Can Companies Claim
R&D Tax Credits in Vermont?
Yes. Vermont offers an R&D Tax Credit for businesses that increase qualifying research activities. The state follows federal Section 41 rules to determine eligible expenses and calculate the credit.
Key Features of the Vermont R&D Credit
Governed by Vermont Code 32 V.S.A Section 5930ii.
Applies to qualified research expenditures conducted in Vermont.
Credit can be applied against personal income tax or business/corporate income tax.
Equal to 27% of the federal R&D credit for Vermont-based expenses.
Unused credits can be carried forward for up to 10 years.
Who Qualifies
More Vermont companies can now qualify. R&D activities can include early concept development through making a product, process, formula, or business component ready for commercial release. Look-back studies can capture unclaimed credits for the previous 3–4 tax years.
Vermont Tax Credit Case Study
A Burlington-based manufacturing company conducted a look-back study for prior years. The project spanned 2022–2024, covering multiple research activities.
The company qualified for $278,930 in federal R&D credits and $75,311 in Vermont state credits.
FEDERAL | VERMONT | |||
Year | Total QREs | Credit | Total QREs | Credit |
2024 | $1,002,170 | $100,217 | $1,002,170 | $27,059 |
2023 | $927,935 | $92,793 | $927,935 | $25,054 |
2022 | $859,199 | $85,920 | $859,199 | $23,198 |
Total | $2,789,304 | $278,930 | $2,789,304 | $75,311 |
Federal R&D Tax Credit Summary
| Year | Total QREs | Federal Credit |
|---|---|---|
| 2024 | $1,002,170 | $100,217 |
| 2023 | $927,935 | $92,793 |
| 2022 | $859,199 | $85,920 |
Total | $2,789,304 | $278,930 |
Vermont R&D Tax Credit Summary
| Year | Vermont Credit |
|---|---|
| 2024 | $27,059 |
| 2023 | $25,054 |
| 2022 | $23,198 |
| Total | $75,311 |
Criteria for Qualifying Research Activities
The four-part test below defines what counts as qualified research activities
Purpose of the Research
The activity should develop or improve a business component, such as a product, process, software, formula, technique, or invention, by enhancing functionality, performance, reliability, or quality.
Resolving Uncertainty
The work must address technical uncertainties, such as determining the optimal design, method, or approach to achieve the desired outcome. The results should not be known in advance.
Systematic Experimentation
Eligible research must follow a structured experimentation process, including trial and error, modeling, simulation, or testing alternatives to reach the intended improvement.
Technological Basis
The activity must rely on hard sciences such as engineering, physical or biological sciences, or computer science. Artistic, social science, or routine data collection work does not qualify.
Why the R&D Tax Credit Matters ?
Since 1981, the R&D Tax Credit has helped businesses save billions in federal and state taxes. The credit enables companies to hire more staff, expand R&D, invest in facilities, and drive innovation. Thousands of businesses across multiple industries take advantage of this benefit each year.