In 2011, the Virginia General Assembly approved new tax credit legislation aimed at encouraging private sector telework in Virginia. The 2011 legislation authorized a tax credit for years 2012 and 2013. In 2012, new legislation extended the tax credit through 2016.
Here are some forms necessary to take advantage of the tax credit:
- Telework Expenses Tax Credit Reservation (Form TEL-1)
- Telework Expenses Tax Credit Confirmation Application (Form TEL-2)
Telework Tax Credit Frequently Asked Questions
- What is the maximum tax credit my organization can receive?
The legislation provides for a tax credit of up to $1,200 per employee, up to $50,000 per organization, for eligible telework expenses incurred during taxable years 2012-2016.
- What expenses are eligible for the credit?
Expenses incurred during the taxable year that allow an employee to begin teleworking are eligible. These expenses can include, but are not limited to, expenses paid or incurred to purchase computers, computer-related hardware and software, modems, data processing equipment, telecommunications equipment, high-speed Internet connectivity equipment, computer security software and devices, and all related delivery, installation, and maintenance fees. Eligible expenses may also include up to $20,000 for conducting a telework assessment.
- Does my business qualify for the tax credit?
Any business subject to income tax in Virginia is eligible to apply for the tax credit.
- What steps do I need to take to apply for the tax credit?
Step 1: Submit a Telework Expenses Tax Credit Reservation Application form (TEL-1) to the Virginia Department of Taxation between September 1 and October 31 in the year proceeding the calendar year in which eligible telework expenses will be incurred.
The Virginia Department of Taxation will provide tentative approval by December 31. If the applications for the credit exceed the $1 million cap authorized by the tax credit legislation, the credits will be allocated to business taxpayers on a prorated basis.
Step 2: Submit a Telework Expenses Tax Credit Confirmation Application form (TEL-2) to the Virginia Department of Taxation by April 1 of the year following the calendar year that eligible expenses were incurred.
Forms TEL-1 and TEL-2 and further instructions on tax credit approval can be found on the Department of Taxation's website, www.tax.virginia.gov
- What guidelines do I have to follow?
The Department of Rail and Public Transportation established guidelines that must be followed to receive the Virginia Telework Tax Credit. Employees must telework at least once a week in order for expenses incurred under the telework agreement to be eligible. Specific guidelines can be found below.
Policy and Guidance
The purpose of the Telework Tax Credit is to remove auto trips by reducing commutes to and from work. Only employees who travel to an office in Virginia qualify. In the tax year a business receives approval for the Virginia Tax Credit, the first six months are devoted to telework assessment expenses up to $20,000. This is when the company's telework policies are developed, including a telework agreement. Beginning in July, the business will implement the program with new teleworkers signing the agreement. The company may claim a tax credit of $1,200 in expenses per new teleworker. Expenses for existing teleworkers do NOT qualify for the tax credit. Businesses interested in the tax credit for telework expenses must submit a Telework Expenses Tax Credit Reservation Application (Form TEL-1 pdf) with the Department of Taxation.
Businesses are also encouraged to sign up with Telework!VA for assistance with their telework program.
Businesses must develop a formal telework policy and employee telework agreement. This can be accomplished with a technical consultant, in-house staff and the resources/samples available under Telework Resources. A telework policy and agreement are not needed at the time a business applies for the tax credit. However, those documents and policies must be developed as part of the business' telework program.
To be counted as a teleworker for the purpose of claiming a telework tax credit, an employee must telework at least one day per week. A teleworking employee must enter into a signed telework agreement on or after July 1, 2012, but before Jan. 1, 2017, and must be a new teleworker (not teleworking previously) to qualify for the tax credit.
Eligible Telework Expenses for Teleworkers (up to $1,200 per teleworker)
Only expenses that are directly needed to enable an employee to telework are eligible. Expenses that would have been incurred for normal business operations, whether or not they telework, are NOT eligible. Eligible expenses may include:
- Computer equipment (laptops/notebooks/tablets)
- Networking equipment and software
- Security and antivirus systems
- Internet access and service (ISP, routers, modems)
- Communications equipment and services (VoIP, landline, or mobile phone service; standard phones, mobile phones or smartphones; video/web cams)
- Telework center fees
Telework Assessment Expenses (up to $20,000)
Consultant or other expenses to assess existing teleworking (both formal and informal), equipment and training needs, barriers/issues, management and employee support, and develop telework policies and procedures, determine employee position eligibility and performance measurement.