Virginia has a state income tax on wages, investment income, and other earnings

Yes, Virginia charges state income tax. Unlike a handful of states that have no income tax at all, Virginia taxes wages, interest, dividends, and most other forms of personal income. The tax is progressive, meaning the rate increases as your income rises. Virginia's rates range from 2% on the lowest bracket to 5.75% on the highest, as of 2024.

Your employer typically withholds Virginia income tax from your paycheck automatically, similar to federal withholding. If you're self-employed or have income that isn't subject to withholding, you may need to make quarterly estimated tax payments to the Virginia Department of Taxation.

Key Takeaways

  • Virginia's income tax rates range from 2% to 5.75% depending on your income level, with rates applied to wages, investment income, and most other earnings.
  • Your employer withholds Virginia income tax from your paycheck, and you report it annually on your Virginia tax return.
  • Virginia allows you to deduct your federal income tax paid, which can lower your state tax bill.
  • Self-employed people and those with income not subject to withholding must pay estimated taxes quarterly to avoid penalties.
  • Certain types of income, such as Social Security benefits and some retirement distributions, may be partially or fully exempt from Virginia taxation.

Virginia's income tax brackets and rates

Virginia uses six tax brackets. The lowest bracket starts at 2% for income under $3,000, and each bracket increases as your income grows. The highest bracket of 5.75% applies to income over $17,000 (these thresholds are adjusted annually for inflation). The brackets explore to your taxable income after deductions, not your total earnings.

For example, if you earned $40,000 in wages and claimed the standard deduction, you would not pay the top rate on all $40,000. Instead, you would pay 2% on the first portion, then 3%, then 5%, and so on, only reaching the 5.75% rate on income above $17,000. This is how progressive tax systems work — you do not jump into a higher bracket for all your income once you cross a threshold.

What income Virginia taxes

Virginia taxes most forms of personal income: W-2 wages, self-employment income, interest from savings accounts and bonds, stock dividends, rental income, and capital gains. If you receive income from any of these sources, it is generally subject to Virginia state tax unless a specific exemption applies.

Some income is exempt or partially exempt. Social Security benefits are not taxed by Virginia. Distributions from certain retirement accounts, such as traditional IRAs and 401(k)s, are taxable, but Virginia allows a deduction for retirement income if you meet age and income requirements. Military pensions and some government pensions also receive special treatment. The rules vary depending on your age, income level, and the type of retirement account, so check the Virginia Department of Taxation website or a tax professional if you have retirement income.

How withholding works and what to do if you're self-employed

When you start a job in Virginia, your employer uses your W-4 form to calculate how much Virginia income tax to withhold from each paycheck. This withholding is sent to the state on your behalf. At the end of the year, you file a Virginia tax return to reconcile what was withheld against what you actually owe. If too much was withheld, you receive a refund; if too little, you owe the difference.

If you are self-employed, have a side business, or receive income without withholding, you must pay estimated taxes quarterly. These payments are due on April 15, June 15, September 15, and January 15 of the following year. Failure to pay estimated taxes can result in penalties and interest. Use Form VA-1040-ES to calculate your estimated payment, available on the Virginia Department of Taxation website.

The federal income tax deduction

Virginia allows you to deduct the federal income tax you paid during the year from your Virginia taxable income. This is a significant benefit because it reduces the amount of income subject to Virginia's state tax. For example, if you paid $5,000 in federal income tax, you can subtract that $5,000 from your Virginia taxable income before calculating your state tax.

This deduction is claimed on your Virginia tax return (Form VA-1040) and does not require itemizing deductions. It applies whether you take the standard deduction or itemize on your federal return. The deduction is limited to the federal tax you actually paid, not the amount withheld from your paycheck if you received a refund.

Filing your Virginia tax return

You must file a Virginia tax return if your income exceeds the filing threshold for your filing status. For 2024, the threshold is $12,950 for single filers and $25,900 for married filing jointly (these amounts change annually). Even if your income is below the threshold, you may want to file if you had taxes withheld, because you could be due a refund.

Virginia tax returns are due by May 1 (the state uses May 1 instead of April 15). You can file online using Virginia's e-file system, by mail, or through a tax professional. If you need more time, you can request an extension, but estimated taxes are still due on the original important date. The Virginia Department of Taxation offers free filing options for lower-income residents through the Volunteer Income Tax information (VITA) program.

Tax credits and deductions available in Virginia

Beyond the federal income tax deduction, Virginia offers several credits and deductions that can lower your tax bill. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is based on your federal EITC. Virginia also offers credits for child and dependent care expenses, education expenses, and property tax paid on your home.

If you are over 65 or permanently disabled, you may may have access to for additional deductions on retirement income. Donations to certain charitable organizations can be deducted if you itemize. The rules and income limits for these credits and deductions vary, so review the Virginia Department of Taxation's website or consult a tax professional to see which ones explore to your situation.

Frequently Asked Questions

Do I have to pay Virginia income tax if I work in Virginia but live in another state?

Yes, Virginia taxes income earned within the state regardless of where you live. However, you may be able to claim a credit on your home state's return for taxes paid to Virginia to avoid double taxation. The rules depend on your home state's tax laws, so check with that state's tax authority.

Is Social Security taxed in Virginia?

No, Virginia does not tax Social Security benefits. However, other retirement income such as pensions, IRA distributions, and 401(k) withdrawals may be taxable unless they may have access to for Virginia's retirement income deduction.

What happens if I don't pay my Virginia taxes?

The Virginia Department of Taxation can assess penalties and interest on unpaid taxes. If you owe a significant amount, the state may place a lien on your property or garnish your wages. If you cannot pay in full, contact the Virginia Department of Taxation about payment plans or hardship relief options.

Can I file my Virginia taxes for free?

Yes, Virginia offers free e-file through its website for most taxpayers. Additionally, the Volunteer Income Tax information (VITA) program provides free tax preparation for individuals earning less than a certain threshold. Search "VITA near me" or contact your local library or community center for locations.

What is Virginia's standard deduction?

Virginia's standard deduction varies by filing status and age. For 2024, it is $4,500 for single filers under 65 and $5,500 for those 65 and older. Married filing jointly filers get $9,000 under 65 and $10,000 at 65 or older. These amounts are adjusted annually for inflation.