How long does Vermont's R&D credit carry forward?

Vermont has no separate state base. The credit is a percentage of the federal Section 41 credit computed on research done in Vermont: 27 percent for tax years beginning before January 1, 2027, and 75 percent for tax years beginning on or after that date. It is nonrefundable, so it only reduces Vermont tax you actually owe.

Any amount left over carries forward for 10 years. Business returns claim and track it on Schedule BA-404, and individual returns use Schedule IN-119.

2026 Act 164, signed June 18, 2026, amended 32 V.S.A. 5930ii to raise the rate to 75 percent of the federal credit for tax years beginning on or after January 1, 2027. The 10-year carryforward was not touched. Credits earned under the 27 percent rate and credits earned under the 75 percent rate get the same 10 years.

The practical effect for a pre-profit company is that each year's unused credit will be much larger from 2027, while the time to use it stays the same. Tracking credits by the year they were earned matters more when the amounts are bigger.

The Vermont research credit is nonrefundable. If your company has no Vermont tax to offset, the credit sits in the carryforward until you do, or until its 10 years run out.

Suppose a pre-profit SaaS company's federal Section 41 credit on its Vermont research is $40,000 in a 2026 tax year and again $40,000 in a 2027 tax year, and it owes no Vermont tax in either year. Its 2026 Vermont credit is 27 percent of $40,000, or $10,800. Its 2027 Vermont credit is 75 percent of $40,000, or $30,000. Both carry forward, for a banked balance of $40,800.

Track the two amounts by the year each was earned. These figures are illustrative, not a projection for any company.

A Vermont credit used in year eight still depends on the federal Section 41 credit computed back when the research happened. The four-part test analysis, the expense records, and the split between Vermont and out-of-state research all have to hold up when the credit is finally applied, often long after the people who did the work have changed roles.

R&D Binder produces the federal Section 41 documentation the Vermont credit rests on. Your CPA files the returns, and whether your facts qualify is your CPA's call.

• Vermont's R&D credit (full overview)
• Vermont R&D credit rate
• Vermont vs the federal credit
• The Section 41 four-part test
• What is a qualified research expense (QRE)?
• Form 6765 and Section G
• Arizona R&D credit
• California R&D credit
• Idaho R&D credit

• 32 V.S.A. 5930ii (research and development tax credit) - Vermont General Assembly
• Vermont 2026 Act 164 (H.933) as enacted, section 58 (amends 32 V.S.A. 5930ii) - Vermont Legislature
• Vermont Schedule BA-404 instructions (2025) - Vermont Department of Taxes
• Vermont Schedule IN-119 instructions (2025) - Vermont Department of Taxes
• Final Vermont legislative update (June 11, 2026) - Downs Rachlin Martin
• KBKG, Vermont R&D tax credit - KBKG