- 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.
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:
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:
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.
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.
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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
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.
Last Updated 12/8/2008 11:15
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