The Virginia Research and Development Tax Credit is a program that encourages businesses to invest in research and development (R&D) in the state. The credit offers a tax incentive of 15% of qualified R&D expenses, up to $300,000 per year. Businesses that qualify for the credit can claim it against their corporate income tax, franchise tax, or insurance premium tax.

The Virginia R&D Tax Credit is available to businesses of all sizes and industries. Qualified expenses include employee wages, supplies, and contract research expenses. Companies must apply to the Virginia Department of Taxation to claim the credit.

The Virginia R&D Tax Credit is a valuable incentive for businesses that invest in R&D. The credit can help companies reduce their tax liability and support innovation in the state.

What are some Qualified R&D Expenses?

Qualified R&D expenses include employee wages, supplies, and contract research expenses. This means that businesses can claim a tax credit for money spent on salaries, lab supplies, and outside research.

How Do I Qualify For The R&D Credit?

Businesses must apply to the Virginia Department of Taxation to qualify for the credit. The department will review the application and determine if the business is eligible for the credit.

It follows the IRC Sec. 41(a), which allows a business to claim a credit against its corporate income tax, franchise tax, or insurance premium tax for money spent on research and development. The credit is available to businesses of all sizes and industries. Qualified expenses include employee wages, supplies, and contract research expenses. 

There is also an increase of 20% for qualified research expenses for businesses and universities members of the Virginia Cooperative Research Center, a consortium of colleges and universities that work together to support research and development. This credit is in addition to the regular 15% credit for 35% of qualified expenses.

If the business’s total eligible credit may exceed $7.7 million of credit cap, every taxpayer is granted a pro-rata amount based on the company’s payroll in Virginia.

To be an eligible taxpayer, one must submit the required Form R&D and all attachments to the Virginia Department of Taxation. There is a later deadline for this form, which is the last day of the twelfth month following the close of your taxable year.

How Do I Claim My R&D Credit?

Businesses must apply to the Virginia Department of Taxation to claim the credit. The department will review the application and determine if the company is eligible for the credit. If the business is suitable, the department will issue a tax credit certificate that can be used to reduce the business’s tax liability.

Ensure that you submit all necessary documentation with your application. Documentation includes receipts, invoices, and other records of the expenses you claim as a credit.

Understanding the benefits of the Virginia R&D Tax Credit can help businesses reduce their tax liability and support innovation in the state. This credit allows companies to claim a percentage of their qualified expenses, making it a valuable incentive for businesses that invest in research and development.