Virginia taxes income, but the rate depends on your bracket

Virginia has a state income tax. The tax applies to wages, investment income, and other earnings. The rate ranges from 2% on the lowest income to 5.75% on the highest, depending on how much you earn. Virginia also taxes capital gains, retirement distributions, and business income.

Unlike some states, Virginia does not have a flat tax rate. Your tax bracket is determined by your filing status and total income for the year. The state uses a progressive system, meaning higher earners pay a higher percentage. You will owe Virginia income tax if you lived in the state for any part of the tax year, even if you moved away partway through.

Virginia does offer a tax credit for taxes paid to other states if you worked in multiple states during the year. This prevents you from paying the same income twice. You report this on your Virginia return.

Key Takeaways

  • Virginia income tax rates range from 2% to 5.75% depending on your income level and filing status.
  • You owe Virginia income tax on wages, investment income, retirement distributions, and business earnings.
  • If you lived in Virginia for any part of the tax year, you must file a state return.
  • Virginia offers a credit for taxes paid to other states, which you claim on your state return.
  • Certain income sources, such as federal Social Security benefits, may be partially or fully excluded from Virginia taxation.

Who has to file a Virginia tax return

You must file a Virginia return if you lived in the state at any point during the tax year and your income exceeds the filing threshold. The threshold varies by age and filing status. For example, a single person under 65 with income over $12,000 must file. A married couple filing jointly with combined income over $24,000 must file. If you are 65 or older, the threshold is higher.

You also must file if Virginia withheld taxes from your paychecks, even if your income falls below the threshold. This is because you may be due a refund. Part-time workers, self-employed people, and retirees with pension or investment income should check the current threshold for their situation, as it changes each year.

Virginia income tax brackets for 2024

Virginia uses five tax brackets. The lowest bracket is 2% and applies to the first portion of your income. Each bracket is wider than the last, so more of your income falls into higher brackets as you earn more. The top bracket of 5.75% applies only to income above a certain threshold, which depends on your filing status.

The exact dollar amounts for each bracket change yearly. A single filer in 2024 moves into the 3% bracket at around $3,000 of taxable income, the 5% bracket at around $17,000, and the 5.75% bracket at around $60,000. Married couples filing jointly have wider brackets. The state publishes updated brackets each January on the Virginia Department of Taxation website.

Your taxable income is not the same as your gross income. You subtract the standard deduction or itemized deductions before calculating which bracket you fall into. This means your actual tax bill is lower than the top bracket rate applied to your total earnings.

What income Virginia taxes and what it does not

Virginia taxes most forms of income: W-2 wages, self-employment income, interest, dividends, capital gains, rental income, and distributions from retirement accounts. If you receive a 1099 form from an employer or financial institution, that income is usually taxable in Virginia.

Some income is partially or fully excluded. Federal Social Security benefits are not taxed by Virginia if you are over 59½ or receiving disability benefits. Military retirement pay is also excluded. Certain pension income may be excluded if you meet age and service requirements. Interest from U.S. Treasury bonds is exempt from Virginia tax, though it is still subject to federal tax.

Gifts and inheritances are not taxed. Proceeds from selling your primary home are not taxed if you meet certain conditions. Disability benefits and workers' compensation are also excluded. If you are unsure whether a specific income source is taxable, the Virginia Department of Taxation publishes a guide on its website.

How to file your Virginia state tax return

You can file your Virginia return on paper or electronically. The paper form is called Form 760, and you mail it to the Virginia Department of Taxation by the same important date as your federal return, usually April 15. Electronic filing is faster and reduces errors. You can use tax software, a tax preparer, or the Virginia Department of Taxation's free filing tool if your income is below a certain threshold.

You will need your federal tax return information to complete your Virginia return, since Virginia uses federal taxable income as the starting point. You will also need W-2 forms, 1099 forms, and documentation of any deductions or credits you claim. If you are self-employed, bring your Schedule C or equivalent business income statement.

If you owe money, you can pay online, by mail, or through a payment plan. If you are due a refund, direct deposit is the fastest way to receive it. The state typically processes refunds within four to six weeks if you file electronically.

Virginia tax credits that reduce what you owe

Virginia offers several credits that lower your tax bill dollar-for-dollar, not just by reducing your taxable income. The Earned Income Credit is available to low- and moderate-income workers. The amount depends on your income, filing status, and number of dependents. Virginia's credit is separate from the federal Earned Income Tax Credit, so you may receive both.

The Child and Dependent Care Credit helps you if you paid for childcare or adult dependent care so you could work. The Education Credits are available if you paid tuition or student loan interest. The Property Tax Credit helps renters and homeowners with low incomes. You must meet income limits for each credit, and the rules vary.

If you paid taxes to another state on the same income, Virginia allows a credit for those taxes. This prevents double taxation if you worked in multiple states. You claim this credit on your Virginia return using the income and taxes reported on the other state's return.

Deductions you can claim on your Virginia return

Virginia allows you to claim either the standard deduction or itemized deductions, whichever is larger. The standard deduction for 2024 is $13,850 for single filers and $27,700 for married couples filing jointly. These amounts increase slightly each year. If you are 65 or older, you receive an additional standard deduction.

If you itemize, you can deduct mortgage interest, property taxes, charitable donations, and certain medical expenses. Virginia follows federal rules for itemized deductions, so your Virginia itemized deductions are usually the same as your federal ones. You cannot claim both the standard deduction and itemized deductions in the same year.

Virginia also allows deductions for contributions to certain retirement accounts, such as traditional IRAs and SEP-IRAs. Contributions to a 401(k) are usually deducted from your paycheck before Virginia tax is calculated, so they reduce your taxable income automatically.

Frequently Asked Questions

Do I have to pay Virginia income tax if I just moved to the state?

Yes, if you moved to Virginia partway through the year, you owe Virginia income tax on all income earned while you lived there. You file a part-year resident return and report only the income from the months you were in Virginia. You may also owe tax to the state you moved from on income earned there.

Is Virginia income tax withheld from my paycheck automatically?

Yes, if you work in Virginia or for a Virginia employer, your employer withholds Virginia income tax from your paycheck based on the W-4 form you complete. The amount withheld depends on your income, filing status, and the number of allowances you claim. You can adjust your withholding by submitting a new W-4 to your employer.

What happens if I do not file a Virginia tax return?

If you owe taxes and do not file, Virginia may assess penalties and interest on the unpaid amount. The penalty starts at 5% of the unpaid tax and increases if the return remains unfiled. If you are due a refund, there is no penalty for not filing, but you forfeit the refund after a certain period. It is better to file even if you cannot pay when ready.

Can I deduct federal income taxes from my Virginia return?

No, Virginia does not allow you to deduct federal income taxes paid. You can deduct state and local property taxes, but the total is capped at $10,000 per year. This is a federal rule that also applies to Virginia returns.

Do I owe Virginia tax on retirement income from out of state?

If you are a Virginia resident, you owe Virginia tax on all income, including retirement distributions from out-of-state accounts. However, certain retirement income may be excluded, such as military retirement pay or pension income if you meet age requirements. Check the Virginia Department of Taxation website for the current exclusions.