Virginia Form 760 - Individual Income Tax Return Instructions

WHAT'S NEW

Advancement of Virginia's Fixed Date Conformity with the Internal Revenue Code: Virginia's date of conformity with the Internal Revenue Code (IRC) was advanced from December 31, 2010, to December 31, 2011, with limited exceptions. Virginia will continue to disallow federal income tax deductions for bonus depreciation allowed for certain assets under IRC §§ 168 (k), 168(l), 168(m), 1400L and 1400N; the five-year carryback of federal net operating loss deductions generated in taxable year 2008 or 2009; and, federal income tax deductions for applicable high yield discount obligations under IRC § 163(e)(5) (F). In addition, fixed date conformity adjustments continue to be required for Cancellation of Debt Income under IRC § 108(i), and the domestic production deduction under IRC § 199.

At the time these instructions went to print, the only required adjustments for "fixed date conformity" were those mentioned above. However, if federal legislation is enacted that results in changes to the Internal Revenue Code for the 2012 taxable year, taxpayers will be required to make adjustments to their Virginia returns that are not described in the instruction booklet. Information about any such adjustments will be posted on the Department's website at www.tax.virginia.gov.

Telework Expenses Tax Credit: The Telework Expenses Tax Credit is an individual and corporate income tax credit for employers who incur eligible telework expenses pursuant to a telework agreement or conduct telework assessments. This credit is equal to the amount of expenses incurred during the calendar year. The amount of the credit cannot exceed $50,000 per employer per calendar year and the credit is for expenses incurred in the calendar year that ends during the taxable year. To qualify for a credit, the employer must enter into a signed telework agreement with the teleworking employee on or after July 1, 2012, but before January 1, 2017. This telework agreement must be in accordance with policies set by the Department of Rail and Public Transportation (DRPT) available on the Telework!VA website at www.teleworkva.org.

Telework Expenses Addition: Individuals who claim the Virginia Telework Expenses Tax Credit are not allowed to exclude those expenses from Virginia Income. To the extent excluded from federal adjusted gross income, any expenses incurred by a taxpayer in connection with the Telework Expenses Tax Credit must be added to the Virginia return.

Debit Card Option for Refunds: Effective beginning with the 2012 taxable year, individual refunds will be issued through prepaid debit cards or by direct deposit to taxpayers' checking or savings accounts. The paper check refund option is being replaced with the debit card option. Taxpayers receiving a refund may choose either debit card or direct deposit by filling in the requested information on Form 760 just below Line 31, YOUR REFUND.

This change is one of the budget reduction measures included in the 2012-2014 Appropriations Act (HB 1301) passed by the General Assembly.

Visit www.tax.virginia.gov for detailed information and answers to frequently asked questions.

Filing Threshold for Individual Income: The filing threshold amounts for taxable years 2012 and beyond have been increased. The new threshold for single individuals has increased from $11,650 to $11,950. The filing threshold for married couples filing jointly has increased from $23,300 to $23,900. The threshold for married couples who file separate returns has increased from $11,650 to $11,950. See Page 1 for more information on the Virginia Filing Threshold.

REMINDER

Extension for Filing Income Tax Returns: Taxpayers are granted an automatic six-month extension for filing an income tax return. No application for extension is required; however, any tentative tax due must be paid with an extension voucher, Form 760IP, by the original due date for filing the return.

Consumer's Use Tax: Did you purchase merchandise by Internet, telephone, or mail, or did you purchase any merchandise outside Virginia and pay no sales tax? If so, you may be required to pay Consumer's Use Tax. Be sure to report the applicable tax on Schedule ADJ.

Filing Options

  • e-File your return online: Electronic filing is used to prepare and file your federal and state tax returns over the Internet. There are three e-File options to choose from - Virginia Free File, Paid e-File and, Virginia Free File fillable forms. Please visit us at www.tax.virginia.gov to find out more about these programs.

If you file online please do not send us a paper copy of your return.

  • File your return on paper:
    • Use commercial tax preparation software and print a copy of your state tax return
    • Download returns and schedules from the Department's website www.tax.virginia.gov
    • Order forms online through the Department's website or call (804) 440-2541

If you fill out your tax return by hand, you can avoid processing delays by printing your information so it can be easily read. Please use black ink and not pencil.

Assistance

  • Contact us for assistance using Live Chat or Secure e-mail at www.tax.virginia.gov
  • Call Customer Service at (804) 367-8031. For TTY users dial 7-1-1.
  • Mail requests for information to:

    Virginia Department of Taxation
    P. O. Box 1115
    Richmond, Virginia 23218-1115

    (Please do not mail your return to this address)

  • Call or visit your Local Commissioner of the Revenue Office, Director of Finance, or Director of Tax Administration for information or return preparation assistance. Check Page 47 for a list of localities and contact information.

Do You Need to File a Virginia Income Tax Return?

Complete Form 760, Lines 1 through 9, to determine your Virginia adjusted gross income (VAGI). If the amount on Line 9 is less than the amount shown below for your filing status, your Virginia income tax is $0.00 and you are entitled to a refund of any withholding or estimated tax paid. You must file a return to receive a refund.

To claim a refund in these cases, skip to Line 17 and enter "0" as your tax, and then complete Lines 18 through 31. You must file if you are:

Single and your VAGI is $11,950 or more

Married filing jointly and combined VAGI is $23,900 or more

Married filing separately and your VAGI is $11,950 or more

When to File Your Return

Filing by mail or commercial delivery service - If you are mailing several documents please consider using a flat envelope to ensure proper handling and faster processing. When filing by mail, the envelope must be postmarked by the due date. Put the correct postage on your envelope. If your return is sent back to you because of insufficient postage, you are liable for penalties and interest if the postmark on the remailed return is after the due date. Tax returns or payment of taxes remitted by a commercial delivery service will be considered timely filed if received in an envelope or sealed container bearing a confirmation of shipment on or before midnight of the day the return or payment is due.

Calendar year filer - If your tax year is January 1, 2012 - December 31, 2012, your individual income tax return must be postmarked no later than May 1, 2013, to avoid penalties and interest.

Fiscal year filer - If your tax year is any consecutive 12 month period other than January - December, your return must be postmarked by the 15th day of the fourth month following the end of your fiscal year. When filing, you should write "Fiscal Year Filer" across the top of Page 1 of Form 760 and attach a statement indicating the beginning and ending months of your 12-month fiscal year.

Outside U.S. - If you are living or traveling outside the United States and Puerto Rico (including serving in the military), the due date of your return is July 1, 2013. Fill in the overseas oval near the bottom of Page 2 of Virginia Form 760.

Weekends and holidays - If the due date falls on a Saturday, Sunday or legal holiday, your return must be postmarked by the next business day.

Extension Provisions - Virginia law provides an automatic six-month filing extension for income tax returns. No application for extension is required. The extension is for filing the return, not for payment of the tax; therefore, you must pay at least 90% of your tax by the due date, May 1 for calendar year filers. To make a payment of tentative tax, use Form 760IP.

Members of the Military - Members of the Armed Forces serving in a combat zone receive either the same individual income tax filing and payment extensions as those granted to them by the IRS, plus an additional fifteen days, or a one-year extension, whichever date is later. All extensions also apply to spouses of military personnel. Service families may wish, however, to file their individual income tax returns before the extended deadlines to receive refunds. Service members who claim this extension should write "Combat Zone" on the top of tax returns, as well as any notice issued by the Virginia Department of Taxation to combat zone personnel regarding tax collection or examination on the outside of the return envelopes used to mail the return. More information can be obtained from Tax Bulletin 05-5 on the website at www.policylibrary.tax.virginia.gov. Go to the Tax Bulletin section and select VTB 05-5 (PD 05-67) from the list of 2005 tax bulletins.

In addition, every member of the armed services deployed outside of the United States is allowed an extension of his or her due date. The extension will expire 90 days following the completion of deployment. Service members who claim this extension should write "Overseas Noncombat" on the top of their tax returns.

Additional information for Spouses of Military Personnel is provided in the Residency Status and Choosing the Right Form to File section later in this booklet.

Where to File

Use e-File to electronically file your federal and state tax returns at the same time. Software programs that provide e-File capability are available online and for purchase in stores. All e-File software will automatically check for completeness, correct errors, generate the applicable schedules and transmit the return from your computer to the IRS's electronic processing system and the Department's electronic processing system. Some vendors will provide this service FREE based on certain qualifiers.

To file by mail, use the list of mailing addresses beginning on Page 47 and look up the city or county where you live or file directly with the Virginia Department of Taxation. Local phone numbers are also provided.

For more information about filing by e-File and filing by mail, go to www.tax.virginia.gov.

Amended Returns

If you or the IRS amends your federal return resulting in changes to your taxable income or any amount affecting the Virginia return, you must file an amended Virginia return within one year. If the IRS provided documentation that acknowledges acceptance of your federal amended return, attach a copy to the Virginia amended return. In addition, if you file an amended return with any other state that affects your Virginia income tax, you must file an amended Virginia return within one year. The Department of Taxation may issue a refund only if the amended return is filed within:

  • three years from the due date of the original return, including valid filing extensions;
  • one year from the final determination of the amended federal return or federal change, whichever is later, provided that the allowable refund is not more than the decrease in Virginia tax attributable to the federal change or correction;
  • one year from the final determination of the amended return of any other state or change or correction in the income tax of the taxpayer for any other state, provided that the refund does not exceed the amount of the decrease in Virginia tax attributable to such change or correction;
  • two years from the filing of an amended Virginia return resulting in the payment of additional tax, provided that the current amended return raises issues relating solely to the prior amended return and that the refund does not exceed the amount of the tax payment made as a result of the prior amended return; or
  • two years from the payment of an assessment, provided the amended return raises issues relating only to the prior assessment and the refund does not exceed the amount of tax paid on the prior assessment.

Complete a new return using the corrected figures, as if it were the original return. Do not make any adjustments to the amended return to show that you received a refund or paid a balance due as the result of the original return. Use the worksheet for amended returns below to determine if you are due a refund or if any additional tax due should be paid with your amended return. If your amended return results in additional tax due, interest must be paid on the tax you owe from the due date to the date filed or postmarked.

Fill in the oval on the front of Form 760, indicating that this is an amended return. Also, fill in the oval on the front of the return if the amended return is the result of a net operating loss (NOL) carryback. General instructions for computing the NOL can be obtained from the website at www.policylibrary.tax.virginia.gov. Select 23VAC10-110-80 and 23VAC10-110-81 located in Chapter 110, Individual Income Tax, Virginia Tax Administrative Code. Attach a complete copy of your federal amended return, if applicable.

Worksheet for Amended Returns - If you are filing an amended return, use the worksheet below to determine if you will receive an additional refund or if you need to make an additional payment.

1. Amount paid with original return, plus additional tax paid after it was filed
______
2. Add Line 1 from above and Line 24 from Form 760 and enter here
______
3. Overpayment, if any, as shown on original return or as previously adjusted
______
4. Subtract Line 3 from Line 2
______
5. If Line 4 above is less than Line 17, Form 760, subtract Line 4 above from Line 17, Form 760. This is the Tax You Owe.
______
6. Refund. If Line 17, Form 760 is less than Line 4 above, subtract Line 17, Form 760 from Line 4 above. This is the Tax You Overpaid
______

Residency Status and Choosing the Right Form to File

  • There are two types of Virginia residents: domiciliary and actual.
  • A domiciliary resident of another state may also be an actual resident of Virginia.
  • Virginia residency may be either full-year or part-year.
  • A nonresident of Virginia may be required to file a Virginia return.

To determine which Virginia return you should file, first determine if you were a resident of Virginia at any time during the taxable year.

Step 1: Determine your residency status

Domiciliary Resident

You are a domiciliary (legal) resident if your permanent home is Virginia. Your permanent home is where, whenever you are absent, you intend to return. Every person has one and only one domiciliary residence at a time. Most domiciliary residents actually live in Virginia; however actual presence in the state is not required. If you have established legal domicile in Virginia, you are a domiciliary resident until you establish legal domicile in another state.

  • Members of the armed forces who claim Virginia as their home of record are domiciliary residents, even if stationed outside of Virginia.
  • A domiciliary resident who accepts employment outside of Virginia but who does not abandon Virginia as his or her domiciliary residence, even if outside of Virginia for many years, remains a domiciliary resident of Virginia. This includes domiciliary residents who accept employment outside of the United States.

Actual Resident

You are an actual resident if:

You maintained an abode in Virginia or were physically present in Virginia for more than 183 total days during the taxable year, even if you are a domiciliary resident of another state or country.

If you are an actual resident of Virginia, you may be required to file as a resident in Virginia and in your domiciliary state. In this situation, you should claim a credit on the return filed in the state of your legal domicile for taxes paid to Virginia.

Students: The rules for determining the residency status of a student are the same as for anyone else.

Military Personnel and Members of the U.S. Congress: If you are a member of the armed forces or of the U.S. Congress who is a domiciliary (legal) resident of another state, you are not subject to taxation as an actual resident of Virginia even if you maintained an abode in Virginia for more than 183 days. However, if you have income from Virginia sources other than your active duty or congressional pay, you may be required to file a Form 763, Nonresident Income Tax Return.

Spouses, Dependents and Congressional Staff Members: The exemption for members of the armed forces and the U.S. Congress does not apply to spouses*, dependents or congressional staffmembers. If you are a spouse or dependent of a member of the armed forces or of the U.S. Congress or you are employed by a member of the U.S. Congress, you must determine your own residency status and filing obligations, even if you filed a joint federal return.

*Spouses of Military Personnel: Under the Servicemember Civil Relief Act, as amended by the Military Spouses Residency Relief Act, a spouse of a military servicemember may be exempt from Virginia income tax on wages if (i) the servicemember is present in Virginia in compliance with military orders; (ii) the spouse is present in Virginia solely to be with the servicemember; and (iii) they both must maintain the same non-Virginia domicile state. More information is available in Tax Bulletin 09-10 and Tax Bulletin 10-1 available on the website at www.tax.virginia.gov.

Step 2: Determine which income tax return you should file

Virginia Residents

File Form 760, Resident Return, if:

  • You were an actual or domiciliary resident for the entire year; or
  • You were an actual or domiciliary resident for a portion of the year, but all of your income for the entire year was from Virginia sources.

File Form 760PY, Part-Year Resident Return, if:

  • You moved into Virginia during the taxable year and became either an actual or domiciliary resident; or
  • You moved out of Virginia during the taxable year and became a domiciliary resident of another state, provided you did not move back to Virginia within six months.

Note to Part-Year Residents: If you had Virginia source income during the taxable year while you were a nonresident, you may also be required to file Form 763, Nonresident Return. See Nonresidents, below.

Married Taxpayers: If one spouse is a nonresident, you may not file a joint Virginia return, even if you filed a joint federal return. The resident spouse will file either Form 760 or Form 760PY, while the nonresident spouse will file Form 763, if applicable. However, if one spouse is a full-year resident and the other spouse is a part-year resident, you may file a joint return using Form 760PY. See the 760PY instructions for information.

Nonresidents

File Form 763, Nonresident Return, if:

You had income from Virginia sources, other than interest from personal savings accounts, interest or dividends from an individual stock market investment, or pension payments from a Virginia payor.

Income from Virginia sources includes:

  1. Items of income gain, loss and deductions attributable to: a) The ownership of any interest in real or tangible personal property in Virginia; b) A business trade, profession, or occupation carried on in Virginia; and c) Prizes paid by the Virginia Lottery and gambling winnings from wagers placed or paid at a location in Virginia.
  2. Income from intangible personal property, including annuities, dividends, interest, royalties and gains from the disposition of intangible personal property employed by an individual in a business, trade, profession or occupation carried on in this state.

If you were a Virginia resident for part of the year and you also received Virginia source income during your period of residence outside Virginia, you must file Form 760PY and Form 763. The Virginia source income reported on Form 763 will be only the Virginia source income you received while a nonresident.

Exceptions for Certain Nonresidents

Kentucky and the District of Columbia: If you are a resident of Kentucky or the District of Columbia who commutes daily to work in Virginia, you are not required to file a Form 763 Nonresident Return, provided that 1) you had no actual place of abode in Virginia at any time during the taxable year and 2) your only income from Virginia sources is salaries and wages and 3) your salary and wages are subject to income taxation by Kentucky or the District of Columbia.

Maryland, Pennsylvania and West Virginia: If you are a resident of Maryland, Pennsylvania or West Virginia and you earn salaries and wages in Virginia, you do not have to file a Form 763, Nonresident Return, provided that 1) your only income from Virginia sources is salaries and wages and 2) you were present in Virginia for 183 days or less during the taxable year and 3) your salaries and wages are subject to taxation by Maryland, Pennsylvania, or West Virginia.

The exception for certain nonresidents of Kentucky, the District of Columbia, Maryland, Pennsylvania and West Virginia applies only to salaries and wages. For Virginia source income not specifically exempted, you must file the Form 763, Nonresident Return.

Instructions for Form 760

Name and Address

Enter your name and mailing address in the space provided. If you use Filing Status 3 (married filing separate returns), DO NOT enter your spouse's name in the spouse name field. Instead enter your spouse's name in the space below the Filing Status 3 line.

Deceased Taxpayers

Use the following instructions to file properly and ensure the refund is addressed to the surviving spouse or personal representative.

Single filers: You must list the filer's name and Social Security Number and fill in the oval on Page 2 for Primary Taxpayer Deceased. Include a copy of the federal Form 1310 and/or the appropriate court appointment papers.

Joint filers: If one filer is deceased, the names and Social Security Numbers of both filers must be listed. Fill in the oval on Page 2 to indicate the deceased filer. Use the Primary Taxpayer Deceased oval if the filer in the Your name and Social Security Number fields is deceased. Use the Spouse Deceased oval if the filer in the Spouse's name and Social Security Number fields is deceased.

If completing a return for joint filers with both filers deceased, the names and Social Security Numbers of both filers must be listed. Fill in both deceased ovals on Page 2. Include a copy of the federal Form 1310 and/or the appropriate court appointment papers.

Address Changes - If your address has changed since last filing, fill in the oval in the street address area.

Ovals - Fill in any ovals that apply to you.

  • Name or filing status has changed since last filing.
  • Virginia return was not filed last year.
  • Dependent on another's return - Be sure to see Page 11.
  • Amended Return - Be sure to fill in both ovals if amending due to Net Operating Loss Deduction.
  • I (We) authorize the Dept. of Taxation to discuss my (our) return with my (our) preparer - By marking this oval you are authorizing the Department of Taxation to respond directly to inquiries from your preparer without contacting you separately for authorization.

Social Security Number

Enter your Social Security Number and the first four letters of your last name in the boxes. If using Filing Status 2, you must also enter the Social Security Number and first four letters of the last name of your spouse. For Filing Status 3, enter your spouse's Social Security Number and record your spouse's name on the line under the Filing Status 3 oval.

Privacy act: In compliance with the Privacy Act of 1974, disclosure of your Social Security Number is mandatory under Va. Code § 58.1-209. Your Social Security Number is used both as a means of identifying your income tax return and also of verifying the identity of individuals for income tax refund purposes.

Locality Code: Look up the three-digit code in the list beginning on Page 47 for the locality in which you lived on January 1, 2013. Enter the corresponding number in the boxes provided on the form. Local school funding is allocated based in part on this information.

Filing Status

In most cases, your filing status will be the same as the one you selected on your federal return. Fill in the oval next to the appropriate filing status. Fill in the Head of Household oval if you checked the Head of Household box on your federal return.

If one spouse is a Virginia resident and the other is a nonresident, they may not file a joint Virginia return, even if they filed a joint federal return. The resident spouse files a separate return under Filing Status 3, using Form 760. A nonresident spouse who has Virginia source income to report will file a separate return on Form 763. The spouses must compute their itemized deductions and allocate exemptions for dependents as if they had filed separate federal returns. As a general rule, the spouse claiming an exemption for a dependent must be reporting at least half of the total federal adjusted gross income. In addition, the spouse must be able to support his/her claim of itemized deductions. If the underlying expenses for itemized deductions cannot be accounted separately, each spouse must claim a proportionate share of the deductions based on their respective shares of the joint federal adjusted gross income.

Exemptions

Enter the number of exemptions allowed in the appropriate boxes. The first box has been completed for you.

Dependents: Generally, you may claim the same number of dependent exemptions allowed on your federal return. If using Filing Status 3, see the Filing Status instructions in the previous section for the rules on claiming dependents. You may never claim less than a whole exemption. The same dependent may not be claimed on separate returns.

Multiply the sum of exemptions claimed in the "You," "Spouse" and "Dependents" boxes by $930.

65 or Over: To qualify for the additional personal exemption for age 65 or over, you must have been age 65 or over on or before January 1, 2013.

Blind: To qualify for the additional personal exemption for the blind, you must have been considered blind for federal income tax purposes.

Multiply the sum of exemptions claimed for "65 or over" and "Blind" by $800.

Low Income Individuals: You cannot claim the 65 or over or Blind exemptions if you also claimed a Credit for Low Income Individuals on Line 21 of Form 760.

Exemption Amount: Add the dollar amount from Part A to the dollar amount from Part B. Enter this amount on Line 11.

Note for Filing Status 3 Each spouse must determine exemptions as if separate federal returns had been filed, using federal rules for separate reporting. If dependent exemptions cannot be accounted for separately, they must be proportionately allocated between each spouse based on each spouse's income. One spouse may never claim less than a whole personal exemption.

Date Of Birth

Please be sure to provide this information. It is used to assist in the verification of taxpayer identity. If you are filing a joint return, enter your date of birth and your spouse's date of birth in the same order as your names and social security numbers.

Line Instructions

To improve accuracy of return preparation and speed the processing of your return, all amount entries on your return must be rounded to the nearest dollar. Amounts less than 50 cents should be rounded down while all amounts of 50 cents - 99 cents should be rounded up.

Line 1 Federal Adjusted Gross Income. Enter the federal adjusted gross income from your federal return. If married filing separately (Filing Status 3), enter only the amount of income attributable to you. Be sure to use the federal adjusted gross income amount, NOT federal taxable income.

Line 2 Additions. If you reported any additions on Virginia Schedule ADJ, enter the total amount from Line 3 of Schedule ADJ.

Line 3Add Lines 1 and 2 and enter the total.

Line 4 - Age Deduction

Are you eligible to claim an age deduction? If so, enter your birth date (and your spouse's birth date, if applicable) in the boxes provided above Line 1 on Form 760.

For 2012, taxpayers born on or before January 1, 1948, may qualify to claim an age deduction based on birth date, filing status and income. A taxpayer who claims an age deduction may NOT claim either of the following:

Disability Subtraction: If you claim an age deduction, you may not claim a disability subtraction. For married taxpayers, each spouse, if eligible, may claim either an age deduction or a disability subtraction. You should claim the deduction or subtraction that gives you the greatest tax benefit.

Credit for Low Income Individuals or Virginia Earned Income Credit: You may not claim both an age deduction and a credit for low income or Virginia Earned Income Credit. For married taxpayers filing separate returns, if one spouse claimed a credit for low income or Virginia Earned Income Credit, neither spouse can claim an age deduction.

If you, or your spouse if you are married, are not claiming a disability subtraction or a credit for low income and your birth date is on or before January 1, 1948, please read the information below to determine if you qualify for an age deduction and how to determine the amount of the age deduction you may claim for 2012.

Taxpayers Age 65 and Older

If you, or your spouse, were born on or before January 1, 1948, you may qualify to claim an age deduction of up to $12,000 each for 2012. The age deduction you may claim will depend upon your birth date, filing status and income.

If your birth date is:

  • On or before January 1, 1939: You may claim an age deduction of $12,000. If you are married, each spouse born on or before January 1, 1939, may claim a $12,000 age deduction. For individuals born after January 1, 1939, the age deduction is based on the criteria below.
  • On or between January 2, 1939, and January 1, 1948: Your age deduction is based on your income. A taxpayer's income, for purposes of determining an income-based age deduction, is the taxpayer's adjusted federal adjusted gross income or "AFAGI." A taxpayer's AFAGI is the taxpayer's federal adjusted gross income, modified for any fixed date conformity adjustments and reduced by any taxable Social Security and Tier 1 Railroad Benefits.
    • For Filing Status 1, Single Taxpayer, the maximum allowable age deduction of $12,000 is reduced $1 for every $1 the taxpayer's AFAGI exceeds $50,000.
    • For All Married Taxpayers, whether filing jointly or separately, the maximum allowable age deduction of $12,000 each is reduced $1 for every $1 the married taxpayers' joint AFAGI exceeds $75,000.

To compute your income-based age deduction, use the Age 65 and Older Age Deduction worksheet on the next page.

Notice to All Married Taxpayers: A married taxpayer's income-based age deduction is always determined using the married taxpayers' joint AFAGI. Regardless of whether you are filing jointly or separately, if you are married, your income-based age deduction is determined using both your and your spouse's income. In addition, if both spouses are claiming an income-based age deduction, regardless of whether filing jointly or separately, the married taxpayers must compute a joint age deduction first, then allocate half of the joint deduction to each spouse.

Note: You can calculate this deduction online using the Age Deduction Calculator at www.tax.virginia.gov

Line 5 Social Security Act and equivalent Tier 1 Railroad Retirement Act Benefits. Enter the amount of taxable social security and/or railroad retirement act benefits that you included in your federal adjusted gross income.

Do not include Tier 2 Railroad Retirement Benefits and Other Railroad Retirement and Railroad Unemployment Benefits. See instructions for Schedule ADJ to determine if these benefits can be included as other subtractions.

Line 6 State Income Tax Refund or Overpayment Credit. Enter the amount of any state income tax refund or overpayment credit that you reported as income on your federal return.

Line 7 Subtractions. If you reported any other subtractions on Virginia Schedule ADJ, enter the total amount from Line 7 of Schedule ADJ.

Line 8. Add Lines 4, 5, 6 and 7 and enter the total.

Line 9 Virginia Adjusted Gross Income Subtract. Line 8 from Line 3 and enter the total. Compare this number with the filing threshold for your filing status on Page 1 to see if you are required to file Form 760. If your income is below the threshold amount, but you had Virginia income tax withheld or made estimated tax payments, follow the instructions on Page 1 to complete your return and claim your refund.

Line 10 Standard or Itemized Deductions. You must claim the same type of deductions (standard or itemized) on your Virginia return as you claimed on your federal return. Your state and local income taxes must be subtracted from your itemized deductions. Property and other taxes included as deductions on your federal return are also allowed on your Virginia return. If one spouse claims itemized deductions the other spouse must also claim itemized deductions.

If a joint federal return was filed and you are filing separate returns in Virginia (Filing Status 3), itemized deductions that cannot be accounted for separately must be allocated proportionately between spouses based on each spouse's share of the income (e.g., federal adjusted gross income).

STANDARD DEDUCTIONS

If you claimed the standard deduction on your federal return, you must also claim the standard deduction on your Virginia return. Enter on Line 10 the amount listed below that corresponds with your filing status.

Single...............................Filing Status 1....Enter $3,000 on Line 10

Married joint return .........Filing Status 2....Enter $6,000 on Line 10

Married separate return...Filing Status 3.....Enter $3,000 on Line 10

Do not complete Lines 10a or 10b when claiming a standard deduction.

Dependent on Another's Return - If you can be claimed as a dependent on the federal return of another taxpayer, your allowable standard deduction is limited to the amount of your earned income. Enter the smaller of the amount of earned income or the standard deduction amount on Line 10.

ITEMIZED DEDUCTIONS

You must claim itemized deductions on your Virginia return if you claimed itemized deductions on your federal return. Before making an entry on Form 760, Lines 10a or 10b, answer the following question:

Do you have an addition (Schedule ADJ, Line 2a) or subtraction (Schedule ADJ, Line 6a) for Fixed Date Conformity?

YES. Refer to Page 12 and follow the instructions on the FDC Worksheet and Itemized Deduction Worksheet to complete Form 760, Lines 10a and 10b.

NO. Enter the total from federal Schedule A on Form 760, Line 10a, and the state and local income tax from federal Schedule A on Form 760, Line 10b. Itemized Deduction Worksheet to complete Form 760, Lines 10a and 10b.

Line 11 Exemptions. Enter the total dollar amount from Exemption Section A plus the total dollar amount from Exemption Section B.

Line 12 Deductions. If you reported any deductions on Virginia Schedule ADJ, enter the total amount from Line 9 of Schedule ADJ. You must attach the Schedule ADJ to your return.

Line 13 Add Lines 10, 11 and 12 and enter the total.

Line 14 Virginia Taxable Income. Subtract Line 13 from Line 9.

Line 15 Amount of Tax. To compute your tax, you can use either the tax table or the tax rate schedule on Page 37 or use the Tax Calculator on the Department's website.

Line 16 Spouse Tax Adjustment (STA). Couples filing jointly under Filing Status 2 may reduce their tax by up to $259 with the STA if both have taxable income to report and their combined taxable income on Line 14 is more than $3,000. Using the STA, couples filing joint returns will not pay higher taxes than if they had filed separate returns. To complete the Spouse Tax Adjustment Worksheet:

  • Recompute your Federal Adjusted Gross Income (FAGI) as if you and your spouse filed separate federal returns. A worksheet is provided on the next page to help in computing separate FAGI.
  • Use the recomputed FAGI to compute the Virginia Adjusted Gross Income (VAGI) for each spouse.
  • Use the separate VAGI on Line 1 of the Spouse Tax Adjustment Worksheet.

HOW IT WORKS: Virginia tax rates increase with income: 2% up to $3,000; 3% from $3,001 to $5,000; 5% from $5,001 to $17,000 and 5.75% for income over $17,000. The STA lets both incomes reported on jointly filed returns benefit from the lower tax rates.

EXAMPLE: The Smiths have combined Virginia taxable income of $42,000. Mr. Smith's income is $30,000 and Mrs. Smith's income is $12,000. Without the STA, their Virginia tax is $2,157. With the STA, both incomes benefit from the lower tax rates. Using the STA Calculator at www.tax.virginia.gov, the Smiths compute an STA of $214, reducing their taxes to $1,943. If you cannot access the Department's website, use the following worksheet to calculate your STA. You will need your federal tax return and, if applicable, a completed Virginia Schedule ADJ.

Enter your STA amount on Line 16 of Form 760. You must also enter the Virginia Adjusted Gross Income (VAGI) for each spouse on Lines 16a and 16b.

TIP: To claim a Spouse Tax Adjustment, both taxpayers on the joint return must have income.

TIP: To speed processing, be sure to enter the Virginia Adjusted Gross Income for each spouse on Lines 16a & 16b.

Line 17 Net Amount of Tax. Subtract Line 16 from Line 15 and enter the difference on Line 17.

Line 18a Virginia Tax Withheld During Tax Year 2012. Enter the amount of Virginia tax withheld from your W-2, 1099 and VK-1 form(s) in the box labeled "Your Virginia Withholding."

Line 18b If filing a joint return, enter the amount of Virginia tax withheld from your spouse's W-2, 1099 and VK-1 form(s) in the box labeled "Spouse's Virginia Withholding."

Line 19 Estimated Payments for Tax Year 2012. Enter the total amount of your 2012 estimated payments. Remember to include any overpayment from your 2011 tax return that you applied to your 2012 estimated taxes (calendar year filers due dates are May 1, 2012; June 15, 2012; September 15, 2012; and January 15, 2013).

If you did not have enough income tax withheld this year, you may need to increase the amount of tax withheld or pay estimated income tax for 2013. Generally, you are required to make payments of estimated income tax if your estimated Virginia tax liability exceeds your Virginia withholding and other tax credits by more than $150. To make estimated payments, file Form 760ES or visit the Department's website at www.tax.virginia.gov/ind.

Line 20 Extension Payments. Enter the amount of tentative tax paid with your Form 760IP or the amount paid if you made an extension payment on the Department's website.

Line 21 Tax Credit for Low Income Individuals or Virginia Earned Income Credit. If you claimed a Credit for Low Income Individuals or Virginia Earned Income Credit on Virginia Schedule ADJ, enter the total amount from Line 17 of Schedule ADJ. Refer to Page 24 of this instruction booklet for additional information. The amount of the credit claimed may not exceed your tax liability on Line 17 of Form 760. For example, if net tax on Line 17 is $141, and the allowable amount of your eligible credit is $300, then enter $141 on Line 21.

Line 22 Credit for Tax Paid to Another State. Enter the amount of credit for tax paid to another state that you claimed on Schedule OSC, Line 21. Refer to Page 27 for additional information. You must attach Schedule OSC and a copy of each state return for which you are claiming credit. The other state's return must show the computation of tax due.

Line 23 Other Credits. If you claimed any credits on Virginia Schedule CR, enter the amount from Section 5, Part 1, Line 1A of Virginia Schedule CR.

If you are only claiming a Political Contributions Credit, enter the amount of the credit and fill in the oval. You do not need to attach Schedule CR. The Political Contributions Credit is available to individuals who make contributions to candidates for state or local political office. The credit is 50% of the amount of the contribution, subject to a $25 limit for individuals and a $50 limit for married taxpayers filing jointly and cannot exceed your tax liability.

Note: The Credit for Low Income Individuals, the Credit for Taxes Paid to Another State and most credits from Schedule CR, including the Political Contribution Credit, are nonrefundable. The total of all nonrefundable credits cannot exceed your tax liability as shown on Line 17 of Form 760.

Line 24 Total Payments and Credits. Add the amounts on Lines 18 through 23.

Line 25 If Line 24 is smaller than Line 17, subtract Line 24 from Line 17. This is the amount of tax you owe.

Line 26 If Line 17 is smaller than Line 24, subtract Line 17 from Line 24. This is the amount of tax you have overpaid.

Line 27 If you would like some or all of your overpayment from Line 26 credited to your estimated taxes for next year, enter the amount in the box.

Line 28 Adjustments and Voluntary Contributions. If you reported any adjustments or voluntary contributions on Virginia Schedule ADJ, enter the total amount from Line 24 of Schedule ADJ.

Line 29 Add Line 27 and Line 28.

Line 30 If you owe tax on Line 25, and you reported any adjustments or voluntary contributions on Virginia Schedule ADJ, add Lines 25 and 29 and enter the total.

-OR-

If you overpaid your taxes on Line 26, but you credited all or part of the overpayment to next year's estimated tax, and/or had adjustments or voluntary contributions that exceeded your overpayment, and Line 29 is greater than Line 26, subtract Line 26 from Line 29 and enter the difference.

PAYMENT OPTIONS

Web Payments: Use the Department's website, www.tax.virginia.gov/ind, to make a payment online. Payments are electronically transferred from your savings or checking account. There is no fee charged by the Department.

Check: If you file your return locally, make your check payable to the Treasurer or Director of Finance of the city or county in which you reside; otherwise, make your check payable to the Department of Taxation. See Page 47 for a listing of localities. Make sure your Social Security Number is on your check and make a notation that it is your 2012 Virginia income tax payment.

If you file but do not pay with the return, you will be billed if your payment is not submitted by May 1st. To submit a payment separately from the return, but on or before May 1st, go to the Department's website and download the Form 760PMT. Important: Never submit Form 760PMT with a copy of your return.

Credit or Debit Card: Call 1-800-2PAY-TAX, or to pay over the Internet, visit www.officialpayments.com. The jurisdiction code for Virginia is 1080. You will need this number when you arrange for a credit or debit card payment.

If you have already filed your return with your Commissioner of the Revenue and did not fill in the credit or debit card oval, call your local Commissioner of the Revenue's office for the correct jurisdiction code prior to initiating your credit or debit card payment. Phone numbers are listed beginning on Page 47.

The company processing the transaction will assess an additional fee. Prior to payment, you will be informed of the fee and will have the option to cancel the transaction at that time with no charge. After you complete the transaction be sure to fill in the oval on Line 30 indicating that you have arranged for a credit or debit card payment.

Line 31 If Line 26 is greater than Line 29, enter the difference in the box. This is your refund.

Choose the debit card or direct deposit option for your refund by filling in the applicable information below Line 31 on Form 760.

Note: You do not have the option to request a paper refund check. You must select either debit card or direct deposit for your refund.

REFUND OPTIONS

Debit Card: Select the debit card option if you want to receive your refund on a prepaid debit card. If you prefer to have funds deposited directly to your checking or savings account, see below and complete the direct deposit section on the form.

Direct Deposit - Get your refund faster: Have your refund deposited directly into your bank account. If the ultimate destination of your refund is to a financial institution within the territorial jurisdiction of the United States, you can use direct deposit to receive your refund fast! However, federal banking regulations have imposed additional reporting requirements on direct deposit of refunds that are ultimately intended for a financial institution outside of the United States. At present, the Virginia Department of Taxation will not support direct deposit of refunds when the ultimate destination is a financial institution outside of the United States. Therefore, when you request direct deposit of your refund by providing bank information on your return, you are certifying that the ultimate destination of the funds is within the United States. Attempting to use direct deposit to transfer funds electronically to a financial institution outside the territorial jurisdiction of the United States will significantly delay your refund.

Fill in the oval to indicate whether the account number is for a checking or savings account.

Bank Routing Number: Enter your bank's nine-digit routing transit number printed on the bottom of your check. The first two digits of the routing number must be 01 through 12 or 21 through 32. Do not use a deposit slip to verify the number. It may contain internal routing numbers that are not part of the actual routing number.

Bank Account Number: Enter your bank account number up to 17 digits. Do not enter hyphens, spaces or special symbols. Enter the number from left to right and leave any unused boxes blank. Do not include the check number.

Remember: It is always faster and more efficient to file your return electronically. If you file your tax return electronically your refund will typically be processed in about 1 week. If you file your tax return on paper, your refund will typically take about 4 weeks.

Fill in All Ovals that Apply

  • Qualifying farmer, fisherman or merchant seaman. Fill in this oval if at least two-thirds of your gross income is a result of self-employment as a farmer, fisherman or merchant seaman.
  • Federal Schedule C filed with your federal return.
  • Overseas on due date. If you were overseas on May 1, 2013, fill in this oval and attach a statement explaining your situation. Your return is due by July 1, 2013.
  • Earned Income Credit claimed on your federal return. If you claimed an Earned Income Credit on your federal return, fill in the oval and enter the amount of the federal credit claimed.
  • Primary Taxpayer Deceased. If the filer in the Your name and Social Security Number fields is deceased.
  • Spouse Deceased. If the filer in the Spouse name and Social Security Number fields is deceased.

Signature(s)

Be sure to sign and date your return. If filing jointly, both spouses must sign the return. In so doing, you agree that filing jointly on this return makes you jointly and severally liable for the tax due and any refunds will be paid jointly. Include your daytime and evening phone numbers in the spaces provided.

Tax Preparer Information

If you paid someone to prepare your return, the preparer should provide his or her contact information in the spaces provided.

Any person who prepares, or employs one or more individuals to prepare, 50 or more individual income tax returns for compensation is required to file all individual income tax returns using eFile. An income tax return preparer does not include volunteers who prepare tax returns for the elderly or poor as part of a nonprofit organization's program.

Tax preparers may request a hardship waiver to these filing requirements by completing and submitting Form 8454P. For additional information, visit www.tax.virginia.gov.

Paid tax preparers are required to complete the Filing Election field located at the bottom of Page 2 of Form 760 using one of the codes below.

Code 2 - Taxpayer opted out of electronic filing.

Code 3 - Preparer prepares less than 50 returns annually.

Code 4 - Preparer capable of electronic filing but return cannot be accepted electronically.

Code 5 - Preparer has a hardship waiver.

Code 6 - Preparer capable of electronic filing but not yet approved as electronic return originator by IRS.

Instructions for Virginia Schedule ADJ

FIXED DATE CONFORMITY UPDATE FOR 2012

Advancement of Virginia's Fixed Date Conformity with the Internal Revenue Code: Virginia's date of conformity with the Internal Revenue Code (IRC) was advanced from December 31, 2010, to December 31, 2011, with limited exceptions. Virginia will continue to disallow federal income tax deductions for bonus depreciation allowed for certain assets under IRC §§ 168 (k), 168(l), 168(m), 1400L and 1400N; the five-year carryback of federal net operating loss deductions generated in taxable year 2008 or 2009; and, federal income tax deductions for applicable high yield discount obligations under IRC § 163(e)(5)(F). In addition, fixed date conformity adjustments continue to be required for Cancellation of Debt Income under IRC § 108(i), and the domestic production deduction under IRC § 199.

At the time these instructions went to print, the only required adjustments for "fixed date conformity" were those mentioned above. However, if federal legislation is enacted that results in changes to the Internal Revenue Code for the 2012 taxable year, taxpayers will be required to make adjustments to their Virginia returns that are not described in the instruction booklet. Information about any such adjustments will be posted on the Department's website at www.tax.virginia.gov.

Additions to Income

Enter your name in the box in the top left corner of Schedule ADJ (both names if filing jointly) and the Social Security Number of the primary taxpayer as shown on your Virginia Individual Income Tax Return.

Line 1 Interest on obligations of other states

Enter the amount of any interest on obligations of other states not included in your Federal Adjusted Gross Income, which is taxable in Virginia, less related expenses.

Line 2 Other additions to Federal Adjusted Gross Income

Line 2a Fixed Date Conformity Addition

A. Bonus Depreciation If depreciation was included in the computation of your Federal Adjusted Gross Income and one or more of the depreciable assets received the special 30% or 50% bonus depreciation deduction for federal purposes in any year from 2001 through 2012 inclusive, then depreciation must be recomputed for Virginia purposes as if such assets did not receive the special 30% or 50% bonus depreciation deduction for federal purposes in any year from 2001 through 2012 inclusive. If the total 2012 Virginia depreciation is less than 2012 federal depreciation, then the difference must be recognized as an addition.

Enter the amount that should be added to Federal Adjusted Gross Income based upon the recomputation of allowable depreciation.

_______

B. Other Fixed Date Conformity Additions Use addition Code 13 below if you have a cancellation of debt income addition due to Fixed Date Conformity. Use addition Code 15 below if you have a domestic production deduction addition due to Fixed Date Conformity. If you are required to make any Other Fixed Date Conformity additions, enter the total amount of such additions on this line. Also, please attach a schedule and explanation of such additions.

Enter any other Fixed Date Conformity additions here.

_______
C. Enter the total of Lines A and B above and on Schedule ADJ, Line 2a
_______

Lines 2b - 2c Other Additions

On Lines 2b - 2c, enter the two digit code listed below, followed by the amount, for any additions to federal adjusted gross income in the categories listed below. If you have more than two additions on Lines 2b-2c of Schedule ADJ, enter the code "00" and the total addition amount on 2b and attach an explanation of each addition to your return.

CODE
10 Interest on federally exempt U.S. obligations Enter the amount of interest or dividends exempt from federal income tax, but taxable in Virginia, less related expenses.
11 Accumulation distribution income Enter the taxable income used to compute the partial tax on an accumulated distribution as reported on federal Form 4970.
12

Lump-sum distribution income - If you received a lump-sum distribution from a qualified retirement plan and used the 20% capital gain election, the ten-year averaging option, or both on federal Form 4972, complete the table below:

Enter the total amount of distribution subject to federal tax. (ordinary income and capital gain)
______
Enter the total federal minimum distribution allowance, federal death benefit exclusion and federal estate tax exclusion..
______
Subtract Line 2 from Line 1. Enter this amount on Line 2b or 2c of your Virginia Schedule ADJ.
______
13 Cancellation of Debt Income (Fixed Date Conformity Adjustment) - Enter the amount of cancellation of debt income from transactions in 2010 that were completed on or before April 21, 2010, elected to be reported as an addition required by conformity in equal amounts over three taxable years: 2010, 2011 and 2012. Taxpayers must add back the entire amount of any cancellation of debt income resulting from transactions after April 21, 2010.
14 Income from Dealer Disposition of Property - Enter the amount that would be reported under the installment method from certain dispositions of property. If, in a prior year, the taxpayer was allowed a subtraction for certain income from dealer dispositions of property made on or after January 1, 2009, in the years following the year of disposition, the taxpayer is required to add back the amount that would have been reported under the installment method. Each disposition must be tracked separately for purposes of this adjustment.
15 Domestic Production Deduction (Fixed Date Conformity Adjustment) - Enter 1/3 of the total amount of the domestic production deduction claimed on your federal return pursuant to IRC § 199. For taxable years 2010 and thereafter, Virginia does not conform to the domestic production deduction allowed under IRC § 199. Instead of allowing this deduction to flow through, Virginia allows a deduction equal to two-thirds of the federal deduction.
16

Telework Expenses - Individuals who claim the Virginia Telework Expenses Tax Credit are not allowed to exclude those expenses from Virginia Income. To the extent excluded from federal adjusted gross income, any expenses incurred by a taxpayer in connection with the Telework Expenses Tax Credit must be added to the Virginia return.

99 Other - Enter the amount of any other income not included in federal adjusted gross income, which is taxable in Virginia. Attach an explanation of the addition.

Line 3 Total Additions

Add Lines 1 through 2c and enter the total in the box. Enter this amount on Line 2 of Virginia Form 760.

Line 4 Obligations of the U.S.

Enter the amount of any income (interest, dividends and gain) from obligations of the U.S. that are included in your federal adjusted gross income, but are exempt from Virginia state tax.

Income from obligations issued by the following organizations IS NOT taxable in Virginia: Tennessee Valley Authority, Federal Deposit Insurance Corporation, Federal Home Loan Bank, Federal Intermediate Credit Bank, Governments of Guam, Puerto Rico & Virgin Islands, U.S. Treasury bills, notes, bonds and savings bonds, Federal Land Bank, Federal Reserve Stock, Farm Credit Bank, Export-Import Bank of the U.S., U.S. Postal Service and Resolution Trust Corporation.

Income from obligations issued by the following organizations IS taxable in Virginia: Federal Home Loan Mortgage Corp., Federal National Mortgage Association, Government National Mortgage Association, Inter-American Development Bank and International Bank for Reconstruction and Development.

Line 5 Disability Income

Enter the amount of disability income reported as wages (or payments in lieu of wages) on your federal return for permanent and total disability. On joint returns, each spouse can qualify for the deduction. Individuals can subtract up to $20,000 of disability income as defined under IRC § 22(c)(2)(b)(iii).

Enter YOUR subtraction on Line 5a and SPOUSE'S subtraction on Line 5b.

A taxpayer cannot claim an age deduction on Line 4 of Form 760 and a subtraction for disability income. Claim the one that benefits you the most. For married taxpayers filing a joint return, each taxpayer may claim, if applicable, an age deduction or a subtraction for disability income.

Line 6 Other subtractions from federal adjusted gross income

Line 6a - Special Fixed Date Conformity Subtraction

A. Bonus Depreciation If depreciation was included in the computation of your Federal Adjusted Gross Income and one or more of the depreciable assets received the special 30% or 50% bonus depreciation deduction for federal purposes in any year from 2001 through 2011 inclusive, then depreciation must be recomputed for Virginia purposes as if such assets did not receive the special 30% or 50% bonus depreciation deduction for federal purposes in any year from 2001 through 2012 inclusive. If the total 2012 Virginia depreciation is more than 2012 federal depreciation, then the difference must be recognized as a subtraction.

Enter the amount that should be subtracted from Federal Adjusted Gross Income based upon the recomputation of allowable depreciation......A. ________

B. Other Fixed Date Conformity Subtractions If you are required to make any Other Fixed Date Conformity subtractions, enter the total amount of such subtractions on this line. Also, attach a schedule and explanation of such subtractions.

Enter total amount of such subtractions here......B. _______

C. Add Lines A and B. Enter here and on Schedule ADJ, Line 6(a)......C. _______

Lines 6b - 6d Other subtractions

On Lines 6b-6d, enter the two-digit code, listed in the following table, in the boxes on Schedule ADJ, followed by the amount, for any subtractions from federal adjusted gross income in the categories listed below.

Other Subtractions for Lines 6b - 6d

If you have more than three subtractions on Lines 6b-6d of Schedule ADJ, enter the code "00" and the amount of total subtractions in the first box and attach an explanation of each subtraction to your return.

CODE
20 Income from Virginia Obligations - Enter the amount of income from Virginia obligations that you included in your federal adjusted gross income. Income from Virginia obligations would include interest on Virginia state bonds or municipal obligations and gains from sales of those obligations that are included in your federal adjusted gross income.
21 Federal Work Opportunity Tax Credit Wages - Enter the amount of wages or salaries eligible for the federal work opportunity tax credit that you included in your federal adjusted gross income. Do not enter the federal credit amount.
22

Tier 2 and Other Railroad Retirement and Railroad Unemployment Benefits - Enter the amount of Tier 2 vested dual benefits and other Railroad Retirement Act benefits and Railroad Unemployment Insurance Act benefits included in federal adjusted gross income and reported on your federal return as a taxable pension or annuity.

24 Virginia Lottery Prizes - Enter the sum of all prizes under $600 awarded to you by the Virginia Lottery Department to the extent that you included them in your federal adjusted gross income.
28 Virginia National Guard Income - Enter the amount of wages or salaries for active and inactive service in the National Guard of the Commonwealth of Virginia for persons of rank O3 and below included in federal adjusted gross income. This amount may not exceed the amount of income received for 39 days or $3,000, whichever is less. Reminder: This subtraction does not apply to members of the active or reserve units of the Army, Navy, Air Force or Marines, or the National Guard of other states or the District of Columbia. If you claim this subtraction, you cannot claim a credit for Low Income Individuals.
30 Military Pay and Allowances Attributable to Active Duty Service in a Combat Zone or a Qualified Hazardous Duty Area - Enter any military pay and allowances earned while serving by the order of the President of the United States with the consent of Congress in a combat zone or qualified hazardous duty area treated as a combat zone for federal tax purposes pursuant to IRC § 112 that has not been otherwise subtracted, deducted or exempted from federal adjusted gross income.
31 Retirement Plan Income Previously Taxed by Another State - Enter the amount of retirement income received during the taxable year on which the contributions were taxed in another state, but were deductible from federal adjusted gross income during the same period. The total amount of this subtraction cannot exceed the amount of the contributions previously taxed by another state, usually in a previous year.
34 Virginia College Savings Plan Income Distribution or Refund - Enter the amount of any income included in federal adjusted gross income that is attributable to a distribution of benefits or a refund from the Virginia College Savings Plan (previously called the Virginia Higher Education Tuition Trust Fund), in the event of a beneficiary's death, disability or receipt of scholarship.
37 Unemployment Compensation Benefits - Enter the amount of unemployment compensation benefits received during the taxable year reported as income on your federal income tax return.
38 Basic Military Pay - Some taxpayers who qualify as military personnel stationed inside or outside Virginia and who are on extended active duty for more than 90 days can subtract up to $15,000 of military basic pay received during the taxable year. If the military basic pay does not exceed $15,000, then the entire amount may be subtracted. If the basic military pay is over $15,000, then the subtraction is reduced by the amount exceeding $15,000. For every $1.00 of income over $15,000, the maximum subtraction is reduced by $1.00. If your basic military pay is $30,000 or more, you are not entitled to a subtraction. On joint returns, each spouse can qualify for the subtraction. If you claim this subtraction, you cannot claim a Credit for Low Income Individuals.
39 Federal and State Employees - Any individual who qualifies as a federal or state employee earning $15,000 or less in annual salary from all employment can subtract up to $15,000 of the salary from that state or federal job. If both spouses on a joint return qualify, each spouse may claim the subtraction. The subtraction cannot exceed the actual salary received. If you claim this subtraction, you cannot claim a Credit for Low Income Individuals.
40 Income Received by Holocaust Victims - To the extent included in your federal adjusted gross income, subtract any income resulting from the return or replacement of assets stolen during the Holocaust and throughout the time period leading up to, during, and directly after World War II as a result of: Nazi persecution, individual being forced into labor against his or her will, transactions with or actions of the Nazi regime, treatment of refugees fleeing Nazi persecution, or holding of such assets by entities or persons in the Swiss Confederation.
41 Payments Made under the Tobacco Settlement - Enter the amount of payments received under the Tobacco Master Settlement Agreement and the National Tobacco Grower Settlement Trust, provided they have not been deducted for federal tax purposes.
42 Gain on the Sale of Land for Open Space Use - Enter the amount of any gain on the sale or exchange of real property or easement to real property which results in the property or easement being devoted to open-space use as defined in Va. Code § 58.1-3230 for a period not less than 30 years.
44 Congressional Medal of Honor Recipients - Enter the amount of military retirement income you received as an individual awarded the Medal of Honor.
46 Military Death Gratuity Payments - Retroactive to taxable year 2001, survivors of military personnel killed in the line of duty may claim a subtraction for military death gratuity payments made after September 11, 2001, to the extent that the payments were included in federal adjusted gross income. Report on Schedule ADJ, Line 6.
49 Certain Death Benefit Payments - Allows a beneficiary taxpayer to subtract the death benefit payments received from an annuity contract that are subject to federal income taxation, for taxable years beginning on or after January 1, 2007. In order to qualify for this subtraction, a death benefit payment is required to meet the following criteria: 1) the source of the payment must be an annuity contract between a customer (the Annuitant) and an insurance company; 2) the payment must be awarded to the beneficiary in a lump sum; and 3) the payment must be subject to taxation at the federal level.
51 Gains from Land Preservation - To the extent a taxpayer's federal gain includes gain or loss recognized on the sale or transfer of a Land Preservation Tax Credit, the taxpayer is required to subtract the gain or add back the loss on their Virginia return.
52 Long-Term Capital Gain - Income taxed as a long-term capital gain, or any income taxed as investment services partnership income for federal tax purposes is allowed as a subtraction provided the income is attributable to an investment in a "qualified business" as defined in Va. Code § 58.1-339.4 or in any other technology business approved by the Secretary of Technology. The business must have its principal facility in Virginia and less than $3 million in annual revenues for the fiscal year preceding the investment. The investment must be made between the dates of April 1, 2010, and June 30, 2015. Taxpayers claiming the Qualified Equity and Subordinated Debt Credit cannot claim this subtraction relating to investments in the same business. In addition, no investment is "qualified" for this deduction if the business performs research in Virginia on human embryonic stem cells.
99 Other - Attach an explanation for other subtractions.

Line 7 Total Subtractions

Add Lines 4 through 6d. Enter the sum in the box to the right and on Line 7 of Form 760.

Deductions from Income

Lines 8a - 8c Deductions

On Lines 8a-8c, enter the three-digit code, listed in the following table, in the boxes on Schedule ADJ, followed by the amount, for any deductions from Virginia adjusted gross income in the categories listed below.

Do not fill in the loss box unless you are claiming a bank franchise deduction (Code 112). See the instructions at the end of this section.

Other Deductions for Lines 8a - 8c

If you have more than three deductions on Lines 8a-8c of Schedule ADJ, enter the code "000" and the amount of total deductions in the first box and attach an explanation of each deduction to your return.

CODE
101 Child and Dependent Care Expenses - You may claim this deduction on your Virginia return only if you were eligible to claim a credit for child and dependent care expenses on your federal return. Enter the amount on which the federal credit for child and dependent care is based. (This is the amount on federal Form 2441 or Schedule 2 of Form 1040A that is multiplied by the decimal amount - up to $3,000 for one dependent and $6,000 for two or more.). DO NOT ENTER THE FEDERAL CREDIT AMOUNT.
102 Foster Care Deduction - Foster parents may claim a deduction of $1,000 for each child residing in their home under permanent foster care, as defined in the Code of Virginia, providing they claim the foster child as a dependent on their federal and Virginia income tax returns.
103

Bone Marrow Screening Fee - Enter the amount of the fee paid for an initial screening to become a possible bone marrow donor, provided you were not reimbursed for the fee and did not claim a deduction for the fee on your federal return.

104 Virginia College Savings Plan Prepaid Tuition Contract Payments and Savings Account Contributions - If you are under age 70 on or before December 31 of the taxable year, enter the lesser of $4,000 or the amount paid during the taxable year for each prepaid tuition contract or a savings trust account entered into with the Virginia College Savings Plan (previously called the Virginia Higher Education Tuition Trust Fund). If you paid more than $4,000 per contract or account during the year, you may carry forward any undeducted amounts until the purchase price has been fully deducted. If you are age 70 or older on or before December 31 of the taxable year, you may deduct the entire amount paid to the Virginia College Savings Plan during the year.
105 Continuing Teacher Education - A licensed primary or secondary school teacher may enter a deduction equal to twenty percent of unreimbursed tuition costs incurred to attend continuing teacher education courses that are required as a condition of employment, provided these expenses were not deducted from federal adjusted gross income.
106 Long-Term Health Care Premiums - Enter the amount of premiums paid for long-term health care insurance, provided they were not actually included as a deduction on Schedule A of your federal income tax return. In addition, the premiums may not have been used as the basis of the Virginia Long-Term Care Insurance Credit, although the taxpayer may be able to claim both the Credit and the Virginia deduction in the same year. For example, if an individual purchased a policy on July 1 and made payments on a monthly basis, he would claim a credit in the current taxable year for six 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 six months of premiums that were not used as a basis for the credit. See the Schedule CR instructions for more information.
107 Virginia Public School Construction Grants Program and Fund - Enter the amount of total contributions to the Virginia Public School Construction Grants Program and Fund, provided you have not claimed a deduction for this amount on your federal income tax return.
108 Tobacco Quota Buyout - Allows a deduction from taxable income for payments received in the preceding year in accordance with the Tobacco Quota Buyout Program of the American Jobs Creation Act of 2004 to the extent included in federal adjusted gross income. For example, on your 2012 Virginia return you may deduct the portion of such payments received in 2011 that is included in your 2011 federal adjusted gross income; while payments received in 2012 may generate a deduction on your 2013 Virginia return. Individuals cannot claim a deduction for a payment that has been, or will be, subtracted by a corporation unless the subtraction is shown on a schedule VK-1 you received from an S Corporation. If you chose to accept payment in installments, the gain from the installment received in the preceding year may be deducted. If, however, you opted to receive a single payment, 10% of the gain recognized for federal purposes in the year that the payment was received may be deducted in the following year and in each of the nine succeeding taxable years.
109 Sales Tax Paid on Certain Energy Efficient Equipment or Appliances - Allows an income tax deduction for 20% of the sales tax paid on certain energy efficient equipment or appliances, up to $500 per year. If filing a joint return, you may deduct up to $1,000.
110 Organ and Tissue Donor Expenses - Allows a deduction for unreimbursed expenses that are paid by a living organ and tissue donor that have not been taken as a medical deduction on the taxpayer's federal income tax return. The amount of the deduction is the lesser of $5,000 or the actual amount paid by the taxpayer. If filing a joint return, the deduction is limited to $10,000 or the actual amount paid.
111 Charitable Mileage - Enter the difference between 18 cents per mile and the charitable mileage deduction per mile allowed on federal Schedule A. If you used actual expenses for the charitable mileage deduction, and those expenses were less than 18 cents per mile, then you may use the difference between actual expenses and 18 cents per mile.
112 Bank Franchise Subchapter S Corporation - Certain shareholders of small businesses may be able to deduct the gain or add the loss of the S Corporation. Complete the worksheet below to determine the amount of your adjustment.
113 Income from Dealer Disposition of Property - Allows an adjustment for certain income from dealer dispositions of property made on or after January 1, 2009. In the year of disposition the adjustment will be a subtraction for gain attributable to installment payments to be made in future taxable years provided that (i) the gain arises from an installment sale for which federal law does not permit the dealer to elect installment reporting of income, and (ii) the dealer elects installment treatment of the income for Virginia purposes on or before the due date prescribed by law for filing the taxpayer's income tax return. In subsequent taxable years the adjustment will be an addition for gain attributable to any payments made during the taxable year with respect to the disposition. In the years following the year of disposition, the taxpayer would be required to add back the amount that would have been reported under the installment method. Each disposition must be tracked separately for purposes of this adjustment.
199 Other - Attach an explanation for other deductions.

Computation of Deduction for S Corporation Subject to Bank Franchise Tax

Certain shareholders of small business corporations subject to bank franchise tax may deduct the gain or add back the loss of the S Corporation. Complete the worksheet below to determine the amount of your adjustment.

a. If your allocable share of the income or gain of the S corporation was included in federal adjusted gross income, enter the amount here ________
b. If your allocable share of the losses or deductions of the S corporation was included in federal adjusted gross income, enter the amount here. . ________
c. Enter the value of any distributions paid or distributed to you by the S corporation to the extent that such distributions were excluded from federal adjusted gross income. ________
d. Add Line b and Line c ________
e. Subtract line d from line a. This is your net deduction amount. If this amount is negative you must enter the amount on Schedule ADJ, line 8a and fill in the box marked "LOSS".. ________

Line 9 Total Deductions

Add Lines 8a through 8c and enter the total in the box. Enter this amount on Line 12 of your Form 760.

Tax Credit for Low Income Individuals or Virginia Earned Income Credit

You may be eligible to claim a Credit for Low Income Individuals if your family Virginia adjusted gross income (family VAGI) is equal to or less than the federal poverty guidelines and you meet the Eligibility Requirements. You are eligible for the Virginia Earned Income Credit if you claimed an earned income credit on your federal return. You cannot claim both a Credit for Low Income Individuals and a Virginia Earned Income Credit. Claim the credit that benefits you the most. Please complete the entire section.

Eligibility Requirements: The Credit for Low Income Individuals or Virginia Earned Income Credit may NOT be claimed if you, your spouse, or any dependents claimed on your return or on your spouse's return claim any of the following:

Before claiming the credit, make sure you are eligible!

  • Age deduction
  • Exemption for taxpayers who are blind or age 65 and over
  • Virginia National Guard subtraction (see Subtraction Code 28)
  • Basic Military pay subtraction (see Subtraction Code 38)
  • Federal & State employee subtraction (see Subtraction Code 39) OR
  • You are claimed as a dependent on another taxpayer's return.

Line 10 Compute your Family VAGI

Enter your Social Security Number, name, and Virginia adjusted gross income (VAGI) from Line 9, Form 760. For all married taxpayers, enter your spouse's Social Security Number and name and then follow the instructions below for your filing status:

  • Filing Status 2, Married Filing Jointly: If you entered the joint VAGI for both you and your spouse exactly as shown on Line 9, Form 760, of your joint return, you do not need to enter a separate VAGI for your spouse. If you entered only your portion of the VAGI from Line 9, Form 760, then enter your spouse's VAGI on your spouse's line. The sum of your VAGI and your spouse's VAGI should equal the joint VAGI amount shown on Line 9, Form 760.
  • Filing Status 3, Married Filing Separately: To claim the credit, you are required to provide your spouse's VAGI. If your spouse is:
    • Filing a separate Virginia Form 760, enter the VAGI on Line 9, Form 760, from your spouse's return. Only one spouse may claim the Credit for Low Income Individuals.
    • Not required to file a Virginia Form 760 (for example, if your spouse is a nonresident), compute your spouse's VAGI as if your spouse is required to file a Virginia Form 760 resident return and enter the amount on your spouse's line.

Enter the Social Security Number and name of each dependent claimed as an exemption on your return and, if any of your dependents had income, enter the VAGI for each dependent. For Filing Status 3, Married Filing Separately, also enter the Social Security Number and name for each of your dependents not claimed as an exemption on your return and, if any of the dependents had income, enter the VAGI for each dependent.

Line 10: Add the VAGI amounts and enter the total. This is your family VAGI.

Line 11

Determine if you Qualify for the Credit for Low Income Individuals: Enter the number of family members listed in Line 10. If your family VAGI on Line 10 is equal to or less than the federal poverty amount for your family size, you are eligible to claim the Credit for Low Income Individuals.

Line 12 Exemptions to Compute Credit

If you qualify for the Credit for Low Income Individuals, enter the number of personal exemptions you reported on your Form 760.

Line 13

Multiply Line 12 by $300. Enter the result on Line 13 and proceed to Line 14. If you do not qualify for the Credit for Low Income Individuals but claimed an Earned Income Credit on your federal return, enter $0 on Line 13 and proceed to Line 14.

Line 14

Enter the amount of Earned Income Credit claimed on your federal return. If you did not claim an Earned Income Credit on your federal return enter $0.

When a taxpayer using the married filing separately status computes the Virginia EITC, the taxpayer must first determine his proportion of the earned income that was used to qualify for the federal EITC. That proportion must then be multiplied by the total Virginia EITC, which is 20% of the federal EITC. The spouses may then claim their proportional shares of the credit on their separate returns.

Line 15

Multiply the amount on Line 14 by 20% (.20).

Line 16

Enter the greater of Line 13 or Line 15.

Line 17 Compute your Credit

Compare the amount entered on Line 16, Schedule ADJ, to your tax liability on Line 17, Form 760. Enter the smaller amount on Line 17, Schedule ADJ and on Line 21, Form 760.

The Credit for Low Income or Virginia Earned Income Credit is a nonrefundable credit. A nonrefundable credit cannot exceed your tax liability. If you claim any credits on Lines 22 or 23, Form 760, in addition to the Low Income or Virginia Earned Income Credit, the sum of all nonrefundable credits claimed cannot exceed your tax liability on Line 17, Form 760.

Many low income individuals who work and have earned income under $50,270 may also qualify for up to $5,891 in Federal Earned Income Credit when filing their federal tax return! See your federal instructions or call 1-800-829-3676 to order Pub 596.

Adjustments to the Amount of Tax

Line 18 Addition to tax

Use Form 760C to compute any addition to tax you may owe for underpayment of estimated taxes. Use Form 760F if at least 66 2/3% of your income is derived from farming, fishing and/or being a merchant seaman.

You will not owe an addition to tax if each payment is made on time and:

  • you owe $150 or less in tax with your return.
  • total withholding and timely estimated payments were at least 90% (66 2/3 for farmers, fishermen and merchant seamen) of your 2012 tax liability after nonrefundable credits or 100% of your 2011 tax liability after nonrefundable credits.
  • you meet one of the exceptions computed on Form 760C or Form 760F.

If you do not meet the criteria shown above, visit www.tax.virginia.gov or refer to Form 760C or Form 760F. If you need to complete Form 760C or 760F, enter the amount of the addition to tax on this line. Those who file 760C or Form 760F should fill in the oval.

Line 19 Penalty

The due date for filing a calendar year return is May 1, and the automatic extension provisions apply to returns filed by November 1. Depending on when you file your return, you may be required to compute an extension penalty or a late filing penalty. For more information on due dates and penalty provisions, refer to When to File Your Return on Page 2 of these instructions.

Extension penalty: If you file your return within six months after the due date and the amount of tax due with the return is more than 10% of your total tax liability, you must compute an extension penalty on the balance of tax due. The extension penalty is applied at the rate of 2% per month or part of a month, from the due date through the date your return is filed. The maximum extension penalty is 12% of the tax due. Note: If you do not pay the tax in full when you file your return, a late payment penalty will be assessed at the rate of 6% per month or part of a month from the date the return is filed through the date the tax is paid, to a maximum of 30%. If you file your return during the extension period, but do not pay the tax due when you file your return, both the extension penalty and the late payment penalty may apply. The extension penalty will apply from the due date of the return through the date the return is filed and the late payment penalty will apply from the date the return is filed through the date of payment. To avoid paying the late payment penalty during the extension period, you must pay any tax owed when you file the return.

Late filing penalty: If you file your return more than six months after the due date, no extension provisions apply and you must compute a late filing penalty of 30% of the tax due with your return.

Line 20 Interest

If you filed a tax due return after the filing date, even if you had an extension, you are liable for interest on the tax due amount on Form 760, Line 25, from the due date to the date filed or postmarked. If you do not pay in full when you file the return, you may be subject to additional penalties and interest. To obtain the daily interest factor, please call (804) 367-8031 or contact your locality.

Line 21 Consumer's Use Tax

Who Should Pay Consumer's Use Tax: If the total amount of purchases was from out-of-state mail order catalog(s) only and totaled $100 or less for the entire year, you are not required to pay the use tax. If the purchases were from out-of-state mail order catalog(s) and exceed $100, or the purchases were of any amount from out-of-state sources other than mail order catalogs, then you must report these purchases and pay consumer's use tax on the TOTAL amount of all untaxed purchases from all sources made during the calendar year.

The tax is 5% of the total price except for food purchased for home consumption. The tax rate on food purchased for home consumption is 2.5%.

Enter the amount of Consumer Use Tax you owe on Line 21 of Virginia Schedule ADJ, or file Form CU-7.

Voluntary Contributions

Line 22 Voluntary Contributions to be made from your refund

You may voluntarily donate all or part of your tax refund to one or more qualifying organizations. Enter the contribution code(s) and amount(s) you are donating in the boxes.

Contribution codes:

60 Virginia Non-game Wildlife Program

61 Democratic Political Party

62 Republican Political Party

63 U.S. Olympic Committee

64 Virginia Housing Program

65 Elderly & Disabled Transportation Fund

66 Community Policing Fund 67 Virginia Arts Foundation

68 Open Space Recreation & Conservation Fund

76 Historic Resources Fund

78 Children of America Finding Hope

82 VA War Memorial Foundation & National D-Day Memorial Foundation

84 Virginia Federation of Humane Societies

85 Tuition Assistance Grant Fund

86 Spay and Neuter Fund

88 Cancer Centers in the Commonwealth

90 Martin Luther King, Jr. Living History and Public Policy Center

93 Celebrating Special Children

Voluntary Contributions to be made from your refund OR tax payment. You may make a payment to the following organizations even if you owe a tax balance or if you wish to donate more than your expected refund.

Note: If you are donating to more than 3 organizations, enter the code "00" in the first box and enter the total amount of all donations. Attach a separate page indicating the amount you wish to contribute to each organization.

71 Chesapeake Bay Restoration Fund

72 Family & Children's Trust Fund (FACT)

73 Virginia's State Forests Fund

74 VA's Uninsured Medical Catastrophe Fund

81 Home Energy Assistance

92 Virginia Military Family Relief Fund

Line 23 Public School and Library Foundations

Lines 23a-23c are for donations to Public School Foundations or Library Foundations. You may contribute to Public School Foundations or Library Foundations even if you owe a tax balance or if you wish to donate more than your expected refund. If you want to donate to more than 3 foundations, enter "999999" and the total amount donated to foundations on 23a, and attach a schedule showing the foundation number, name and amount donated to each.

Public School and Library Foundations - enter 6 digit code from the lists starting on Page 33.

Line 24 Total adjustments

Enter the total of Lines 18 - 23c. Enter this amount on Line 28 of Form 760.

Instructions for Virginia Schedule OSC

Compute all credits for taxes paid to other states on Schedule OSC and enter the total credit claimed on Line 22 of Form 760.

Generally, Virginia will allow taxpayers filing resident individual income tax returns to claim credit for income tax paid as a nonresident to another state on earned or business income derived from sources outside Virginia or any gain (if included in federal adjusted gross income) on the sale of a capital asset outside Virginia, provided the income is taxed by Virginia as well as the other state. See Va. Code § 58.1-332 for information on capital assets. If the income is from Arizona, District of Columbia, California or Oregon, claim the credit on the nonresident income tax return of that state instead of on the Virginia return. Attach a complete copy Schedule OSC and all other states' returns to Form 760. The credit must be computed separately for each state. Schedule OSC is available on our website at www.tax.virginia.gov or by calling (804) 440-2541.

Border State Method You may qualify for a special computation if you are required to file a return with Virginia and only one other state provided that other state is 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 these qualifications, fill in the border state oval and enter "100.0" in the Income Percentage field.

Line 1 Filing Status

Enter the number listed below to identify the filing status claimed on the other state's tax return.

  1. Single
  2. Married Filing Jointly
  3. Married Filing Separately
  4. Other

Line 2 Claiming Credit

Enter the number listed below to identify the person claiming the credit.

  1. You
  2. Spouse
  3. You and Spouse

Line 3 Qualifying Taxable Income

Enter the total taxable income from all of the following categories that apply to you to the extent that this income was taxed by the other state:

  • Earned or business income derived from sources outside Virginia that is subject to tax by Virginia as well as another state;
  • Gain from the sale of a principal residence outside Virginia that was included in your federal adjusted gross income;
  • Gain from the sale of any capital asset not used in a trade or business.
  • Income on which corporation income tax was 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 some states, the tax is computed on total taxable income (from all sources) and then reduced by an allocation percentage. In these cases, you must multiply the total taxable income shown on the other state's return by the allocation percentage to determine the amount of income to enter on this line.

Line 4 Virginia Taxable Income

Enter the amount of Virginia taxable income from Line 14 of Virginia Form 760. If you filed separately in the other state, but are filing jointly in Virginia, enter only the Virginia taxable income attributable to the filer whose income was taxed by the other state.

Line 5 Qualifying Tax Liability

Enter the amount of tax liability reflected on the return you filed with the other state.

Line 6 Identify the State

Enter the 2 character postal abbreviation for the other state.

Line 7 Virginia Income Tax

Enter the amount of Virginia income tax from Line 17 of Virginia Form 760. If you filed separately in the other state, but are filing jointly in Virginia, enter the Virginia income tax due on the amount of Virginia Taxable Income reported on Line 14. Use the tax tables or the tax rate schedule to determine the amount of tax.

Line 8 Income Percentage

Divide the amount of Qualifying Taxable Income by the Virginia Taxable Income. Round the number to one decimal place. The income percentage cannot exceed 100%.

Line 9 Virginia Ratio

Multiply the amount of Virginia income tax by the income percentage.

Line 10 Credit

Enter the lesser of qualifying tax liability or Virginia ratio. Enter the total credit claimed on Line 22 of Form 760.

If claiming more than one credit, continue to Line 11 of Schedule OSC and enter the total of all credits for taxes paid to other states on Line 22 of Form 760.

Note: The sum of all nonrefundable credits claimed cannot exceed your tax liability as shown on Line 17 of Form 760. Nonrefundable credits include the Tax Credit for Low Income Individuals and Credit for Tax Paid to Another State.

About Virginia Schedule CR

Each section of Schedule CR notes the carryover period, if any, that applies to the credit. As a general rule, the maximum nonrefundable credit available is the amount on Schedule CR, Section 1, Part 1, Line 1A, reduced by the other credits claimed, regardless of the order on Schedule CR. There are five refundable credits: Virginia Coal Employment and Production Incentive Tax Credit, Coalfield Employment Enhancement Tax Credit (computed on Form 306), Motion Picture Production Tax Credit, Agricultural Best Management Practices Tax Credit and Research and Development Expenses Tax Credit. These refundable credits are reported in Section 3 of Schedule CR. The combined total of nonrefundable and refundable credits is entered on Form 760, Line 23; Form 760PY, Line 25; or Form 763, Line 25.

If the total of your nonrefundable credits is larger than the balance of the maximum nonrefundable credit available, the following rules will ensure that you receive the maximum benefit of your credits:

  • Claim nonrefundable credits without a carryforward provision (such as the credit for political contributions) first;
  • Claim carryover credits from prior years next (in expiration order);
  • Utilize current year credits in the order of their carryover provision next;
  • Then report any unused credits as carryovers for succeeding taxable years to the extent allowed by law.

Partners of a partnership, shareholders of an S corporation, and members of a limited liability company may claim the amount of credit passed through to them by the partnership, S corporation, or limited liability company. Generally, distributions of a credit by a partnership, S corporation, or limited liability company to its partners, shareholders, or members are in proportion to their ownership or interest in the partnership, S corporation, or limited liability company. Any partnership, S corporation, or limited liability company distributing a credit to its partners, shareholders, or members must give each owner a Schedule VK-1.

MAXIMUM NONREFUNDABLE CREDITS

The total nonrefundable credits claimed on Schedule CR may not exceed the amount of tax shown on your return less the total amount reported for the spouse tax adjustment, credit for tax paid to another state, and credit for low-income individuals or Virginia earned income credit.

CREDIT DESCRIPTIONS

Trust Beneficiary Accumulation Distribution Credit

If only claiming the credit set forth under Va. Code § 58.1-370 on Schedule CR, enter the amount of this credit on Form 760, Line 23, Form 760PY, Line 25 or Form 763, Line 25. Write "Trust Beneficiary Accumulation Distribution Credit" to the left of the entry box. If you are claiming other credits on Schedule CR, add the amount of this credit to the total on Schedule CR, Section 2, Line 1A. A schedule showing the credit computation must be attached to your return.

Enterprise Zone Act Credit

Businesses located within an Enterprise Zone that have initiated use of the Enterprise Zone General Income Tax Credit or have a signed agreement with the Commonwealth regarding the use of such credits in place by July 1, 2005, may be eligible based on job creation to take a credit against the tax due on zone taxable income in an amount of 80% of the tax due for the first year and 60% of the tax due for the second through the tenth years. Excess general tax credit, if any, may not be carried forward. Such credits are authorized through fiscal year 2019.

In addition, businesses located within an Enterprise Zone that have initiated use of the Zone Investment Tax Credit or have a signed agreement with the Commonwealth regarding the use of such credits in place by July 1, 2005, may be eligible for a credit against zone taxable income. The investment credit can be carried forward until the full amount is used. Such credits are authorized through fiscal year 2019.

If the annual tax credit requested exceeds the annual appropriation, the Virginia Department of Housing and Community Development will issue a proportionate amount to each qualified business firm requesting the credits. Complete Form 301 and attach to Schedule CR to claim this credit.

For qualification forms and additional information, contact: Virginia Department of Housing and Community Development, Office of Community Revitalization & Development, Main Street Centre, 600 East Main Street, Suite 300, Richmond, VA 23219, or call 804-371-7121.

Neighborhood Assistance Act Tax Credit

The Virginia Neighborhood Assistance Act provides tax credits to businesses that donate money, property, limited professional services and contracting services directly to pre- approved Neighborhood Assistance Program organizations whose primary function is to benefit low income families, including but not limited to scholarships for K through 12 students attending nonpublic schools. Individuals may receive a credit for a donation of cash or marketable securities to an eligible organization. Licensed veterinarians, physicians, dentists, nurses, nurse practitioners, physician assistants, chiropractors, optometrists, dental hygienists, pharmacists, professional counselors, clinical social workers, clinical psychologists, marriage and family therapists, and physical therapists who donate their services for an approved clinic may also be eligible for credits. Excess donor credit, if applicable, may be carried forward for the next five taxable years. The amount of credit attributable to a partnership or S corporation shall be allocated to the partners and shareholders in proportion to their ownership or interest in the partnership or S corporation. For a list of approved organizations or additional information, contact the Virginia Department of Social Services, Neighborhood Assistance Program, 801 E. Main Street, Richmond, VA 23219-3301 or the Virginia Department of Education, P.O. Box 2120, Richmond, VA 23218-2120, Division of Finance and Operations, Attn: Neighborhood Assistance Tax Credit Program for Education.

Recyclable Materials Processing Equipment Credit

For taxable years beginning on or after January 1, 2008, and before January 1, 2015, an income tax credit may be claimed for purchases made during the taxable year for machinery and equipment used exclusively in or on the premises of manufacturing facilities or plant units which manufacture, process, compound or produce items of tangible personal property from recyclable materials within the Commonwealth for sale. For the purposes of determining "purchase price paid," the taxpayer may use the original total capitalized cost of such machinery and equipment, less capitalized interest. The credit is 10% of such expenditures and cannot exceed 40% of the taxpayer's Virginia income tax liability for the year, computed prior to computing the credit. Any amount unused this year may be carried forward for the next ten taxable years.

The Virginia Department of Environmental Quality (DEQ) administers the certification of all recycling machinery and equipment. To claim this credit, you must have received pre- approval from DEQ certifying the equipment. Attach your certified DEQ Form 50-11S along with purchase receipts and invoices for the equipment purchase to the income tax return in order to receive the credit. For additional information on how to qualify for certification, contact the Department of Environmental Quality, Equipment Certification Officer, P.O. Box 1105, Richmond, VA 23218 or call 804-698-4145.

Conservation Tillage Equipment Credit

This credit may be claimed by an individual purchasing and using conservation tillage equipment for the purpose of agricultural production. The tax credit is 25% of conservation tillage equipment expenditures made, or $4,000, whichever is less. The term conservation tillage equipment means no- tillage planters and drills designed to reduce soil compaction, (including guidance systems to control traffic patterns that are designed to minimize soil disturbance) which may be attached to equipment already owned. Any amount unused this year may be carried over to the next five taxable years.

Attach a statement to your return showing purchase date, description and credit computation when claiming this credit.

Precision Fertilizer and Pesticide Application Equipment Credit

The Precision Fertilizer and Pesticide Application Equipment Credit is 25% of all expenditures for equipment certified by the Virginia Soil and Water Conservation Board as providing more precise pesticide and fertilizer application, or $3,750, whichever is less. Qualifying individuals must be engaged in agricultural production for market and have in place a nutrient management plan approved by the local Soil and Water Conservation District. Any unused credit may be carried forward for the next five taxable years.

Rent Reduction Program Credit

This credit expired December 31, 2010. Only carryover credits from prior years are allowed. For additional information, contact: Brenda Hawkins, Virginia Housing Development Authority, 601 S. Belvidere Street, Richmond, VA 23220- 6504 or call 804-343-5763.

Clean-Fuel Vehicle and Vehicle Emissions Testing Equipment Credits

An income tax credit may be claimed for purchases of vehicle emissions testing equipment and clean-fuel vehicles made while you were a Virginia resident.

The Clean-Fuel Vehicle Credit is equal to 10% of the deduction allowed under Internal Revenue Code § 179A for purchases of clean-fuel vehicles principally garaged in Virginia or certain refueling property placed in service in Virginia or 10% of the costs used to compute the credit under Internal Revenue Code § 30. The Vehicle Emissions Testing Equipment Credit is 20% of the purchase or lease price paid during the taxable year for equipment certified by the Department of Environmental Quality (DEQ) for vehicle emissions testing within a locality that is required by law to implement an enhanced vehicle emissions inspection program or, after January 1, 1998, within any locality adjacent to those localities required to implement the program.

Clean Fuel Vehicle Credit - You are not required to submit a specific form as part of your tax return to document the purchase of a clean-fuel vehicle. However, you should retain documentation to support your claim for the tax credit as an audit may be conducted to verify any credit claimed under these provisions.

Vehicle Emissions Testing Equipment Credit - Attach a copy of the letter from DEQ to the equipment vendor certifying that the equipment configuration meets the regulation and equipment specification requirements for use in the enhanced vehicle emissions inspection program. For a copy of this letter, contact your equipment vendor or the DEQ Northern Virginia Regional Office in Woodbridge at 703-583-3900. You are not required to submit a specific form for the Vehicle Emissions Testing Equipment Credit.

Major Business Facility Job Tax Credit

Individuals, estates, trusts, corporations, banks, insurance companies and telecommunications companies may claim a Virginia tax credit if the taxpayer creates at least 50 new full- time jobs in connection with the establishment or expansion of a major business facility, and the company is engaged in a qualifying industry in Virginia. 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 50 to 25. Credits will be recaptured proportionately if employment decreases during the five years following the initial credit year.

This nonrefundable credit is equal to $1,000 per qualifying new job in excess of the 50/25 job threshold in enterprise zones or economically distressed areas. This credit is spread over two years for taxpayers whose credit year begins January 1, 2009 through December 31, 2014. The credit only applies to facilities where an announcement to expand or establish such a facility was made on or after January 1, 1994. The credit must be claimed ratably beginning with the taxable year following the year in which the facility is established or expanded, or the new qualifying jobs are added. Unused credits may be carried forward for the next ten taxable years. A qualified business firm receiving an Enterprise Zone Job Creation Grant under Va. Code § 59.1-547 shall not be eligible to receive a Major Business Facility Job Tax Credit for any job used to qualify for the Enterprise Zone Job Creation Grant.

To apply for this credit, complete Form 304. All applications must be submitted to the Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715 90 days prior to the due date of your return. A letter will be sent to certify the credit. To claim this credit, complete Section 1, Part 9 of Schedule CR.

Foreign Source Retirement Income Tax Credit

A credit is available to Virginia residents who paid income tax to a foreign country on pension or retirement income derived from past employment in a foreign country provided such income is included in Virginia taxable income for the taxable year. For purposes of computing the credit, the foreign currency must be translated 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. If you filed separately in the foreign country, but are filing jointly in Virginia, enter only the Virginia taxable income attributable to the filer whose income was taxed by the foreign country. For the purposes of this credit, possessions of the U.S. are considered foreign countries. Any foreign country that does not qualify for the federal tax credit (under IRC § 901(j)) does not qualify for this Virginia credit. To claim this credit, complete Schedule CR and attach a copy of the return filed in the foreign country or other proof of tax payment to the foreign country.

Historic Rehabilitation Tax Credit

Individuals, estates, partnerships, trusts or corporations incurring eligible expenses in the rehabilitation of a certified historic structure are entitled to claim a credit against the tax imposed by Va. Code §§ 58.1-320, 58.1-360, 58.1-400, 58.1- 1200, 58.1-2500 or 58.1-2620. The credit is equal to 25% of eligible rehabilitation expenses for projects completed in 2000 and thereafter. To qualify, the cost of the rehabilitation must equal at least 50% (25% if the building is an owner occupied residence) of the assessed value of the building for local real estate tax purposes in the year preceding the start of the rehabilitation. Any unused credit may be carried forward for ten years. The rehabilitation work must be certified by the Virginia Department of Historic Resources as consistent with the Secretary of the Interior's Standards for Rehabilitation. Applications for certification may be obtained from the Virginia Department of Historic Resources, 2801 Kensington Avenue, Richmond, VA 23221, 804-367-2323, or visit www.dhr.virginia.gov.

Day-Care Facility Investment Tax Credit

A credit is allowed in an amount equal to 25% of the expenditures paid or incurred to establish a day-care facility for the children of employees, not to exceed $25,000. The total credits approved may not exceed $100,000 in any fiscal year. To be eligible for the credit: (1) the facility must 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 prior to claiming the credit. To apply, submit a letter of application that specifies the employer's name, location of the facility and certification of items (1)-(3) above. Send the application to: Virginia Department of Taxation, Tax Credit Administration Unit, P.O. Box 715, Richmond, VA 23218-0715. Applications are approved in the order received. Approved applicants will receive an approval form from the department. To claim the credit, complete Section 1, Part 12, of the Schedule CR. This credit is nonrefundable but excess credit may be carried forward for three years.

For additional information contact the Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715 or call 804-786-2992.

Low-Income Housing Tax Credit

The Board of Housing and Community Development stopped approving Low-Income Housing Credits beginning June 30, 2010. Only carryover credits from prior years are allowed. For additional information, contact the Department of Housing and Community Development at 804-371- 7117.

Qualified Equity and Subordinated Debt Investments Credit

Taxpayers making a "qualified investment" in the form of equity or subordinated debt in a "qualified business" may be eligible for this credit. Businesses may apply for designation as a qualified business using Form QBA. The qualification is valid only for the calendar year of the application. Therefore, the business needs to reapply each year for qualification. To qualify, the business must (1) have annual gross revenues of no more than $3 million in its most recent fiscal year, (2) have its principal office or facility in the Commonwealth, (3) be engaged in business primarily in or having substantially all of its production in the Commonwealth and (4) have 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).

The credit equals 50% of the qualified business investments made during the taxable year. For the 2010 taxable year, the total amount of credit granted is limited to $5 million. For the 2011 taxable year, the total amount of credit granted is limited to $3 million. For taxable years beginning with 2012, the total amount of credit granted is limited to $4 million. Beginning in 2009, one-half of this amount must be allocated to commercialization investments and the other half is available for all other qualifying investments. If credit applications for either half exceed the allowed amount, the credits for that half will be prorated. If credit applications for either half are less than the allowed amount, the balance will be available for allocation to the other type of credits. The total amount of credit that may be used per taxpayer per taxable year may not exceed $50,000. The credit is nonrefundable. Unused credits may be carried forward up to 15 years. Equity and debt investments held in connection with a qualified business investment must be held by the investor for at least three full calendar years following the calendar year for which the credit is allocated except in certain instances. If the holding period is not met, the unused credit amount will be forfeited, and an assessment will be issued for the amount used to which shall be added interest, computed at the rate of one percent per month, compounded monthly from the date the tax credits were claimed.

Taxpayers cannot receive a grant from the Small Business Investment Grant Fund and claim the Qualified Equity and Subordinated Debt Investments Tax Credit for the same investment.

This credit requires pre-approval by the Department of Taxation. Investors must apply to the Department by April 1 of the year following the year the investment was made using Form EDC. Taxpayers filing Form EDC after April 1 will be denied this credit. All approved investors filing a timely Form EDC will be notified of the allowable credit by June 30. Since the tax return of most individuals is due May 1, most investors will need to file a return on extension or amend their original return to claim the credit.

Pass-Through Entities must file Form PTE with the Department of Taxation at least 60 days before filing their income tax return. A copy of the certification letter from the Department of Taxation is a required attachment to Form PTE.

Visit our website at www.tax.virginia.gov to obtain Form QBA, Form EDC and Form PTE. Information on the application process is also available from the Virginia Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715, or call 804-786-2992.

Worker Retraining Tax Credit

This credit allows an employer to claim a tax credit for the training costs of providing eligible worker retraining to qualified employees. "Eligible worker retraining" includes noncredit courses that are approved by the Department of Business Assistance and that are provided by any of the Commonwealth's community colleges or a private school. Eligible worker retraining programs also include courses (credit, noncredit) undertaken through an apprenticeship agreement approved by the Virginia Apprenticeship Council. The credit is 30% of all training costs through a community college, or up to $100 annual credit for each employee if incurred at a private school. Employers must apply for certification of the amount of allowable credit using Form WRC, Worker Retraining Tax Credit, by April 1 of the year following the year in which the training expenses were paid or incurred, before claiming the credit on their income tax return. All approved businesses filing a timely Form WRC will be notified of their allowable credit by June 30. The maximum Worker Retraining Credits granted to all employers is limited to $2,500,000 annually. If the total credits approved exceed this amount, each will be prorated. The credit is allowable against individual income tax, fiduciary income tax, corporation income tax and the bank franchise tax. The credit is also allowable against taxes imposed upon insurance companies and utility companies (under Va. Code §§ 58.1-2500 et seq. and 58.1-2620 et seq. This credit is nonrefundable, but excess credit may be carried forward for the next three taxable years. To claim this credit, complete Section 1, Part 16 of Schedule CR. For information on pre-approved apprenticeship programs, contact the Virginia Department of Labor and Industry at 804-225-4362. For information on noncredit course approval, contact: Virginia Department of Business Assistance, P. O. Box 446, Richmond, VA 23218- 0446, or call 804-371-8120.

Waste Motor Oil Burning Equipment Credit

A business that operates a business 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 during the taxable year, provided that the equipment is used exclusively for burning waste motor oil at the business facility. The total credit allowed to any taxpayer in any taxable year of purchase is limited to $5,000. Taxpayers successfully applying for equipment certification with the Department of Environmental Quality by filing Form DEQ 50-12 will receive a statement from that agency certifying that the equipment is used for burning waste motor oil. For additional information concerning equipment qualifying for this credit or to apply for tax credit certification, contact: Virginia Department of Environmental Quality, Attention: Equipment Certification Officer, P. O. Box 1105, Richmond, VA 23218, or call 804- 698-4145.

Long-Term Care Insurance Tax Credit

An individual may claim a credit equal to 15% of the amount paid by the individual during the taxable year in eligible 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 of eligible premiums that may be used as a basis for this credit, the individual must subtract any amount actually included as a deduction on Line 4 of Schedule A of the individual's federal income tax return. In addition, the individual may not claim this credit to the extent the same 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. See the example below.

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 six 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 six months of premiums that were not used as a basis for the credit. For more information, contact: Virginia Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715, or call 804-786-2992.

Biodiesel and Green Diesel Fuels Tax Credit

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.

Form BFC is used to apply to the Virginia Department of Taxation for a Biodiesel Fuels Credit after the Department of Mines, Minerals, and Energy has certified that you have satisfied all the requirements of Va. Code § 58.1-439.12:02.

The amount of the credit is $0.01 per gallon, not to exceed $5,000 annually. Any credit not used for the taxable year may be carried over to the next three taxable years. The amount of the credit allowed cannot exceed the tax liability for the tax year the credit is being claimed.

The amount of the credit attributable to a partnership, electing small business corporation (S corporation), or limited liability company 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. For more information, contact: Virginia Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218-0715, or call 804-786-2992.

Livable Home Tax Credit

Individuals or licensed contractors may be eligible for an income tax credit of up to $5,000 for the purchase/construction of a new accessible residence or up to 50% of the cost of retrofitting activities on an existing residence not to exceed $5,000. Any tax credit that exceeds the eligible individual's or licensed contractor's tax liability may be carried forward for up to seven years. If the total amount of tax credits issued under this program exceeds $1 million in a fiscal year, Virginia Department of Housing and Community Development (DHCD) will prorate the amount of credits among the eligible applicants. Individuals or licensed contractors must obtain pre- approval before claiming the credit on their income tax returns. Applications are to be filed with the DHCD by February 28 of the year following the year in which the purchase/construction or retrofitting was completed. Documentation must be submitted with the application. If you are using a carryforward amount from the Home Accessibility Tax Credit/Livable Home Tax Credit, please enter that amount in Section 1, Part 20, Line B. For more information, contact: Virginia Department of Housing and Community Development, Special Needs Housing, Main Street Centre, 600 East Main Street, Suite 300, Richmond, VA 23219, or call 804-371-7124.

Riparian Forest Buffer Protection for Waterways Tax Credit

Individuals, grantor's trusts and corporations may qualify for an income tax credit of 25% of the value of the timber on an area designated as a riparian buffer for a waterway. The credit may not exceed $17,500 or the total amount of tax, whichever is less. To apply for this credit, file Department of Forestry (DOF) Form 179 with DOF or apply online at www.dof.virginia.gov.

A riparian buffer is land adjacent to a waterway on which timber may be harvested. In order to receive the credit, the owner of such land must refrain from harvesting more than 50% of such timber. The buffer must be at least 35 feet wide and no more than 300 feet. There must be a Stewardship Plan and annual certification of compliance for each tract. The buffer must remain in place for at least fifteen years. The land that is the subject of this credit cannot be the subject of this credit again for fifteen years after it was first taken. The credit may be carried over for the succeeding five taxable years. For more information contact: Virginia Department of Forestry, 900 Natural Resources Dr., Suite 800, Charlottesville, VA 22903, or call 434-977-6555.

Land Preservation Tax Credit

This tax credit is for 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 in perpetuity.

Credits granted prior to 2007 are 50% and the credits granted for 2007 and beyond are 40% of the fair market value, as substantiated by a "qualified appraisal" prepared by a "qualified appraiser", as those terms are defined under applicable federal law and regulations governing charitable contributions. The credit limit for a taxpayer has been $100,000. However, for taxable years 2009, 2010 and 2011 the total amount of credit that may be used per taxpayer per taxable year may not exceed $50,000 or the tax liability, whichever is less. The credit limit is $100,000 for the 2012 taxable year and for each taxable year thereafter. For taxpayers affected by the 2009 and 2010 usage limit, an additional 2 year carryforward will be added to the credit. For taxpayers affected by the 2011 usage limit, an additional 3 years carryforward will be added to the credit. Any unused credit not affected by the carryforward will retain the original carryforward periods (5 years for donations originating prior to January 1, 2007 and 10 years for donations originating on or after January 1, 2007).

Any taxpayer holding a Land Preservation Tax Credit that originated on or after January 1, 2002, may transfer unused but otherwise allowable credit for use by another taxpayer on Virginia income tax returns. Transfers and pass-through allocations derived from donations recorded on or after January 1, 2007, are subject to a fee. See Schedule A of Form LPC-1 or Form LPC-2 for further information.

If this credit is taken, then for the next three years taxpayers cannot take a subtraction for the gain on the sale of land or easements dedicated to open-space use. A subtraction is allowed for any gain or income recognized by a taxpayer on the application of a Land Preservation Tax Credit against a Virginia income tax liability to the extent the gain is included in and not otherwise subtracted from federal adjusted gross income. The transfer of the credit and its application against a tax liability shall not create gain or loss for the transferor or the transferee.

Before claiming the credit, complete and file Form LPC-1 and/or Form LPC-2 with the Department of Taxation at least 90 days before filing an annual return. Additionally, applicants filing for tax credits of $1 million or more must apply to the Department of Conservation and Recreation to receive verification of the conservation value. The Department of Taxation will issue a letter acknowledging the amount of the credit. For assistance contact the Virginia Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715, or call 804-786-2992.

Community of Opportunity Tax Credit

Community of Opportunity Tax Credit provides Virginia income tax credits to landlords with qualified housing units located in census tracts with poverty rates of less than ten percent in the Richmond Metropolitan Statistical Area who participate in the Housing Choice Voucher program.

The amount of tax credit for an eligible property will be based on ten percent of annual fair market rent for that specific unit and prorated when units are qualified for less than the full tax year. Prorations will be based on full calendar months. A landlord may receive tax credits on one or more units within the same tax year. Credits taken for any one tax year cannot exceed the tax liability for that year. Credits not taken for the year for which they are allocated may be carried forward, but cannot be carried forward for more than five years.

Should eligible applications received by the March 1 deadline exceed the annual appropriation, tax credits will be prorated based on the total amount of qualified requests received and the total amount of credits available. If the annual appropriation for tax credits is not fully allocated based on qualified applications received by the March 1 deadline, the remaining balance will be allocated on a first-come first served basis. Unused balances will not be allocated more than three years after the tax year in which they were first made available.

Credits granted to a partnership, limited liability company, or electing small business corporation (S corporation) shall be allocated to the individual partners, members, or shareholders in proportion to their ownership or interest in such business entity. The landlord must assume responsibility for distributing credits in this manner. No person shall be allowed a tax credit under Va. Code § 58.1-339.9 (Rent Reductions Tax Credit) and the Community of Opportunity Tax Credit tax credit for the rental of the same dwelling unit in a taxable year.

For additional information, please contact: Virginia Department of Housing and Community Development, Main Street Centre, 600 East Main Street, Suite 300, Richmond VA 23219, or call 804-371-7000.

Green Jobs Creation Credit

For taxable years beginning on and after January 1, 2010, but before January 1, 2015, a $500 income tax credit is allowed for the creation of "green" jobs paying an annual salary in excess of $50,000. Each taxpayer is allowed a credit for up to 350 new green jobs. In order to qualify for the tax credits, the taxpayer must have created the green job and filled it during the taxable year in which the credit is claimed. The credit is allowed for the taxable year in which the job has been filled for at least one year and for each of the four succeeding taxable years provided the job is continuously filled during the respective taxable year. Any unused tax credits may be carried over for 5 taxable years.

To apply for this credit, complete Form GJC. All applications must be submitted to the Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715, 90 days prior to the due date of your return. A letter will be sent to certify the credit. To claim the credit you must complete Section 1, Part 24 of Schedule CR.

For assistance contact the Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715 or call 804-786-2992.

Political Contributions Credit

Establishes a tax credit for individuals who make contributions to candidates for state or local political office equal to 50% of the amount of the contribution, subject to a $25 limit for individuals and a $50 limit for married taxpayers filing jointly.

Farm Wineries and Vineyards Tax Credit

An individual and corporate income tax credit is available for Virginia farm wineries and vineyards in an amount equal to 25% of the cost of all qualified capital expenditures made in connection with the establishment of new Virginia farm wineries and vineyards and capital improvements made to existing Virginia farm wineries and vineyards.

The total amount of tax credits available for a calendar year cannot exceed $250,000. If applications for this credit exceed $250,000, the Department of Taxation will allocate the credits on a pro rata basis. Any credit amounts that exceed a taxpayer's liability can be carried forward for ten years. Taxpayers cannot claim both this credit and a federal deduction for the same expenses under IRC § 179.

The business must apply by April 1st using Form FWV. Submitting a late application will disqualify you from the credit. All applications must be sent to the Virginia Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218- 0715. 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.

For assistance contact the Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715 or call 804-786-2992.

International Trade Facility Tax Credit

An income tax credit is allowed for either increasing jobs related to an international trade facility or capital investment in an international trade facility. Taxpayers can elect to claim either credit, but cannot claim both credits in the same taxable year. The amount of the credit is equal to $3,500 per new qualified full-time employee that results from increased qualified trade activities by the taxpayer or two percent of the amount of capital investment made by the taxpayer to facilitate the increased eligible trade activities.

No more than $250,000 in tax credits can be issued in any fiscal year. If the amount of tax credits requested exceeds $250,000, the credits will be allocated proportionately among all qualified taxpayers. The Virginia Department of Taxation will determine the credit amount for the taxable year and provide a written certification to each taxpayer. The amount of the credit will be limited to fifty percent of the taxpayer's tax liability for the taxable year. Any unused credit amount can be carried forward for ten years.

The business must apply by April 1st using Form ITF. Submitting a late application will disqualify you from the credit. All applications must be sent to the Virginia Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218- 0715. 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. For assistance contact the Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715 or call 804-786-2992.

Port Volume Increase Tax Credit

An individual and corporate income tax credit is available for taxpayers engaged in the manufacturing of goods or the distribution of manufactured goods that use Virginia maritime port facilities and increase port cargo volume through these facilities.

To qualify for the credit, a taxpayer must generally increase its port cargo volume at Virginia port facilities in a single calendar year by 5% over its base year port cargo volume. Base year port cargo volume is equal to the total amount of net tons of noncontainerized cargo or 20-foot equivalent units (TEUs) of cargo actually transported by way of a waterborne ship or vehicle through a port facility during the 2011 calendar year or the first calendar year in which it meets the requirements of 75 tons of noncontainerized cargo or 10 loaded TEUs. The amount of the credit is generally equal to $50 for each TEU above the base year port cargo volume. However, a qualifying major facility may apply for a credit equal to $50 for each TEU transported through a port facility during the major facility's first calendar year.

Any taxpayer claiming this credit must first submit an application to the Virginia Port Authority by March 1 of the calendar year after the taxable year in which the increase in port cargo volume occurs. The maximum amount of tax credits is capped at $3.2 million for each calendar year. If, on March 15 of each year, the cumulative amount of tax credits requested by qualifying taxpayers for the prior year exceeds $3.2 million, the credits will be prorated among the qualifying taxpayers who requested the credit. A qualifying taxpayer is generally not permitted to receive more than $250,000 each calendar year. However, if, on March 15 of each year, the $3.2 million credit amount is not fully allocated among qualifying taxpayers, those taxpayers who have already been allocated a credit for the prior year are allowed a pro rata share of the remaining credit amount. Any unused tax credits may be carried over for five taxable years.

For more information, contact: Virginia Port Authority, 600 World Trade Center, Norfolk, VA 23510, or call 800-446-8098.

Barge and Rail Usage Tax Credit

An income tax credit is allowed for transporting cargo containers by barge and rail rather than by trucks or other motor vehicles on the Commonwealth's highways. The amount of the credit is $25 per 20-foot equivalent unit or 16 tons of noncontainerized cargo moved by barge or rail rather than by trucks or other motor vehicles on Virginia's highways. Containers for which this credit is claimed must result from a diversion of shipments from the highways. To receive a credit, an international trade facility is required to apply to the Virginia Department of Taxation. No more than $1.5 million in tax credits can be issued in any fiscal year. The Department will determine the allowable credit amount for the taxable year and provide a written certification of the credit amount to each taxpayer.

The business must apply by April 1st using Form BRU. Submitting a late application will disqualify you from the credit. All applications must be sent to the Virginia Department of Taxation, Tax Credit Unit, P.O. Box 715, Richmond, VA 23218- 0715. 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. For assistance contact the Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715 or call 804-786-2992.

Telework Expenses Tax Credit

The Telework Expenses Tax Credit is an individual and corporate income tax credit for employers who (1) incur eligible telework expenses pursuant to a telework agreement or (2) conduct telework assessments. This credit is equal to the amount of expenses incurred during the January 1, 2012 to January 1, 2017 calendar years and must be for eligible telework expenses incurred during the calendar year that ends during the taxable year. The amount of the credit cannot exceed $50,000 per year for each employer.

To qualify for a credit for eligible telework expenses incurred pursuant to a telework agreement, the employer must enter into a signed telework agreement with the teleworking employee on or after July 1, 2012, but before January 1, 2017. This telework agreement must be in accordance with policies set by the Department of Rail and Public Transportation (DRPT). Such policies are available on the Telework!VA website at www.teleworkva.org. The maximum amount of expenses that can be used in determining the amount of this portion of the credit is $1,200 per employee.

The portion of the credit for telework assessment expenses is equal to the costs of preparing an assessment, not to exceed $20,000. This portion of the credit can only be claimed once by an employer.

Taxpayers may claim this credit for taxable years beginning on or after January 1, 2012, but before January 1, 2017. The aggregate amount of tax credits that will be issued is capped at $1 million annually. If credit applications exceed the $1 million cap, credits will be allocated on a pro rata basis.

The amount of credit claimed cannot exceed the tax liability of the taxpayer. There is no carryforward of any unused credit. Accordingly, even if a taxpayer is granted a credit amount, he must have sufficient tax liability in order to claim the full credit amount. If the amount of credit granted exceeds the taxpayer's tax liability, he may only claim the credit up to the amount of his tax liability for the taxable year. To be eligible for this credit, the employer is not allowed to deduct the qualified expenses in any taxable year. If these expenses are deducted for federal purposes, they will need to be included as an addition on the Virginia return. Taxpayers are not eligible for this tax credit if any other income tax credit is claimed for the same expenses.

To qualify for the credit, the employer cannot claim another Virginia income tax credit on the jobs, wages or other expenses for the same employee.

Taxpayers are required to apply to the Department of Taxation to reserve a portion of the credit. The reservation application must be filed between September 1 and October 31 of the year preceding the taxable year for which the tax credit is earned. The Department of Taxation will provide tentative approval by December 31. If the applications for the credit exceed the cap, the credits will be allocated to taxpayers on a pro rata basis. To be eligible to claim the credit a Telework Expenses Tax Credit Confirmation Application, must be filed by April 1 of the year following the calendar year that the eligible expenses were incurred.

Information on the application process is available from the Virginia Department of Taxation, Tax Credit Unit, P. O. Box 715, Richmond, VA 23218-0715, or call 804-786-2992.

Coalfield Employment Enhancement Tax Credit

For taxable years beginning on or after January 1, 1996, but before January 1, 2017, a tax credit may be earned by individuals, estates, trusts and corporations who have an economic ownership interest in coal mined in Virginia. Credits may be claimed for taxable years beginning on or after January 1, 1999. Compute the allowable credit on Form 306 and report it on Schedule CR for the tax year in which the credit is claimed and/or earned.

Virginia Coal Employment and Production Incentive Tax Credit

This credit may be allocated between a qualifying electricity generator and qualifying person with an economic interest in coal. The allocation of this credit may not exceed $3 per ton. All credits earned on or after January 1, 2006, or prior to July 1, 2016, which are allocated to persons with an economic interest in coal may be redeemed by the Tax Commissioner if the credits exceed the taxpayer's state tax liability for the applicable taxable year. You must complete the Form 306, Form 306T and its attachments to claim this credit.

Motion Picture Production Tax Credit

Qualifying motion picture production companies are eligible to receive a series of refundable individual and corporate income tax credits in the aggregate amount of $2.5 million for the 2010-2012 biennium and $5 million for any biennium thereafter.

Base-Income Tax Credit: The base credit available is 15% of all qualifying expenses (including wages), with a bonus of 5% if the production is filmed in an economically distressed area of the Commonwealth, making the total base credit available up to 20% of qualifying expenses.

Additional Virginia Resident Credit: The production company is allowed an additional credit of 10 to 20% of the total aggregate payroll for Virginia residents employed in connection with the motion picture production. For companies that spend at least $250,000 in total production costs in the Commonwealth, but not more than $1 million, the credit will equal 10% of the total Virginia resident aggregate payroll. For companies that spend over $1 million in total production costs in the Commonwealth, the credit will equal 20% of the total aggregate Virginia resident payroll.

Additional Virginia Resident First-Time Industry Employee Credit: In addition to the above outlined credits, companies may claim a credit of 10% of their total aggregate payroll for Virginia residents who are employed as first time actors or first time members of a production crew in connection with a production in Virginia.

The aggregate amount of all motion picture credits to be issued is capped at $2.5 million for the 2010-2012 biennium and $5 million in each biennium thereafter. To qualify for this credit, production companies must submit an initial application to the Virginia Film Office ("VFO") at least 30 days prior to production and must enter into a Memorandum of Understanding. After production is complete, the production company must submit documentation to the VFO and will be issued a certification letter. A taxpayer may only claim this credit after receiving the certification letter from the VFO. For more information, contact: Virginia Film Office, 901 East Byrd Street, Richmond, VA 23219-4048, or call 800-854-6233.

Credits available through the Virginia Motion Picture Production Tax Credit are offered in addition to other Virginia production incentives. For additional information regarding all available funding assistance for Virginia productions, please refer to the Virginia Film Office's website (http://FilmVirginia.org).

Agricultural Best Management Practices (BMP) Tax Credit

This credit is available to qualified taxpayers engaged in agricultural production for market or having equines that create needs for agricultural best management practices to reduce nonpoint source pollutants who have in place a soil conservation plan approved by the local Soil and Water Conservation District (SWCD). The credit is 25% of the first $70,000 expended for agricultural best management practices approved by the local SWCD. The maximum credit is $17,500 or the total amount of state income tax obligation of the individual. Effective for tax years beginning on and after January 1, 2011, this credit is refundable to individual taxpayers. The credit is still non- refundable to corporate taxpayers. Individual taxpayers who had a carryforward amount from credits claimed in 2006, 2007, 2008, 2009, or 2010 are permitted to claim that carryforward amount on their 2011 return and will receive a refund for any excess amount of the carryforward. Individual taxpayers who had a carryforward amount from credits claimed prior to 2006 are not permitted to claim that carryforward amount on their 2011 return. If a pass-through entity (PTE) distributes this credit to an individual partner, shareholder, or member, the amount of the Agricultural Best Management Practices Tax Credit listed on the individual's Schedule VK-1 is refundable and should be claimed in Section 3, Part 3 of the Schedule CR. Any amount distributed by a PTE to a corporate partner, shareholder, or member is non-refundable. For additional information about eligible BMPs, contact your local Soil and Water Conservation District Office.

For additional tax return related information visit our website at www.tax.virginia.gov, or call the Virginia Department of Taxation at 804-786-2992.

Research and Development Expenses Tax Credit

A refundable individual and corporate income tax credit is allowed for qualified research and development expenses for taxable years beginning on or after January 1, 2011, but before January 1, 2016. The tax credit is equal to (i) 15% of the first $167,000 in Virginia qualified research and development expenses, or (ii) 20% of the first $175,000 of Virginia qualified research and development expenses if the research was conducted in conjunction with a Virginia public or private college or university, to the extent the expenses exceed a base amount. There is a $5 million cap on the total amount of credits allowed in any fiscal year. If the total amount of approved tax credits is less than the $5 million limit, the Department of Taxation will allocate the remaining amount to the taxpayers already approved for the tax credits for the taxable year for 15% of the second $167,000 in Virginia qualified research expenses or 20% of the second $175,000 in Virginia qualified research expenses if the research was conducted in conjunction with a Virginia public college or university to the extent the expenses exceed the Virginia base amount, on a pro rata basis.

The business must apply by April 1st using Form RDC. 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. This credit requires certification from the Tax Credit Unit in order to be claimed on your tax return. A letter will be sent to certify the credit.

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 in the business entity using Form PTE within 30 days after the credit is granted.

Any taxpayer that is allowed a Research and Development Expenses Tax Credit is not allowed to use the same expenses as the basis for claiming any other Virginia tax credit. If the taxpayer conducts research and development in Virginia on human cells or tissue derived from induced abortions or from stem cells obtained from human embryos, then the credit for the approved research and development expenses will not be allowed to be refunded to the taxpayer.

If you did not conduct embryonic stem cell research in Virginia, then the tax credit is refundable. Enter the amount of the credit that is allowed on Line 4A under Section 3, Part 4 of the Schedule CR.

If you did conduct embryonic stem cell research in Virginia, then the tax credit is nonrefundable. Enter the amount of the credit that is allowed in Section 1, Part 30 of the Schedule CR.

WHAT TO ATTACH

Attachments should be included with your return when claiming original or carryover credits. Computation schedules are required for carry forward claims. Missing attachments may cause a credit to be disallowed.

  • Enterprise Zone Act Credit: Attach Form 301.
  • Recyclable Materials Processing Equipment Credit: Approved Form 50-11S from the Department of Environmental Quality as well as receipts, invoices or other documentation to confirm purchase price paid.
  • Conservation Tillage Equipment Credit: Statement showing purchase date, description and credit computation.
  • Precision Fertilizer and Pesticide Application Equipment Credit: Statement showing purchase date, description and credit computation.
  • Vehicle Emissions Testing Equipment Credit: Copy of the letter from the Department of Environmental Quality (DEQ) to the equipment vendor certifying that the equipment configuration meets the regulation and equipment specification requirements for use in the enhanced vehicle emissions inspection program. A copy of the letter may be obtained from the equipment vendor or the DEQ Northern Virginia Regional office in Woodbridge, Virginia by calling (703) 583-3900.
  • Foreign Source Retirement Income Tax Credit: Copy of the tax return filed in the other country or other proof of income tax paid to the foreign country and a schedule showing computation of foreign currency converted to United States Dollars.
  • Waste Motor Oil Burning Equipment Credit: Approved Form 50-12 from the Department of Environmental Quality, receipts, invoices or other documentation to confirm purchase price paid.
  • Biodiesel and Green Diesel Fuels Tax Credit: Attach the letter of certification from the Virginia Department of Taxation authorizing the credit.
  • Coalfield Employment Enhancement Tax Credit and Virginia Coal Employment and Production Incentive: Form 306 with completed schedules, if appropriate. See "What to Attach" on the instructions for Form 306 for additional attachment requirements and information.