Paige Smith | Published May 21, 2025 10 Min
Virginia’s top-tier education system, stable corporate tax rate, and robust infrastructure budget make it one of the best states for businesses of all sizes. And the data proves it: Virginia recently ranked number one, for the third time in five years, in CNBC’s 2024 Top States for Businesses.
If you own a business in the Commonwealth or want to start one, here’s what you should know about the state’s tax credits, incentives, and exemptions.
Virginia business tax credits and incentives
Employment and expansion tax credits and incentives
Major Business Facility Job Credit
Virginia’s Major Business Facility Job Credit is available to qualified businesses that either establish new facilities or expand existing facilities in the state (retail businesses aren’t eligible). To qualify for the credit, companies have to meet one of two job creation thresholds with their expansion projects:
- Tier 1: Create at least 51 new jobs anywhere in Virginia.
- Tier 2: Create at least 26 new full-time jobs in designated Enterprise Zones or economically distressed areas.
Businesses that qualify can earn a $1,000 credit for each new job created in excess of the qualifying minimums above. They can use the credit to offset their corporate income tax, fiduciary income tax, bank franchise tax, or insurance premiums license tax.
Fill out Form 304 to apply for the credit, or learn more at the Virginia Department of Taxation.
Plus, get actionable tips on hiring employees in Virginia legally and efficiently.
Worker Training Tax Credit
The Worker Training Tax Credit encourages Virginia employers to invest in employee training. That includes training courses from Virginia colleges and universities, training courses from one of Virginia’s Eligible Training Providers, and apprenticeship training.
Businesses that qualify can get a credit equal to 35% of their classroom training costs. The credit maxes out at $500 per qualified employee who receives training, and $1,000 per employee, if the employee’s income was below the state’s median wage for the year prior to applying.
Businesses can also get a tax credit to offset 35% of their costs for providing manufacturing training and education to middle and high school students. These programs have to be approved by the Virginia Department of Education first.
Learn how to claim the credit here.
Virginia Enterprise Zone – Job Creation Grant
The Virginia Enterprise Zone (VEZ) Job Creation Grant is a five-year cash incentive program available to businesses that create new, full-time, well-paying jobs in designated EZs throughout the state.
To qualify for the incentive, businesses have to create at least four new, full-time jobs, pay wages that are at least 150% of the state minimum wage, and offer health benefits with 50% of the premiums paid by the employer. If they do, they can get up to $500 per year per new job created.
Businesses paying new employees 175% of the state’s minimum wage (and offering health benefits) can get even more—up to $800 per year per job. Apply for the program here.
Related: See every state’s minimum wage.
Virginia Economic Development Incentive Grant
The Virginia Economic Development Incentive Grant (VEDIG) program incentivizes companies to relocate to Virginia and create new jobs within the state. To qualify, companies must meet the following criteria:
- At least half of the facility’s revenue must come from outside the Commonwealth.
- There must be competition between Virginia and another state or country for attracting the project.
- Companies locating their headquarters or projects to parts of Virginia with a population of 300,000 or more have to: 1) create 400 new full-time jobs with average salaries of at least 150% of the local average wage, or create 300 new full-time jobs with average salaries at least 200% of the local average wage and 2) Invest at least $5 million or $6,500 per job in real estate, equipment, machinery or other personal property at the facility.
- Companies locating elsewhere in Virginia have to: 1) create 200 new full-time jobs with average salaries of at least 150% of the local average wage and 2) invest at least $6,500 per job.
Find out how to apply for VEDIG here.
Pro tip: Before you set employee wages, review your business’s compensation model.
Green and Alternative Energy Job Creation Tax Credit
The Green and Alternative Energy Job Creation Tax Credit lets businesses take a tax credit for creating new green jobs that pay an annual salary of at least $50,000. The credit is $500 per job created, up to 350 jobs.
Keep in mind: This credit only applies to tax years before January 1, 2025. If your business created a qualifying green job in 2024 or earlier, learn how to claim the credit here.
Research and development tax credits
Major Research and Development Tax Credit
The Major Research and Development Tax Credit applies to Virginia companies that have racked up over $5 million in qualified research and development (R&D) expenses within the state. If that’s the case, eligible companies can take an income tax credit that’s a portion of their qualifying expenses. Here’s the breakdown:
- For the first $1 million in qualifying expenses, the income tax credit is equal to 10% of the difference between the current year’s qualifying expenses and 50% of the average amount of the qualifying expenses for the three previous years.
- For qualifying expenses over $1 million, the income tax credit is equal to 5% of the difference between the current year’s qualifying expenses and 50% of the average amount of the qualifying expenses for the three previous years.
For companies that didn’t have qualifying R&D expenses for the previous three years, the credit is equal to 5% of the current year’s expenses. The maximum credit a company can receive per year is $300,000, or $400,000 if the company conducted its research in conjunction with a Virginia college or university.
Learn more about what constitutes qualified R&D activities, and find out how to apply for the credit.
Refundable Research and Development Tax Credit
Virginia’s Refundable Research and Development Tax Credit applies to businesses that have amassed $5 million or less in qualified R&D expenses.
Qualified companies can get a tax credit equal to 15% of the first $300,000 in qualified expenses above their base amount of expenses. For companies that conducted research with a Virginia college or university, the credit increases to 20% of the first $300,000 in qualified expenses above the base amount.
Learn how to calculate your base amount, then apply for the credit.
Investment tax credits
Qualified Equity and Subordinated Debt Investments Credit
With Virginia’s Qualified Equity and Subordinated Debt Investments Credit, investors can get a tax credit for making a qualified investment in certain Virginia businesses. Investors can either get equity in the company by purchasing their stock or loan the company money in the form of subordinated debt. Investors who qualify can get an income tax credit equal to 50% of their investment amount, up to $50,000 a year.
For businesses to qualify for an investment under this credit, they need to meet the following criteria:
- Have an annual gross revenue of $3 million or less
- Be located in Virginia
- Be engaged in business, or do all their production, in Virginia
- Hasn’t gotten more than $3 million in aggregate gross cash proceeds from issuing equity or debt investments
- Is engaged primarily in one of the following fields: advanced computing, advanced materials, advanced manufacturing, agricultural technologies, biotechnology, electronic device technology, energy, environmental technology, information technology, medical device technology, or nanotechnology.
If your business wants to apply for qualification, fill out Form QBA. If you’re an investor and want to apply for the credit, fill out Form EDC.
Industry-specific tax credits
Barge and Rail Usage Tax Credit
The Barge and Rail Usage Tax Credit supports international trade facilities (ITFs) operating in Virginia. An ITF is a company engaged in port-related activities in Virginia and uses barge and rail systems (instead of trucks or cars) to move cargo through port facilities in the state.
The tax credit amount depends on how much cargo a business ships by rail or barge, over their base amount. The base amount is the amount a business shipped in the previous year. The credit is equal to $25 per 20-foot equivalent unit (TEU); 16 tons of noncontainerized cargo; or 1 unit of roll-on/roll-off cargo.
Complete Form BRU to apply for the credit.
International Trade Facility Tax Credit
Virginia companies that increase shipments through an ITF or make a capital investment in an ITF can qualify for the International Trade Facility Tax Credit. Capital investments include exterior, structural, mechanical, or electrical improvements to a commercial or industrial building; land improvements like grading and landscaping; and machinery, tools, and equipment used to move cargo.
The program offers two credit types:
- The Port Jobs Tax Credit, an income tax credit equal to $3,500 per new, permanent full-time job created by your increase in shipments through an ITF
- The Port Investment Tax Credit, an income tax credit equal to 2% of your capital investment in an ITF
To be eligible for either one of the credits, your company must have moved at least 5% more cargo through Virginia port facilities than the previous year. Learn how to claim the credit here.
Port Volume Increase Tax Credit
Virginia businesses that increase their shipments or deliveries through a Virginia port by at least 5% are eligible for the Port Volume Increase Tax Credit. The credit is only available to businesses in agriculture, manufacturing, and mineral or gas extraction.
To qualify, your base volume, which is the amount of goods you either shipped or received through a Virginia port, needs to be at least 75 net tons or 10 TEUs of cargo. The credit amount is equal to $50 per TEU over your base volume.
Find out how to apply for the credit here.
Motion Picture Production Tax Credit
The Virginia Film Office (VFO) offers a Motion Picture Production Tax Credit to eligible production companies that set their film or TV projects in the state.
Production companies that spend at least $250,000 on eligible production costs in Virginia can qualify for an income tax credit equal to 15% of their production expenses. The credit goes up to 20% for companies that film in economically distressed areas of Virginia.
Companies can also get additional payroll tax credits:
- 10% of the payroll of Virginia residents employed in the production (20% if expenses are over $1 million)
- 10% of the payroll of Virginia residents employed as first-time actors or first-time crew members
The following types of projects are eligible:
- Feature-length films
- Documentaries
- Long-form specials
- Television mini-series
- Episodic television series
- Commercial advertisements
- Videos and music videos
- Digital interactive media productions
- Interactive television that’s at least 30 minutes long
Learn more and find out how to apply on the VFO website.
Recyclable Materials Processing Equipment Tax Credit
This tax credit is available to manufacturing businesses in Virginia that purchased machinery and equipment for the purpose of processing recyclable materials. The credit is equal to 20% of the cost of the equipment.
However, like the green jobs credit, this credit only applies to tax years beginning before January 2, 2025. Find out how to claim the credit here.
Converting waste into raw materials is just one way to become a more environmentally sustainable operation. Here are six other effective strategies.
Donation tax credits
Education Improvement Scholarships Tax Credit
Businesses that donate to approved scholarship foundations are eligible for the state’s Education Improvement Scholarships Tax Credit. The credit is equal to 65% of the donation amount, and businesses can take the credit against their corporation income tax, bank franchise tax, or insurance premiums license tax.
Get pre-authorized for the credit and donation on the VDOE’s website.
Virginia sales and use tax exemptions
Virginia also exempts certain companies from paying the state’s 5% sales and use tax on specific purchases, including:
- Production-related supplies and equipment
- Agricultural materials and equipment
- Research and development purchases
- Data center equipment and software
Get more details here.
Virginia city and county tax credits
Some cities and counties in Virginia have their own business tax credits and incentive programs. Virginia Beach’s Economic Development Investment Program, for example, gives cash incentives to qualified local businesses that create new jobs.
Review the economic development section of your city’s website to explore your options.
Virginia business financing
Along with their myriad tax credits and incentives, Virginia also has a slew of business grant programs and state-run loans to check out. For a complete list of resources, bookmark Gusto’s guide to business grants and loans in the Commonwealth.
