income tax -- Enter the amount of income tax from your return, minus any spouse tax adjustment or credit for low-income individuals claimed. If you filed separately in another state, but are filing jointly in Virginia, enter the amount of Virginia income tax due on the taxable income reported on Schedule OSC or Schedule NPY. Use the tax tables or the tax rate schedule to determine the amount of tax.
Income percentage -- The next step is to determine what percentage of income in Virginia is also taxable in the other state. To do this, divide the qualifying taxable income from the other state by the Virginia taxable income. The result should not exceed 100%. Special computation for border states: You may qualify for a special computation of the credit if you are required to file a return with Virginia and only one of the following states: Kentucky; Maryland; North Carolina; or West Virginia, The income from the border state must consist solely of wages and salaries or business income from federal Schedule C, and your Virginia taxable income must be at least equal to the taxable income shown on the other state's return. If you meet all of the qualifications, enter 100%.
Allowable credit -- To determine how much of the tax paid to another state is allowable for computing the credit, multiply the Virginia income tax by the income percentage. The credit is the lesser of this computation or the qualifying tax paid to the other state.
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This credit may be claimed for taxable years beginning on and after January 1, 2006 by any C-corporation that manufactures cigarettes in Virginia and exports cigarettes to a foreign country. To qualify for the credit, the business must (1) have manufactured cigarettes in Virginia the previous tax year and (2) have current year export volume of at least 50% of the base year (2004) export volume. "Base year export volume" is defined as the number of cigarettes manufactured by a corporation which were exported by the manufacturer during its taxable year that began in calendar year 2004.
The credit is a designated rate per 1,000 cigarettes of the current year export volume based on the ratio of current year export volume to base year export volume.
| If Export % is At Least | But Less Than | Credit Factor/1,000 |
|---|---|---|
| .50 | .60 | $0.20 |
| .60 | .80 | $0.25 |
| .80 | 1.00 | $0.30 |
| 1.00 | 1.20 | $0.35 |
| 1.20 | $0.40 |
The Department of Taxation may grant only $6 million of cigarette export credits each year. If total eligible credit requests received by April 1 exceeds the annual $6 million limitation, each taxpayer will be granted a prorated amount as determined by the Department. If the Department determines that any allocated credits cannot be used by the taxpayer, the allocation of unused credits will be cancelled and the balance reallocated to other applicants.
Businesses wishing to participate in the Cigarette Export Credit must file Form CEC with the Department of Taxation no later than April 1 each year for exports made the previous tax year.
The taxpayer must submit a written statement with their Form CEC certifying its base year export volume. The taxpayer must also attach to Form CEC a listing of monthly export volumes as reported to the Federal Bureau of Alcohol, Tobacco, and Firearms for each month of the taxable year.
The Department will notify taxpayers by June 30 of the amount of Cigarette Export Credit that has been granted to them.
A taxpayer who does not claim a granted credit on their current year tax return may not carry over the credit to an ensuing tax year.
Reference: Virginia Code 58.1-439.12:01
This credit benefits individuals, estates, trusts and corporations who have an economic ownership interest in coal mined in Virginia. The credit may be earned for taxable years beginning on or after January 1, 1996, but before January 1, 2008. This credit may be claimed on your return in taxable years beginning on or after January 1, 1999 through December 31, 2010.
Compute your allowable credit on Form 306.
All filers must complete Form 306 B. Individual and fiduciary filers complete Schedule CR, Part XXV, and corporate filers complete Form 500CR, Part XXV to claim this credit. Attach Form 306 for both the Earned Year (a copy of the original) and the Claimed Year (current year) with the completed schedules where appropriate. Follow instructions on Form 306 for "What to Attach."
Reference: Virginia Code 58.1 - 439.2.
Individuals and corporations that invest in conservation tillage equipment for the purpose of farming may claim this credit. The term "conservation tillage equipment" means a "no-till" planter or drill designed to minimize soil disturbance. This includes planters and drills that may be attached to existing equipment.
The tax credit is 25% of conservation tillage equipment expenditures, up to a maximum credit of $4000. The allowable credit is the lesser of the total credit or your tax liability. Any unused credit may be carried forward for five years.
Individual filers complete Schedule CR, Part V and corporate filers complete Form 500CR, Part IV to claim this credit. Attach a statement showing the purchase date, description of equipment, and the credit computation.
Reference: Virginia Code 58.1 - 334.
For taxable years beginning on and after January 1, 1997, an employer may be eligible for a credit for expenditures incurred to establish a day-care facility for the children of employees. The maximum credit is $25,000. The Department of Taxation may not approve more than $100,000 in total credits in any fiscal year.
To be eligible for the credit, the employer's day care facility must meet the following criteria: (1) the facility shall be operated under a license issued by the Virginia Department of Social Services; (2) the building permit application for the facility must be submitted after July 1, 1996; (3) the facility must be used primarily by the children of the taxpayer's employees and; (4) the Tax Commissioner must approve the credit application before a credit may be claimed. Any unused credit may be carried forward for three taxable years.
To apply for this credit, submit a letter of application that specifies the employer's name and location of the facility. You must also provide certification of items (1) and (2) above. Send your application to: Virginia Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715.
Individual filers complete Schedule CR, Part XII, and corporate filers complete Form 500CR, Part XIV to claim this credit.
Reference: Virginia Code 58.1-439.4.
Businesses 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. The credit is a percentage of the tax due on taxable income from within the zone. In addition, a credit for a percentage of unemployment tax due on zone employees may be claimed.
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 the real property improvement tax credit or the investment tax credit.
Effective July 1, 2005, the Enterprise Zone Act credit has been replaced with a grant program administered by the Department of Housing and Community Development (DHCD). Certain businesses that signed agreements with DHCD prior to the expiration of the Enterprise Zone Act credit provisions may continue to claim the business tax credit and the real property improvement credit.
For forms to qualify and additional information on this credit, visit the Virginia Department of Housing and Community Development website at http://www.dhcd.virginia.gov/.
All filers must complete Form 301 and attach the certificate of qualification from the Virginia Department of Housing and Community Development to claim this credit. If applicable, attach the Certificate of Unemployment Tax Credit from the Virginia Employment Commission. Individuals must also complete Schedule CR, Part II, to claim nonrefundable credits, and Part XXVI to claim the Real Property Improvement Credit, which is refundable. Corporate filers must complete Form 500CR, Part III, to claim nonrefundable credits, and Part XXVI to claim the Real Property Improvement Credit.
Complete Form 301 and Schedule 500CR, Part III, to claim this credit. Attach the certificate of qualification from the Virginia Department of Housing and Community Development and a completed Form 301. If applicable, attach the Certificate of Unemployment Tax Credit from the Virginia Employment Commission.
Reference: Virginia Code 59.1-280
Reference: Virginia Code 59.1-280.1
Individuals and corporations may claim this credit for equipment purchased to provide more precise pesticide application. You must be engaged in agricultural production for market and have a nutrient management plan approved by your local Soil and Water Conservation District in place.
The credit is 25% of the cost of the certified equipment, or $3,750, whichever is less. The allowable credit may not exceed your tax liability. Unused credits may be carried forward for five years.
Individual filers complete Schedule CR, Part VI, and corporate filers complete Form 500CR, Part VI to claim this credit. Attach confirmation of purchase and a statement of approval from the applicable Virginia Soil and Water Conservation District.
Reference: Virginia Code 58.1-337.
Reference: Virginia Code 58.1-436.
Effective for taxable years beginning on or after January 1, 1998, 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 country. The retirement income must be included in Virginia taxable income on the return to which this credit is applied. The credit is nonrefundable and excess credits cannot be carried forward.
To compute the credit, the foreign currency must be converted into U.S. dollars using the prevailing exchange rate that most nearly reflects the value of the currency at the time the taxes were actually paid to the foreign country.
For purposes of this credit, a foreign country shall include all possessions of the United States. Any foreign country that does not qualify for the federal foreign tax credit (IRC 901[j]) does not qualify for this Virginia credit.
Complete Schedule CR, Part X, to claim this credit. Attach a copy of the return filed in the foreign country or other proof of tax payment to the foreign country and a schedule showing computation of foreign currency converted to U.S. dollars.
Reference: Virginia Code 58.1 - 332.1.
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An individual, estate, trust, or corporation incurring eligible expenses in the rehabilitation of a certified historic structure is entitled to claim a credit against their respective taxes.
The credit is equal to 25% of rehabilitation expenses for projects completed in 2000 and thereafter.
To qualify, the cost of the rehabilitation must equal to at least 50% (25% if the building is owner occupied) of the assessed value of the building for local real estate tax purposes prior to the rehabilitation. The rehabilitation work must be certified by the Virginia Department of Historic Resources and be consistent with The Secretary of the Interior's Standards for Rehabilitation. The allowable credit may not exceed your tax liability. Unused credits may be carried forward for 10 years.
Applications for certification of buildings and rehabilitation projects may be obtained from the Virginia Department of Historic Resources, 2801 Kensington Avenue, Richmond, VA 23221. You must receive certification of the credit before claiming it on your tax return.
Individual and fiduciary filers complete Schedule CR, Part XI, and corporate filers complete Form 500CR, Part XIII, to claim this credit. Attach Schedule CR and your certification to your return.
Reference: Virginia Code 58.1 -339.2.
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Individuals and corporations may take a credit for conveying land located in Virginia for such purposes as historical or conservation preservation, agricultural use, forest use, open space, and natural resource conservation.
To the extent a credit is taken, no subtraction for the gain on the sale of land dedicated to open space use (58.1-322 [22]) shall be allowed for three years following the year in which the credit is taken.
The maximum credit that can be claimed for tax years 2002-2008 is $100,000 and for tax years 2009-2010 is $50,000.
Individual filers complete Schedule CR, Part XXII, and corporate filers complete Form 500CR, Part XXII, to claim this credit.
For Donations Recorded Prior to January 1, 2007
The credit is 50% of the fair market value of the land or interest in land. The credit is not refundable, but it can be carried forward for up to five years. The fair market value is determined by a "qualified appraisal" as prepared by a "qualified appraiser" as those terms are defined under applicable federal law and IRS regulations governing charitable contributions.
For purposes of this credit, any qualified appraiser must be licensed in the Commonwealth. Should the appraiser falsely or fraudulently overstate the value of the contributed property, the Department of Taxation (TAX) is authorized to disallow further appraisals signed by that appraiser and refer the appraiser to the Real Estate Appraisal Board for appropriate disciplinary action. In addition, if TAX determines that an appraisal was false or fraudulent, the agency may disregard the appraisal in determining the fair market value of the property and the allowable tax credit.
The value of the donated interest in the land must be reduced by the amount of gain that would not have been a long term capital gain if the property had been sold by the taxpayer at its fair market value. Also, any open space land, dedicated to fulfill density requirements, is excluded from the Land Preservation Credit.
This credit may be transferred to another taxpayer for use on Virginia income tax returns if the qualified donation was made on or after January 1, 2002. The transfer of the credit must be completed before the end of the tax year in order to use the credit for that year.
The donation or transfer must be registered with the Department of Taxation to be valid. You must use Form LPC-1 to notify the Department of the creation of a new Land Preservation Credit (LPC) donation or of a transfer to another taxpayer of an existing LPC. Form LPC should be submitted to the Department within 60 days of the credit's origination or transfer, or at least 90 days before you file your annual return claiming the credit. The Department will deny any LPC credits that have not been pre-registered.
For Donations Recorded On or After January 1, 2007
Legislation enacted by the 2006 General Assembly made significant changes to the requirements for qualifying for and receiving the Land Preservation Credit (LPC). These changes apply only to donations recorded on or after January 1, 2007.
General Information: The LPC is available to taxpayers that convey land or interest in land located in Virginia to a public or private agency eligible to hold such land or interests therein for conservation or preservation purposes. The conveyance must be held in perpetuity.
Standards for Appraisals: When placing a value on a donation, appraisers must follow the Uniform Standard of Professional Appraisal Practice (USPAP) for all LPC donations. In addition, less-than-fee donations must comply with Section 170(h) of US Internal Revenue Code of 1986. The Commonwealth will use these two documents as their appraisal guidelines.
Annual Cap on Credits Granted: The Department of Taxation (TAX) is authorized to acknowledge no more than $106,647,000 in LPC credits for tax year 2009. Taxpayers must file Form LPC-1 to register a donation. The credits will be issued on a "first-come, first-serve basis." A credit will not be allocated from the current year's credit pool until a completed Form LPC-1 application and all supporting documents are received by TAX. This includes the approval from the Department of Conservation and Recreation (DCR) for donations requesting a credit of $1 million or more. Once the annual CAP limit is met, any subsequent credit requests will be issued for the next available calendar year.
Increase in Annual Cap. The amount of the annual limit for each year will be increased by an amount equal to $100 million multiplied by the percentage that the consumer price index (CPI-U) published by the U.S. Department of Commerce, for the 12 month period ending August 31 of the previous year exceeds the CPI-U as of August 31, 2006.
Dual Basis Prohibited. Any building that serves as a basis for the Historic Rehabilitation Credit cannot serve as a basis for the LPC credit nor vice versa for a period of 5 years.
No more than 25% of the total LPC credit allowed shall be for a reduction in value to any structure and other improvements to land.
Amount of Credit. Effective for donations made on or after January 1, 2007, the credit amount is reduced to 40% of the appraised value of the land donation.
Carry Forward. Land Preservation Credits may be carried forward for ten (10) years from the year in which they are issued.
LPC Application and Certification Process
File Form LPC. Form LPC-1 "Application for a Land Preservation Credit" must be completed by the taxpayer and submitted to TAX in order to establish the credit. A copy of Form LPC-1 must also be submitted to the Department of Conservation and Recreation (DCR). The credit must be established and acknowledged by TAX before the taxpayer can transfer the credit or claim the credit on their tax return. If a taxpayer files a return claiming a credit before the credit is acknowledged, processing of the return will be significantly delayed.
All credit requests of $1 million or more must be submitted to both DCR and TAX for review. TAX must receive approval from DCR before the application is considered complete. Once the completed application is reviewed by TAX, an LPC number will be assigned and an acknowledgment letter will be sent to the taxpayer.
Additionally, if a donation is made by the same or related party (immediate family member or an affiliated entity) on any remaining portion of a recorded parcel which has already been used as the basis for an existing LPC within the past eleven (11) years, the existing LPC must be aggregated with the new request to determine if the total credit for that property exceeds $1 million, thus requiring DCR approval.
LPC Transfer Fee
New Fee on Transfers. Effective January 1, 2007, a fee will be imposed on any transfer arising from the sale of land preservation credits and on all pass-through allocations. The fee does not apply to transfers and allocations on donations made prior to January 1, 2007, even though the actual transfer may not occur until after January 1, 2007. Only transfers of donations recorded on or after January 1, 2007 are impacted by this fee.
The fee will be 2% of the appraised value of the donated interest. Because the statute relates the 2% fee to the donated interest and the credit is 40% of that figure, the fee is equal to 5% of the credit amount being transferred or allocated, as shown in the sample calculation below:
Scenario presented in Code of Virginia Section 58.1-513
$10,000 (donated interest being transferred/allocated)
x___.02 (fee multiplier imposed by statute)
$200 (fee dollars collected by statute)
Calculation of Credit Value
$10,000 (donated interest being transferred/allocated)
x___.40 (credit multiplier imposed by statute)
$4,000 (credit value of the donated interest)
If $200 is the amount of fee collected at the donated interest level, what percentage of the credit value generates the same fee amount?
$4,000(x) = 200
x = 200/4000
x = .05 or 5%
The fee is capped at $10,000 per taxpayer per donation. So if you are transferring or allocating credits derived from more than one donation, your fee may exceed $10,000.
Contact Information
Tax Credit Unit
Virginia Department of Taxation
PO Box 715
Richmond, VA 23218
804-786-2992
Tax Credit Program
Department of Conservation & Recreation
203 Governor Street, Suite 302
Richmond, VA 23219
804-371-5218
Reference: Virginia Code 58.1 - 512.and 513
LPC Comparison
The 2006 General Assembly passed HB 5019, which made significant changes to the Land Preservation Credit. Below is a table that shows the comparative changes resulting from this legislation. Note that these changes apply only to donations recorded in 2007 and beyond.
LPC Comparison Category For Donations Recorded in 2006 & Prior Donations Recorded in 2007 and beyond
Percentage of Credit 50% 40%
Carry Forward 5 Years 10 Years
CAP None 2007 = $100 Million
2008 = $102,287,081
2009 = $106,647,000
Applications To TAX ONLY Tax & DCR
Transfer Fee Not Applicable Calculation is 2% of the donated interest or 5% of the credit amount transferred/allocated
Who Pays Fee Not Applicable Transferor; Pass-through Entity
Fee CAP Not Applicable $10,000 per taxpayer per donation
To register a donation, use Form LPC-1 (PDF 810Kb). To transfer a credit, use Form LPC-2 (PDF 30 Kb). For instructions on applying or transferring credits, see the LPC Application and Transfer Procedures (PDF 30Kb).
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Livable Home Tax Credit (formally Home Accessibility Credit). Effective for January 1, 2008 this credit is now being administered by the Department of Housing and Community Development (DHCD). For tax year 2009, individuals may be eligible for an income tax credit of $500 for the purchase of a new accessible residence and 25 percent of the cost of retro-fitting activities, not to exceed $500. However, please note that the 2009 General Assembly passed legislation that effective January 1, 2010 the credit limit has been increased to $2,000 for new residences, and 50% of the amount spent retrofitting an existing residence, not to exceed $2,000. Any tax credit that exceeds the eligible individual’s tax liability may be carried forward for five years. If the total amount of tax credits issued under this program exceeds $1million in a fiscal year, DHCD will pro rate the amount of credits among the eligible applicants. Applications are to be filed with the Virginia Department of Housing and Community Development (DHCD) by February 28 of the year following the year in which the purchase or retro-fitting was completed. For additional information please contact Kathy Robertson at 804-225-3129.
Form: LHTC Application and LHTC Guidelines or Brochure
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Individuals may claim a 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. Any unused credit may be carried forward for the next five taxable years. In order to determine the amount that may be used as a basis for this credit, the individual must subtract any amount actually included as a deduction on Schedule A of the individual’s federal income tax return. In addition, the individual may not claim this credit to the extent the premiums have been used to claim the Virginia deduction for long-term health care premiums. It may be possible, however, for an individual to claim this credit and the Virginia deduction in the same year.
Example
This credit is based on the amount paid during the taxable year, even if the months covered by the policy extend into the following taxable year. For example, if an individual purchased a policy on July 1 and paid for 12 months, he would base his credit on the entire payment, even though only six months of the coverage period would fall in the taxable year in which he claimed the credit. If however, the individual made payments on a monthly basis, he would claim a credit in the current taxable year for 6 months of premiums and a credit in the second year for the next six months of premiums in order to reach the allowed total of 12 months. In that case, the individual could also claim a deduction in the second year for the 6 months of premiums that were not used as a basis for the credit.
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If you are a Virginia taxpayer and you claimed a low-income housing tax credit on your federal income tax return for housing units placed in service in Virginia on or after January 1, 1998, you may qualify to claim the state low-income housing tax credit.
The Virginia credit is a percentage of the federal credit. If in subsequent years you are subject to the federal recapture provisions for this credit, you will also be subject to a recapture amount on your Virginia return.
You must receive certification from the Virginia Department of Housing and Community Development before claiming this credit on your tax return. The allowable credit may not exceed your tax liability. For additional information contact the Dept of Housing and Community Development at 804/371-7117.
Individual filers complete Schedule CR, Part XIII, and business filers complete 500CR Part XV to claim the credit.
Reference: Virginia Code 58.1 - 435 and 36-55.63.
Reference: Virginia Code 58.1- 336.
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You may qualify to claim the Credit for Low Income Individuals (CLI) if your total family Virginia adjusted gross income is below federal poverty guidelines. Family Virginia adjusted gross income includes the total Virginia adjusted gross income for you, your spouse and your dependents, even if they do not file their own Virginia returns. If you and your spouse file separate returns, the family income includes income from your return, your spouse's return and any income for any dependents claimed on either return. Only one spouse may claim the CLI. For more information on computing Virginia adjusted gross income, refer to Form 760.
The maximum credit you may claim is $300 for each personal and dependent exemption claimed on your Virginia return. Unlike the Federal Earned Income Credit, this credit is not refundable. The amount of CLI claimed may not exceed your tax liability. Excess credit amounts may not be carried forward to future years.
You may not claim this credit if you, your spouse or any dependent listed on your return claimed one or more of the following exemptions, deductions or subtractions:
subtraction for wages or salaries received by members of the Virginia National Guard
subtraction for up to $15,000 of military basic pay for military service personnel on extended active duty
subtraction for up to $15,000 of salary for a federal or state employee whose annual salary is $15,000 or less
additional personal exemption for blind or aged taxpayers (NOTE: If you qualify for both the CLI and an additional exemption for blindness, it may be to your advantage to claim the CLI, rather than the additional exemption).
age deduction
In addition, you cannot claim this credit if you were claimed as a dependent on another taxpayer's return.
Claiming the credit is a two-step process. First, you must determine if you qualify for the credit. If so, then you must compute your allowable credit. Use the following table to see if you qualify for the CLI:
If the number of eligible exemptions is: Your family Virginia adjusted income must be less than
1 $10,210
2 $13,690
3 $17,170
4 $20,650
5 $24,130
6 $27,610
7 $31,090
8 $34,570
For each additional exemption over 8, add $3,480 to the guidelines. Eligible exemptions include personal exemptions only - you may not claim the CLI if you also claim additional exemptions for blindness or age.
If you qualify for the credit, multiply the total number of personal exemptions claimed on your return by $300. The credit cannot be more than your total tax as shown on line 17 of your income tax return, Form 760. Use Schedule ADJ to report the credit.
EXAMPLE:
Mary and John file a joint return (Filing Status 2), and claim exemptions for two dependents. Both spouses have income. One dependent is a teenager with a part-time job. The other dependent has no income. The total tax for both spouses is $235. Eligibility for the CLI and the amount of credit is determined as follows:
Taxpayer's VAGI $13,500
Spouse's VAGI $ 2,000
Dependent 1 VAGI $1,500
Dependent 2 VAGI $0
Total Family VAGI $17,000
Based on the table, the qualifying income amount for a return reflecting 4 exemptions is $20,650. Because the total family VAGI is less than $20,650, these taxpayers qualify for the CLI. The allowable credit is the number of exemptions multiplied by $300, or the total tax, whichever is less. Four exemptions at $300 each results in a maximum potential credit of $1,200. However, because John and Mary's total tax is only $235, the CLI is limited to $235, resulting in a tax liability of zero. The unused credit balance cannot be refunded or carried over to subsequent taxable years.
To claim this credit, complete Schedule ADJ and attach it to Form 760.
Virginia Earned Income Credit: -- Legislation enacted by the 2004 General Assembly expands the provisions of the credit for low-income individuals (CLI), effectively creating a nonrefundable Virginia earned income tax credit. Beginning with taxable year 2006, individuals may claim the conventional credit, as computed on Schedule ADJ, or claim a credit for 20% of the earned income tax credit (EITC) that they reported on the federal return, whichever is greater.
The provision for claiming 20% of the federal EITC is available to most filers who claimed an EITC, even to individuals who would not otherwise be eligible for the CLI on the Virginia return because of receiving Virginia adjusted gross income that exceeds the federal poverty guideline amounts. As in the past, this credit is nonrefundable. Filers who claim certain deductions and special exemptions, as well as filers who can be claimed as dependents on another individual's returns may not claim the credit. Please review Schedule ADJ for revisions and detailed instructions on the new EITC provision.
Reference: Virginia Code 58.1 - 339.8.
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Companies engaged in any business in the Commonwealth, except for retail trade business, may claim a Virginia tax credit if the taxpayer creates at least 100 new full-time jobs in connection with the establishment or expansion of a major business facility.
If a taxpayer is located in an enterprise zone or in an economically distressed area (as defined by the Virginia Department of Economic Development), the threshold is reduced from 100 new full time jobs to 50. The credit is equal to $1,000 per qualified full-time employee (in excess of the 100/50 threshold) who was employed during the credit year. The credit year is defined as the first taxable year following the taxable year in which the major business facility was established or expanded. The credit is earned in one-third increments over three taxable years beginning with the credit year. Please note, for tax years 2009 & 2010, the credit can be earned in 1/2 increments over a two year period. The allowable credit may not exceed your tax liability. Unused credits may be carried forward for ten years.
Credits will be recaptured proportionately if employment decreases during the five years following the initial credit year. Compute on Form 304.
Individual filers complete Schedule CR, Part IX, and corporate filers complete Form 500CR, Part X, to claim this credit.
Please Note this Change in Procedures:
All Major Business applications (Form 304) must be submitted to the Department of Taxation,Tax Credit Unit, PO Box 715, Richmond, VA 23218-0715 90 days prior to filing your return. Form 304 is no longer part of your income tax return. This credit requires certification from the Tax Credit Unit to be claimed on your tax return. A letter will be sent to certify the credit. This letter must be attached to your return.
Reference: Virginia Code 58.1 - 439.
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A business contributing to an approved Neighborhood Assistance Program (NAP) organization may receive a state tax credit equal to 40 percent of their contribution. Eligible business contributions include cash, stock, goods, real estate, rent/lease of nonprofit's facility, and limited health care, professional, and contracting services. Tax credits are available if the contribution value is at least $1,000 or no more than $437,500. The minimum tax credit issued for a business contribution is $400 ($1,000 X .40). A contributing business may take a maximum of $175,000 ($437,500 X .40) in NAP credits for any tax year.
Individuals who contribute directly to an approved NAP organization may also receive a state tax credit equal to 40 percent of their contribution. However, only cash contributions and or marketable securities are eligible. The minimum donation by an individual must be at least $500 for a $200 ($500 x .40) tax credit. No maximum tax credit cap is imposed for individuals unless all available tax credits are allocated. Then, the maximum tax credit per taxable year for individuals will be $50,000.
Applications from organizations wishing to participate in NAP must be received in the Virginia Department of Social Services by the first business day in May each year. For a list of currently approved organizations or additional information, contact the Virginia Department of Social Services, Neighborhood Assistance Program, 7 N 8th St., Richmond, VA 23219.
Individual filers complete Schedule CR, Part III, and corporate filers complete Form 500CR, Part II, to claim this credit. All filers must also attach their credit certificate from DSS to the income tax return.
Reference: Virginia Code 58.1 - 333.
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You may qualify to claim this credit if you made contributions to political candidates in a primary, special, or general election for local or state office. The election must be held in the year in which the contribution is made.
The Virginia credit is equal to 50% of the political contributions made to candidates for state and local offices, not to exceed $25 for an individual taxpayer or $50 for taxpayers filing a joint return. The credit is non-refundable and unused credits cannot be carried forward to subsequent years.
Complete Schedule CR, Part XXIII, to claim this credit. If this is the only credit you are claiming, you may omit Schedule CR, and fill in the Political Contributions Credit oval on your income tax return.
Reference: Virginia Code 58.1 - 339.6.
To Qualify
This credit is available to individual and fiduciary taxpayers making a qualified investment in the form of "equity" or "subordinated debt" in a pre-qualified small business venture. Businesses must file Form QBA by December 31 of the year that they request qualification. The business must reapply each year to maintain qualification. Investors must file Form EDC by April 1 of the year following the investment to apply for their credit. Submitting a late application will disqualify you for the credit. All applications must be sent to the Virginia Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218 - 0715. The Department of Taxation will notify investors of the amount of their authorized credit by June 30th.
Qualified Investment
Qualified investment means a cash investment in a qualified business in the form of equity or subordinated debt; however, an investment shall not be qualified if the taxpayer who holds such investment, or any of such taxpayer's family members, or any entity affiliated with such taxpayer, receives or has received compensation from the qualified business in exchange for services provided to such business as an employee, officer, director, manager, independent contractor or otherwise in connection with or within one year before or after the date of such investment. For the purposes hereof, reimbursement of reasonable expenses incurred shall not be deemed to be compensation.
Commercialization Investment
Commercialization investment means a qualified investment in a qualified business that was created to commercialize research developed at or in partnership with an institution of higher education.
Equity
Equity means common stock or preferred stock, regardless of class or series, of a corporation; a partnership interest in a limited partnership; or a membership interest in a limited liability company, which is not required or subject to an option on the part of the taxpayer to be redeemed by the issuer within 3 years from the date of issuance. No equity investment will qualify for this credit if it is required to be redeemed or subject to an option to be redeemed by the issuer within 5 years of the date of issuance.
Subordinated Debt
Subordinated debt means indebtedness of a corporation, general or limited partnership, or limited liability company that (i) by its terms required no repayment of principal for the first 3 years after issuance; (ii) is not guaranteed by any other person or secured by any assets of the issuer or any other person; and (iii) is subordinated to all indebtedness and obligations of the issuer to national or state-chartered banking or savings and loan institutions.
Qualified Business
Effective January 1, 2009 a qualified business means a business which (i) has annual gross revenues of no more than $3 million in its most recent fiscal year, (ii) has its principal office or facility in the Commonwealth, (iii) is engaged in business primarily in or does substantially all of its production in the Commonwealth, (iv) has not obtained during its existence more than $3 million in aggregate gross cash proceeds from the issuance of its equity or debt investments (not including commercial loans from chartered banking or savings and loan institutions), and (v) is primarily engaged, or is primarily organized to engage, in the fields of advanced computing, advanced materials, advanced manufacturing, agricultural technologies, biotechnology, electronic device technology, energy, environmental technology, information technology, medical device technology, nanotechnology, or any similar technology-related field determined by regulation by the Department of Taxation to fall under the purview of this section.
How Much is the Credit?
The credit is equal to 50% of the qualified business investments made during the taxable year. If total annual requests for the credit exceed $3 million, the Department of Taxation will prorate the credit for each taxpayer.
The credit a taxpayer may claim per taxable year may not exceed the credit authorized by the Department of Taxation, $50,000, or the income tax liability on that year's return, whichever is less. The credit is nonrefundable. Unused credits may be carried forward up to 15 years.
To Claim the Credit
Complete Schedule CR, Part XV, to claim this credit. Please note: Since the Department of Taxation does not complete authorization of these credits until June 30 each year, it will be necessary for the taxpayers with a May 1 due date to either file for an extension, or file an amended return in order to claim this credit.
Reference: Virginia Code 58.1 - 339.4.
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A Virginia resident or manufacturing business entity may claim an income tax credit for purchases of equipment that can produce tangible personal property items from recyclable materials. The manufacturing facility must be located within Virginia, and must be engaged in the manufacture, production, processing or compounding of tangible personal property for sale. The recycling machinery or equipment must be used exclusively in or on the manufacturing premises.
The credit is 10% of the purchase price paid during the taxable year for the recycling equipment. The total allowable credit may not exceed 40% of the tax liability, computed prior to applying the credit. Unused credits may be carried forward for 10 years.
Effective January 1, 2008 the amount of the credit attributable to a partnership, electing small business corporation (S corporation), or limited liability company (LLC) must be allocated to the individual partners, shareholders, or members in proportion to their ownership or interest within the business entity using Form PTE.
For additional information on how to qualify for certification, contact the Department of Environmental Quality P.O. Box 10009, Richmond, VA 23240-0009 or call 804-698-4145.
Individual filers complete Schedule CR, Part IV, and corporate filers complete Form 500CR, Part VII, to claim the credit. Attach your approved Form 50-115, as well as purchase receipts and invoices.
Reference: Virginia Code 58.1-338 and 58.1-439.7
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Corporations investing at least $350 million within the Commonwealth before January 1, 2003, are eligible for a corporate income tax credit for the purchase of recycling processing equipment. The manufacturing facility must be located within Virginia, and must be engaged in the manufacture, production, processing or compounding of tangible personal property for sale. The recycling machinery and equipment must be used exclusively in or on the manufacturing premises.
The credit is ten percent (10%) of the purchase price paid during the taxable year for the recycling equipment. The total allowable credit in any one tax year may not exceed sixty percent (60%) of the corporation's Virginia income tax liability. Unused credits may be carried forward for twenty (20) years.
To qualify for the credit, the Department of Environmental Quality must certify that such machinery and equipment is integral to the recycling process. To obtain certification, contact the Department of Environmental Quality, Equipment Certification Officer. In addition, the Department of Business Assistance must certify that the corporation has made the required investment within the Commonwealth.
Individual filers complete Schedule CR, Part IV, and corporate filers complete Form 500CR, Part VII, to claim this credit. Attach the approved form 50-115 from the Department of Environmental Quality and the receipts and invoices for the purchase of the equipment.
Reference: Virginia Code 58.1-439.8
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Owners of rental property who provide a rent reduction to low income tenants who: 1) are over age 62; 2) have a mental disability, or; 3) have been homeless (those in domestic violence and homeless shelters) at any time within the previous 12 months preceding the lease term are eligible to apply for a state income tax credit.
The reduced rent must be at least 15% below the market rate. After January 1, 2000, no credit may be claimed unless credit was validly claimed on the unit for all or part of the month of December 1999. The credit is equal to 50% of the total rent reductions given to eligible tenants during the taxable year. The total amount of credit a taxpayer may claim per taxable year may not exceed their tax liability. Unused credits may be carried forward for five years. Total credits approved in a fiscal year cannot exceed $50,000.
For more information and to apply for the credit, contact the Virginia Housing Development Authority.
Individual filers complete Schedule CR, Part VII, and corporate filers complete Form 500CR Part VIII to claim this credit.
Reference: Virginia Code 58.1 -339.9.
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You may qualify to claim this credit if you own land abutting a waterway on which timber is harvested, and forbear harvesting timber on certain portions of the land near the waterway. The distance from the waterway to the most distant end of the riparian buffer must be at least 35 feet and no more than 300 feet. The buffer must remain in place for at least 15 years. The land that is the subject of the credit cannot be the subject of this credit again for 15 years after it was first taken
To qualify for this credit, the property owner must comply with an individualized Forest Stewardship Plan to be certified by the State Forester. The credit amount is subject to recapture if the Stewardship Plan is violated
The credit is 25% of the value of timber on the area designated as a forested buffer for a waterway, not to exceed $17,500 or the total amount of tax liability, whichever is less. Unused credits may be carried forward for five years.
For more information contact the Virginia Department of Forestry, Fontaine Research Park, 900 Natural Resources Dr. Suite 800, Charlottesville, VA 22903-0758, or call (804) 977-6555.
Individual filers complete Schedule CR, Part XXI, and corporate filers complete Form 500 CR, Part XXI, to claim this credit. Attach a completed copy of DOF Form 179 to your tax return.
Reference: Virginia Code 58.1 - 339.10.
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You may qualify to claim this credit if you were the beneficiary of a trust whose Virginia taxable income includes all of 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 accordingly. To prevent double taxation of the distribution to the beneficiary, Virginia law allows the beneficiary to claim a credit for the income taxes paid by the trust. The credit is computed as follows:
D = Virginia addition for accumulation distribution
T = Total Virginia taxable income reported by the trust on Form 770 for the years in which the income was accumulated
P = Virginia income tax paid by the trust for the years in which the income was accumulated
C = Allowable Virginia tax credit to be claimed by the beneficiary
Computation of credit: (D ÷ T) x P = C
A schedule showing the credit computation must be attached to your return.
Reference: Virginia Code 58.1-370.
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Vehicle Emissions Testing Equipment
The credit is equal to 20% of the purchase or lease price for equipment certified by the Department of Environmental Quality for vehicle emissions testing. The equipment must be located within, or adjacent to, any locality that requires an enhanced vehicle emissions inspection program.
Individual filers complete Schedule CR, Part VIII, and corporate filers complete Form 500CR, Part IX, to claim this credit. Attach a copy of the Department of Environmental Quality's letter to the equipment vendor certifying that the equipment configuration meets the regulations for use in the enhanced vehicle emissions inspection program. To obtain a copy of the letter, contact your equipment vendor or the DEQ Northern Virginia Regional Office in Woodbridge.
Clean Fuel Vehicle and Certain Refueling Property
General instructions -- For taxable years beginning before January 1, 2006, a credit may be claimed for: 10% of the deduction allowed under IRC Section 179A for the purchase of clean fuel vehicles, including hybrid vehicles, principally garaged in Virginia, or for the purchase of refueling property placed in service in Virginia; or, for taxable years beginning before January 1, 2007, 10% of the total costs used to compute the credit for electric vehicles under IRC Section 30. Individual filers complete Schedule CR, Part VIII, and corporate filers complete Form 500CR, Part IX, to claim this credit. For clean fuel vehicles, provide a property description. For qualified electric vehicles for which a federal credit was claimed, federal Form 8834 must also be attached. For refueling property, attach a copy of federal Form 4562 or other form showing computation of the Federal Section 179A deduction. Unused credits may be carried forward for five years.
For taxable years beginning before January 1, 2006 only: If you claimed a clean fuel vehicle deduction on your federal return, you may claim a credit on your Virginia return equal to 10% of the amount deducted on your federal return, not to exceed your Virginia tax liability. As explained in the general instructions, you must provide a description of the property for which the credit is being claimed. In lieu of a separate statement, you may write directly on the individual Schedule CR or the corporate Form 500CR. For example, if you claimed a clean fuel vehicle deduction on your federal individual income tax return for the purchase and use of a Honda Insight (hybrid vehicle), you should complete Schedule CR, Part VIII, Lines 30 through 34, and write next to line 30, "Clean Fuel Vehicle - Honda Insight".
For taxable years beginning before January 1, 2006 only: If you claimed a credit for qualified electric vehicles on your federal return, you may claim a credit on your Virginia return equal to 10% of the cost used to compute the federal credit.
For taxable years beginning before January 1, 2007 only: If you claimed a deduction for clean fuel vehicle refueling property on your federal return, you may claim a credit on your Virginia return equal to 10% of the amount deducted on your federal return, not to exceed your Virginia tax liability.
Reference: Virginia Code 58.1 - 438.1.
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For tax years beginning on or after January 1, 1999, a business that operates a facility in Virginia that accepts waste motor oil from the public is allowed a tax credit equal to 50% of the purchase price paid for equipment used to exclusively burn waste motor oil.
The total amount of credit a taxpayer may claim per taxable year may not exceed $5,000. The taxpayer can only use the credit in the year the qualified equipment is purchased. Any unused portion of the credit may not be carried forward.
The Department of Environmental Quality must certify the equipment prior to claiming this credit. Apply for certification by filing Form DEQ 50-12 with the Department of Environmental Quality at 629 E. Main Street, 5th floor, Richmond, VA 23219. For additional information contact the Department of Environmental Quality at 804-698-4145.
Individual filers complete Schedule CR, Part XVII, and corporate filers complete Form 500CR, Part XVIII, to claim this credit. Attach the certificate from the Department of Environmental Quality, receipts, invoices or other documentation to confirm purchase price paid.
Reference: Virginia Code 58.1-439.10
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To Qualify
This credit allows an employer to claim a tax credit for the training costs of providing eligible worker retraining to qualified employees for taxable years beginning on or after January 1, 1999.
The credit may be applied against individual income tax, estate and trust tax, corporate income tax, bank franchise tax, and taxes imposed on insurance companies and utility companies.
Eligible Worker Retraining
Eligible worker retraining includes approved non-credit courses provided by any of the Commonwealth's community colleges or a private school. It also includes credit or non-credit retraining courses undertaken through an apprenticeship agreement approved by the Virginia Apprenticeship Council.
How Much is the Credit?
Generally, the credit is 30% of all classroom training costs but is limited to up to $100 annual credit per student if the course work is incurred at a private school. The Department of Taxation is authorized to issue up to $2,500,000 of retraining credits annually. If total requested credits exceed this amount, the Department of Taxation will prorate the authorized credits.
Credits taken may not exceed your tax liability in any one taxable year. Unused credits may be carried forward for three years.
Employer Certification
Employers must apply for certification of the amount of allowable credit using Form WRC. All WRC applications requiring course approval must be sent to the Virginia Department of Business Assistance, 707 East Main Street, Suite 300, Richmond, VA 23219 by April 1 following the year that the expenditures were paid or incurred. Applications requesting apprenticeship retraining credit must be sent to the Virginia Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715 by the same April 1 deadline.
The Department of Taxation will notify WRC applicants of their allowable credit by June 30.
Other Information
For information on pre-approved apprenticeship programs, contact your Virginia Department of Labor and Industry apprenticeship representative. For information on non-credit course approval, contact the Virginia Department of Business Assistance.
To Claim the Credit
Individual filers complete Schedule CR, Part XVI, and corporate filers complete Form 500CR, Part XVII, to claim this credit.
Reference: Virginia Code 58.1 - 439.6.
Last Updated 1/6/2010 12:12
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