Vermont Research and Development Tax Credit

Vermont Research and Development Tax Credit

Supports Vermont businesses with innovation tax credits that reduce innovation costs.

The Vermont Research and Development Tax Credit (32 V.S.A. § 5930ii), first enacted in 2009, allows any Vermont taxpayer who qualifies for the federal R&D credit under IRC §41 to claim an additional Vermont state credit equal to 27% of the federal credit allowed in that year, for R&D expenditures made within Vermont. The credit applies against Vermont personal income tax or corporate and business income tax. It is nonrefundable; unused credits carry forward for up to 10 years. There is no separate application, no competitive review, and no annual deadline — the credit is claimed directly on the regular Vermont income tax return.

The Vermont Department of Taxes publishes an annual list, released by January 15 each year under the RP-1298 series, naming all taxpayers who claimed the credit during the most recently completed calendar year. This transparency mechanism is established in the statute itself at § 5930ii(c). The credit has been available since 2009 and remains on the books for the 2025 and 2026 tax years at the 27% base rate.

A 2026 legislative bill proposed a new, higher-rate tier for small manufacturers: taxpayers classified as manufacturers with an enterprise value under $31 million would be eligible for a credit equal to 75% of the federal R&D credit, compared to the standard 27% available to all other claimants. As of early May 2026, the bill had passed both chambers of the Vermont Legislature and was awaiting the Governor's signature. If enacted, the expanded rate would apply to Vermont manufacturers meeting the valuation threshold, while the 27% rate would continue for all other eligible taxpayers. Businesses should confirm the bill's final status before filing.