Questions & Answers

What is the 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, 2022 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, 2022. 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. 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, 2022. 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.

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