Tax credits are available to certain taxpayers at both the state and federal levels. A tax credit is a tax incentive which allows qualified taxpayers to reduce their tax liability to the state.
Tax credits are available for individuals and businesses and provide incentives to support business growth and activities in Vermont.
Here is a list of tax credits available to individuals:
Charitable Housing Investment Credit
Credit for Income Tax Paid to Another State or Canadian Province
Credit Options for Child and Dependent Care
Qualified Sale of Mobile Home Park Credit
Research and Development Credit
Vermont Charitable Giving Tax Credit
Vermont Earned Income Tax Credit
Vermont Higher Education Investment Plan (VHEIP) Credit
CHARITABLE HOUSING INVESTMENT CREDIT
This tax credit encourages investment in eligible housing charities. The eligible housing charity is determined by Vermont Department of Housing and Community Development.
Credit Limit: Not to exceed 3% of average outstanding principal balance of investment during taxable year. Aggregate of charitable investment allowed outstanding in any year is limited to $5 million.
CREDIT FOR INCOME TAX PAID TO ANOTHER STATE OR CANADIAN PROVINCE
If you are a Vermont resident or part-year resident and pay income tax to another state, territory, district, or province (but not city or county), Vermont allows a credit for that tax on the Vermont income tax return. This is income that is taxed by both Vermont and the other taxing jurisdiction.
To calculate the credit, use Schedule IN-117, VT Credit for Income Tax Paid to Other State or Canadian Province. If you have capital gain, business income, or made adjustments to calculate your federal adjusted gross income, see Technical Bulletin 38.
CREDIT OPTIONS FOR CHILD AND DEPENDENT CARE
Vermont offers tax relief to employees who have dependent care expenses in order to stay in the workforce. Taxpayers have two options for a child and dependent care credit:
- Credit for Child and Dependent Care or
- the Low Income Child and Dependent Care Credit.
You cannot take both credits.
Credit for Child and Dependent Care
If you are eligible for the federal Child and Dependent Care Credit you qualify for the state tax credit.
Credit Amount: The tax credit amount is 24% of the federal Child and Dependent Care Tax Credit.
Credit Limitation: You must be eligible for and receive the Federal tax credit. This credit is nonrefundable.
Low Income Child and Dependent Care Credit
To qualify for this credit, you must meet the following criteria:
- $29,999 or less adjusted gross income for filing Single or Head of Household
- $39,999 or less adjusted gross income for filing Married Joint or Civil Union Joint
- Use an accredited provider on the List of Child Care Programs Qualifying for the Vermont Low Income Child and Dependent Care Tax Credit
Learn more from the Agency of Human Services
Credit Amount: The tax credit amount is 50% of the federal child and dependent care tax credit.
Credit Limitation: You must be eligible for and receive the Federal tax credit. This is a refundable credit.
QUALIFIED SALE OF MOBILE HOME PARK CREDIT
The purpose of this tax credit is to encourage sales of mobile home parks to its residents, or to a nonprofit organization that represents them, in order to provide stability to the mobile home park community. For more information about this tax credit, contact the Vermont Department of Housing and Community Development.
Credit Limitation: The credit limit cannot exceed Vermont tax liability, credit is nonrefundable. Unused credits may be carried forward for three years.
RESEARCH & DEVELOPMENT CREDIT
If you take the federal R&D credit, you may qualify for a state R&D credit on eligible expenditures made in Vermont. The Vermont credit can be taken in an amount equal to 27% of the federal tax credit allowed in the taxable year. This credit applies to personal income tax or business or corporate income tax. Any unused credit available may be carried forward up to 10 years.
Each year, we publish a list of taxpayers who claimed this credit during the most recently completed calendar year. For more information about this tax credit, contact the Vermont Department of Taxes.
VERMONT CHARITABLE GIVING TAX CREDIT
In response to the Federal Tax Cuts and Jobs Act of 2017, Vermont lawmakers created a nonrefundable credit of 5% on the first $20,000 of eligible charitable contributions per tax year. This new credit begins with the 2018 tax year and applies to the Vermont Income Tax Return.
Taxpayers making charitable donations should keep good records, including receipts, of tax-deductible contributions. Do not send receipts to the Department of Taxes. Taxpayers may be asked to provide evidence of donations later.
VERMONT EARNED INCOME TAX CREDIT
If you do not have qualifying children and do not meet age requirements, you are not eligible for the Vermont EITC.
- Schedule IN-112, VT Tax Credits and Adjustments
- Schedule IN-113, Income Adjustment Calculations if you are a part-year resident.
VERMONT HIGHER EDUCATION INVESTMENT PLAN (VHEIP) CREDIT
The purpose of this tax credit is to encourage savings for college. Any U.S. citizen or resident alien, including the account holder, can be the beneficiary. The beneficiary must have a valid Social Security number or taxpayer identification number. Refer to the Vermont Department of Taxes for more information about claiming this tax credit.
Credit Amount: The credit amount is 10% of the first $2,500 contributed annually to a beneficiary's account. Rollovers from another state's qualified tuition plan into VHEIP are also eligible for this tax credit.