Virginia Research and Development Tax Credit Summary

Virginia allows a refundable individual and corporate income tax credit for conducting qualified research and development in Virginia, to the extent a taxpayer's Virginia qualified R&D expenses (QREs) exceed a base amount. Here is a summary of the credits:

  • The credit is allowed in the taxable year in which qualified R&D expenses are reported on the federal income tax return.
  • Virginia's R&D tax credit follows IRC Section 41 rules for qualified activities and expenses, and follows a modified version of the federal regular credit method.
  • The R&D credit is comprised of a base credit and a supplemental credit that is available only to the extent that the total amount of credits granted for a fiscal year is less than the annual credit cap ($7 million for tax years 2019-2020; $7.7 million for tax years 2021 -2024).
  • The base credit for is equal to 15 percent (15%) of the first $300,000 in Virginia QREs paid or incurred by the taxpayer during the credit year.
  • An increased credit rate (20%) is available for qualified expenses paid to a Virginia college or university.
  • If the total eligible credit requests exceed the $7.7million credit cap for all credits ($7 million for tax years 2019-2020), each taxpayer will be granted a pro rata amount of credits as determined by the Department.
  • An eligible taxpayer must submit an Application for the Research and Development Expenses Tax Credit, Form RDC and any supporting documentation to the Department no later than September 1 of the year following the credit year.