Virginia Form 763 Schedule Adj Instructions
LINE INSTRUCTIONS FOR VIRGINIA SCHEDULE 763 ADJ
FIXED DATE CONFORMITY UPDATE FOR 2014
Virginia's Fixed Date Conformity with the Internal Revenue Code: Virginia's date of conformity with the federal enhanced Earned Income Tax Credit ("EITC") was extended to taxable years ending before January 1, 2018. Virginia will continue to allow taxpayers to claim either the Tax Credit for Low-Income Individuals or a credit equal to 20% of the Federal EITC that was claimed for the taxable year. Low-Income taxpayers may also continue to claim the portion of the Virginia Low-Income Tax Credit that is based on the federal EITC without making complex adjustments on their Virginia income tax returns.
During the 2014 Session, the General Assembly did not advance Virginia's date of conformity with the Internal Revenue Code, and the date of conformity remains January 2, 2013. Virginia will continue to disallow federal income tax deductions for bonus depreciation allowed for certain assets under Internal Revenue Code ("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).
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 IRC for the 2014 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 FEDERAL ADJUSTED GROSS INCOME
If you received federally tax exempt interest dividends from a regulated investment company (mutual fund) that invested in obligations both taxable and exempt for Virginia purposes, the entire dividend income must be entered as an addition unless you attach a statement provided by the fund that:
- details the amount of dividends you earned; and
- summarizes the prorations between exempt and taxable dividends (monthly breakdown is preferred).
A typical situation would involve a mutual fund that invests in bonds of several states, including Virginia. The interest on the bonds issued by the other states is taxable for Virginia purposes, even though exempt for federal purposes. Unless the taxpayer is able to substantiate the amount attributable to the Virginia bonds, the total amount of dividends exempt from federal taxation will be an addition on the Virginia return.
Line 1 - Interest on Obligations of Other States
Enter the interest not included in federal adjusted gross income, less related expenses to the extent not deducted in determining federal taxable income, on obligations of any state other than Virginia, or of a political subdivision of any such state unless created by compact or agreement to which this state is a party.
Line 2 - Other Additions
Enter on Line 2a any addition due to Fixed Date Conformity.
A. Bonus Depreciation - For an explanation, please see the section titled, Fixed Date Conformity Update. 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 from Supplemental Instructions - 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. ...................______
C. Total of Lines A and B - Enter the total of Lines A and B here and on Schedule 763 ADJ Line 2a...................______
Lines 2b - 2c - Other Additions
On Lines 2b - 2c, enter the 2-digit code listed below, followed by the amount, for any additions to federal adjusted gross income. If you have more than 2 additions on Lines 2b - 2c of Schedule 763 ADJ, enter code "00" and the total addition amount on Line 2b and attach an explanation of each addition to your return.
|10||Interest on Federally Tax-Exempt US Obligations - Enter the interest or dividends, less related expenses to the extent not deducted in determining federal taxable income, on obligations or securities of any authority, commission or instrumentality of the United States, which the laws of the United States exempt from federal income tax but not from state tax.|
|11||Accumulation Distribution Income - Enter the taxable income used to compute the partial tax on an accumulation distribution as reported on federal Form 4970.|
Lump-Sum Distribution Income - If you received a lump-sum distribution from a qualified retirement plan and elected to use the 20% capital gain election, the 10-year averaging option, or both on federal Form 4972, complete the worksheet below to determine what portion, if any, must be included as an addition on the Virginia return.
|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 deduction 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.|
|16||Telework Expenses - Individuals who claim the Virginia Telework Expenses Tax Credit are not allowed to exclude those expenses from Virginia taxable 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 included as an addition on the Virginia return.|
|17||First-Time Home Buyer Savings Accounts - To the extent excluded from federal adjusted gross income, an account holder must add any loss attributable to his or her first-time home buyer savings account that was deducted as a capital loss for federal income tax purposes. For more information, see the First-Time Home Buyer Savings Account Guidelines, available in the Laws, Rules & Decisions section of the Department's website at www.tax.virginia.gov.|
Attach an explanation for other additions.
Line 3 - Total Additions
Add Lines 2a, 2b and 2c and enter on Line 3 and on Form 763, Line 2.
SUBTRACTIONS FROM FEDERAL ADJUSTED GROSS INCOME
To the extent included in federal adjusted gross income, the following subtractions are allowed on the Virginia return. No amount previously excluded from FAGI can be claimed as a subtraction in computing Virginia taxable income. The same income may not be included in more than one subtraction.
Special instructions for members of the military Virginia law provides three subtractions for military servicemembers.
- military pay and allowances earned while serving in a combat zone or qualified hazardous duty area (Va. Code § 58.1-322 C 21);
- military basic pay for personnel on extended active duty for periods in excess of 90 consecutive days (Va. Code § 58.1-322 C 23); and
- wages or salaries received for active and inactive service in the National Guard of the Commonwealth (Va. Code § 58.1-322 C 11).
Servicemembers may be eligible for more than one subtraction, but the same income may not be included in more than one subtraction. For example, a servicemember may not deduct the same income for both the military basic pay subtraction and the National Guard subtraction.
If you received income from a regulated investment company (mutual fund) that invested in obligations both taxable and exempt for Virginia purposes, the entire income must be considered taxable by Virginia unless you attach a statement provided by the fund that:
- details the amount of income you earned; and
- summarizes the prorations between exempt and taxable income (monthly breakdown is preferred).
If you provide this information, enter the exempt portion of income on Line 4 or Line 6 as appropriate.
Line 4 - Income from U.S. Obligations
Enter the amount of income (interest, dividends and gain) derived from obligations or the sale or exchange of obligations of the United States and on obligations or securities of any authority, commission or instrumentality of the United States to the extent included in federal adjusted gross income, but exempt from state income taxes under the laws of the United States. This includes, but is not limited to, stocks, bonds, treasury bills and treasury notes. It does not include interest on refunds of federal taxes, equipment purchase contracts or normal business transactions.
The following is a partial list of taxable and exempt income. This list is based on the Department's analysis of federal and state law as applicable to selected organizations. For organizations not listed below, additional information must be attached showing that the income is exempt from Virginia income tax.
|VA Tax Status|
|Export-Import Bank of the United States (Export-Import Bank of Washington)||Exempt|
|Farm Credit Bank||Exempt|
|Federal Deposit Insurance Corporation||Exempt|
|Federal Home Loan Bank||Exempt|
|Federal Intermediate Credit Bank||Exempt|
|Federal Land Bank||Exempt|
|Federal Reserve Stock||Exempt|
|Governments of Guam, Puerto Rico and Virgin Islands||Exempt|
|Resolution Trust Corporation||Exempt|
|Student Loan Marketing Association (Sallie Mae)||Exempt|
|Tennessee Valley Authority||Exempt|
|US Postal Service||Exempt|
|US Treasury bills, notes, bonds & savings bonds (such as Series E, EE, H, HH, etc.)||Exempt|
|Federal Home Loan Mortgage Corporation (Freddie Mac)||Taxable|
|Federal National Mortgage Association (Fannie Mae)||Taxable|
|Government National Mortgage Association (Ginnie Mae)||Taxable|
|Inter-American Development Bank||Taxable|
|International Bank for Reconstruction and Development||Taxable|
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 deduct up to $20,000 of disability income as defined under IRC § 22(c)(2)(b)(iii).
You - Enter YOUR subtraction on Line 5a.
Spouse, Filing Status 2 - Enter SPOUSE'S subtraction on Line 5b.
NOTE: Eligible taxpayers may claim EITHER this disability income subtraction OR the age deduction on Line 4, Form 763. If you are married filing a joint return, each spouse may claim, if eligible, either an age deduction or disability subtraction. Use the one that benefits you the most.
Line 6 - Other Subtractions
Line 6a Enter the amount if you have any subtraction due to Fixed Date Conformity.
A. Bonus Depreciation - For an explanation, please see the section titled, Fixed Date Conformity Update. Enter the amount that should be subtracted from Federal Adjusted Gross Income based upon the recomputation of allowable depreciation..._____
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 Supplemental Fixed Date Conformity subtractions here..______
C. Total of Lines A and B - Enter the total of Lines A and B here and on Schedule 763 ADJ, Line 6a....................______
Lines 6b - 6d - Other Subtractions
Enter the code and subtraction amount on Lines 6b - 6d. If you have more than 3 subtractions, enter Code "00" and the total amount of Other Subtractions you are claiming on Line 6b and attach to your return a list showing each subtraction along with its subtraction code and amount.
Income from Virginia Obligations - Enter the amount of income from Virginia obligations that you 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.|
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.
If any part of your Tier 1 Railroad Retirement Act benefits paid by the Railroad Retirement Board is properly treated as a fully taxable pension on your federal income tax return, deduct the amount received while a resident of Virginia on this line. Do not include any amount of Tier 1 Railroad Retirement Board retirement benefits that were included in your gross income as the taxable portion of your social security and railroad retirement benefits on your federal return because that portion should be deducted on Line 5 of the Form 763.
This subtraction does not apply to supplemental annuities received by retired employees of railroads under a company pension plan set up by a particular railroad, whether the plan was contributory or non contributory.
|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 or Virginia Earned Income Credit.|
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 Benefits - Enter the amount of unemployment compensation benefits received during the taxable year reported as income on your federal income tax return.|
|38||Military Basic Pay - Military service personnel may subtract up to $15,000 of military basic pay received during the taxable year, provided they are on extended active duty for a period in excess of 90 consecutive days. Military personnel stationed inside or outside Virginia are eligible. This subtraction is allowed for military basic pay that is included in federal adjusted gross income and is not included in another subtraction, such as the Virginia National Guard Income Subtraction. 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 of income over $15,000, the maximum subtraction is reduced by $1. 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 or Virginia Earned Income Credit.|
|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 or Virginia Earned Income Credit.|
|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, an 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||Tobacco Settlement Fund Income - 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 the Va. Code § 58.1-3230 for a period not less than 30 years.|
|44||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.|
|49||Certain Death Benefit Payments - Allows a beneficiary taxpayer to subtract the death benefit payments received while a Virginia resident 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 death benefit payment is made pursuant to an annuity contract with 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.|
|50||Pass-Through Entity Income - Enter the amount of Pass-Through Entity (PTE) income that was included on a unified return. Do not include the PTE income in the nonresident allocation percentage schedule.|
|51||Gains from Land Preservation - This is a subtraction for federal gain or federal income recognized by a taxpayer on the application of a Land Preservation Tax Credit. The transfer of the credit and its application against a tax liability shall not create gain or loss for the transferor or the transferee of such credit.|
|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.|
|53||Historic Rehabilitation - To the extent included in federal adjusted gross income, any amount of gain or income recognized by a taxpayer in connection with the Historic Rehabilitation Tax Credit is allowed as a subtraction on the Virginia return.|
First-Time Home Buyer Savings Accounts - To the extent included in federal adjusted gross income, an individual may subtract any income attributable to a first-time home buyer savings account that was taxed as interest, capital gains, or other income for federal income tax purposes. Distributions from a first-time home buyer savings account may only be used for the purpose of paying or reimbursing the down payment and allowable closing costs for the purchase of a single-family residence in Virginia by a qualified beneficiary. The subtractions claimed by an account holder in all prior taxable years are subject to recapture in the taxable year in which account funds are withdrawn for any other purpose.
To claim the subtraction, an individual must designate an account as a first-time home buyer savings account. An individual may designate an account by submitting an attachment with their Virginia income tax return for the first taxable year in which such individual claims the subtraction. An individual must submit a separate attachment for each account that he or she is designating. The attachment must include the following information:
After designating an account as a first-time home buyer savings account, the account holder is required to include an attachment with updated information for the account for all future taxable years in which he or she is required to file a Virginia income tax return. If an account holder has designated more than one existing first-time home buyer savings account, the account holder is required to submit a separate attachment with updated information for each account. More information is available in the First- Time Home Buyer Savings Account Guidelines, which are available in the Laws, Rules & Decisions section of the Department's website at www.tax.virginia.gov.
Other - Attach a schedule of explanation for other subtractions.
Line 7 - Total Subtractions
Add Lines 4, 5a, 5b and 6a-6d and enter the amount on Line 7 and on Form 763, Line 7.
DEDUCTIONS FROM VIRGINIA ADJUSTED GROSS INCOME
Lines 8a - 8c Deductions
On Lines 8a-8c, enter the 3-digit code, listed in the following table, in the boxes on Schedule 763 ADJ, followed by the amount, for any deductions from Virginia adjusted gross income in the categories listed below.
Other Deductions for Lines 8a - 8c If you have more than 3 deductions on Lines 8a-8c of Schedule 763 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.
Child and Dependent Care Expenses - Enter the amount on which the federal credit for child and dependent care expenses is based. This is the amount on federal Form 2441 or Schedule 2 of Form 1040A that is multiplied by the decimal amount. Do not enter the federal credit amount.
You may claim the deduction for child and dependent care expenses on your Virginia return only if you were eligible to claim a credit for child and dependent care expenses on your federal return. If you filed a joint federal return and you file a separate Virginia return, you may allocate this amount as mutually agreed.
The amount of employment-related expenses that may be deducted is limited to the amount actually used in computing the federal credit for child and dependent care expenses. As a general rule, you are limited to a maximum of $3,000 for one child and $6,000 if you are claiming the expenses for two or more dependents, or the earned income of the spouse having the lowest income, whichever is less.
|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, provided that 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, if you were not reimbursed for the fee or 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 contributed during the taxable year to each Virginia529 account (Virginia 529 prePAID, Virginia 529 inVEST, College America, or CollegeWealth). If you contributed more than $4,000 per account during the taxable year, you may carry forward any undeducted amounts until the contribution 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 contributed to the Virginia529 accounts during the taxable year. Only the owner of record for an account may claim a deduction for contributions made.|
|105||Continuing Teacher Education - A licensed primary or secondary school teacher may enter a deduction equal to 20% of unreimbursed tuition costs incurred to attend continuing teacher education courses that are required as a condition of employment, provided that 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 that they were not actually included as a deduction on Schedule A of your federal income tax return.|
|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.|
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 and received while a Virginia resident. For example, on your 2014 Virginia return you may deduct the portion of such payments received in 2013 that is included in your 2013 federal adjusted gross income; while payments received in 2014 may generate a deduction on your 2015 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 an 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.|
|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.|
Bank Franchise Subchapter S Corporation - Certain shareholders of small businesses corporations subject to bank franchise tax 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 deduction 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. Each disposition must be tracked separately for purposes of this adjustment.|
|114||Prepaid Funeral, Medical, and Dental Insurance Premiums - You may be allowed a deduction of payments for (i) a prepaid funeral insurance policy that covers you or (ii) medical or dental insurance premiums for any person for whom you may claim a deduction for such premiums under federal income tax laws. To qualify for this deduction, you must be age 66 or older with earned income of at least $20,000 for the taxable year and federal adjusted gross income not in excess of $30,000 for the taxable year. The deduction is not allowed for any portion of premiums for which you have been reimbursed, have claimed a deduction for federal income tax purposes, have claimed another Virginia income tax deduction or subtraction, or have claimed a federal income tax credit or any Virginia income tax credit.|
Other - Attach an explanation for other deductions.
Line 9 - Total Deductions
Add Lines 8a through 8c and enter on Line 9 and on Form 763, Line 14.
COMPUTATION FOR TAX CREDIT FOR LOW- INCOME INDIVIDUALS OR VIRGINIA EARNED INCOME TAX CREDIT
You may be eligible to claim a Tax Credit for Low-Income Individuals if your family Virginia adjusted gross income (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 Tax Credit if you claimed an Earned Income Tax Credit on your federal return. Claim the credit that benefits you the most. However, you cannot claim both credits. Please complete the entire section.
The tax credit for low-income or Virginia Earned Income Credit may NOT be claimed if you, your spouse, or any dependent claims any of the following:
- Virginia National Guard subtraction (Subtraction Code 28);
- Basic military pay subtraction (Subtraction Code 38);
- Federal and state employees subtraction for earnings of $15,000 or less (Subtraction Code 39);
- Exemption for blind taxpayers or taxpayers age 65 and over;
- the Age Deduction; or
- You are claimed as a dependent on another taxpayer's return.
To compute total annual family income you must compute the "Guideline Income" for each family member and add those amounts together.
Guideline Income is defined as federal adjusted gross income modified by the Virginia additions and qualifying Virginia subtractions that apply to full-year residents.
After the worksheet has been filled in for each person on your tax return, complete Schedule 763 ADJ, Lines 10-17.
If you and your spouse file separate returns, only one spouse may claim the Credit for Low-Income Individuals, but both may claim their proportionate share of the Virginia Earned Income Tax Credit.
Guideline Income Worksheet
The income, additions and subtractions entered on the worksheet must be shown for the entire taxable year.
11. Add Lines 5 through 10.
|1. FAGI from the federal return..||$ _____|
|2. Interest earned on obligations of other states exempt from federal tax..||$ _____|
|3. Other additions to FAGI...||$ _____|
|4. Subtotal. Add Lines 1, 2 and 3..||$ _____|
|5. State income tax refund or overpayment credit reported on your federal return..||$ _____|
|6. Income (interest, dividends or gains) on U.S. obligations or securities exempt from state income tax, but not from federal tax...||$ _____|
|7. Social Security or equivalent Tier 1 Railroad Retirement Act benefits reported as taxable income on your federal return..||$ _____|
|8. Disability income reported as wages (or payments in lieu of wages) on your federal return...||$ _____|
|9. Unemployment benefits included in FAGI...||$ _____|
|10. Other subtractions from FAGI..||$ _____|
|11. Add Lines 5 through 10...||$ _____|
|12. Guideline Income. Subtract Line 11 from Line 4..||$ _____|
Line 10 - Compute Your Total Guideline Income
If more room is needed, attach a schedule with the name, SSN and Guideline Income for each additional dependent.
Enter your name, social security number and Guideline Income. Filing Statuses 2, 3 and 4 must also complete spouse information.
Your Spouse's Information
Enter your spouse's name, social security number and Guideline Income.
All married taxpayers, regardless of filing jointly or separately, must complete this line.
Enter the name and social security number for each dependent claimed as an exemption on your return and, if any of your dependents had income, enter the Guideline Income for each dependent.
For Filing Status 3 (Married Filing Separately), also enter the name and social security number of your dependents not claimed as an exemption on your return and, if any of the dependents had income, enter the Guideline Income for each dependent.
Enter Total Family Guideline Income
Total the Guideline Income Worksheet for each family member (each exemption reported and from any additional schedule attached).
Line 11 - Enter Total Number of Exemptions Listed on Line 10 and on any Attached Schedule.
Enter the total number of exemptions listed on Line 10 and on any attached schedule.
Determine Eligibility for Credit for Low-Income Individuals - Using the number on Line 11 as Eligible Exemptions, compare the dollar amount on Line 10 to the Poverty Guideline below. If Line 10 amount is greater than the Poverty Guideline amount, you do not qualify for the Credit for Low-Income Individuals, Continue to Line 14.
Line 12 - Exemptions
If you are eligible based on the table above, enter the number of personal and dependent exemptions from Form 763. Do not include exemptions for age 65 or older and blind.
Line 13 - Multiply
Multiply the number of exemptions reported on Line 12 by $300. If you do not qualify for the Tax Credit for Low-Income Individuals but claimed an Earned Income Tax Credit on your federal return, enter $0 on Line 13 and proceed to Line 14.
Line 14 - Earned Income Tax Credit claimed on your federal return
Enter the amount of Earned Income Tax Credit claimed on your federal return. If you did not claim an Earned Income Tax Credit on your federal return, enter $0.
When a taxpayer using the married filing separately status computes the Virginia Earned Income Tax Credit, the taxpayer must first determine his proportion of the earned income that was used to qualify for the federal Earned Income Tax Credit. That proportion must then be multiplied by the total Virginia Earned Income Tax Credit, which is 20% of the federal Earned Income Tax Credit. The spouse may then claim his proportional share of the credit on his separate return.
Multiply Line 14 by 20% (.20).
Enter the greater of Line 13 or Line 15.
Line 17 - Credit
Compare the amount of tax on Form 763, Line 19, to the amount on Schedule 763 ADJ, Line 16. Enter the lower amount on Line 17. This is your Tax Credit for Low-Income Individuals. Also, enter this amount on Form 763, Line 24.
The Credit for Low-Income Individuals is a nonrefundable credit. A nonrefundable credit cannot exceed your tax liability. If you claim any credits on Form 763, Line 25 or Line 26, in addition to the Credit for Low-Income Individuals, the sum of all nonrefundable credit claimed cannot exceed your tax liability on Line 19 of Form 763.
Many low-income individuals who work and have earned income under $52,427 may also qualify for up to $6,143 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.
ADDITION TO TAX, PENALTY AND INTEREST
Addition to Tax for Underpayment of Tax
Even if your return results in a refund, you may owe an "addition to tax" for underpaying your withholding or estimated tax. Virginia law requires that you pay your income tax in timely installments throughout the year by having income tax withheld or making payments of estimated tax. If you do not pay at least 90% of your tax in this manner, you may be charged an addition to tax.
There are 4 (quarterly) installment periods for determining whether you underpaid your tax for the year. If your taxable year is from January 1 through December 31, your quarterly payments are due May 1, June 15, September 15, and January 15 (of the following year). Underpayments are determined as of each installment due date, so an overpayment in one quarter cannot cancel out an underpayment for a previous quarter. The addition to tax does not apply if each payment is made on time and:
- the total tax paid through withholding and timely estimated tax payments is at least 90% (66 2/3% for farmers, fishermen or merchant seamen) of the current year's tax liability (after nonrefundable credits) or 100% of last year's tax liability (after nonrefundable credits);
- the sum of the quarterly underpayments for the year is $150 or less; or
- you meet one of the exceptions computed on Form 760C or Form 760F. Attach Form 760C or 760F showing the computation.
Line 18 - Addition To Tax
Enter the amount of the addition to tax computed on Form 760C (for individuals, estates and trusts) or Form 760F (for farmers, fishermen or merchant seamen). If you underpaid your estimated income tax or had insufficient income tax withheld for the taxable year, you may owe the "addition to tax" computed on Form 760C or Form 760F.
Line 19 - Penalty
If you file your return after May 1, 2015, you may owe either a late filing penalty or an extension penalty.
Late Filing Penalty - If you file your return more than 6 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.
Extension Penalty - If you file your return by the extended due date and the tax due is greater than ten percent of your total tax liability, you will owe an extension penalty. The penalty is 2% per month or part of a month from the original due date of the return until the date of filing. The extension penalty cannot exceed 12% of the tax due.
Late Payment Penalty - If you file your return before the due date or within 6 months after the due date, but do not pay the tax due at the time of filing, the unpaid balance will be subject to a late payment penalty of 6% per month from the date of filing through the date of payment, up to a maximum of 30%. The late payment penalty will be assessed in addition to any extension penalty that may apply. The automatic extension provisions apply only to returns that are filed within six months from the due date. If you file your return more than six months after the due date, a late filing penalty of 30% will apply to the balance of tax due with your return.
NOTE: If you file your return after the extended due date, your extension will be void and you will owe the late filing penalty. If you file your return by the extended due date, but do not pay the tax in full, a late payment penalty will accrue on the balance of tax due. Interest accrues on any balance of tax owed with a return filed on extension, regardless of whether the balance exceeds 10% of the tax.
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 763, Line 29, from the due date to the date filed or postmarked. To obtain the daily interest factor, please call 804-367-8031 or contact your locality.
Line 21 - Addition to Tax, Penalty and Interest
Add Lines 18 through 20. Enter here and on Form 763, Line 34.