How Virginia income tax works: federal AGI, four old brackets, 5.75%

Virginia’s income tax looks graduated and behaves flat. The rate schedule has four brackets, 2%, 3%, 5% and 5.75%, but the top one begins at $17,000 of taxable income and the schedule has not been adjusted since 1990, so nearly every working household pays 5.75% on most of what it earns and the three lower brackets together are worth about $258. The return, Form 760, starts from federal adjusted gross income, which means the federal standard deduction and every federal deduction taken below the AGI line, including the new ones for tips, overtime, car-loan interest and the $6,000 senior deduction, never reach Virginia. What Virginia gives back is its own: a standard deduction of $8,750 single or $17,500 joint, $930 for each person on the return, no tax on Social Security, and a short list of subtractions and deductions that a reader has to know to ask for. There is no local income tax anywhere in the state.

The practical rule: a federal break that lowers AGI, an IRA contribution, an HSA deposit, student loan interest, lowers Virginia tax too, at 5.75%. One that comes off after AGI does nothing here. A tipped worker who owes no federal tax on $8,000 of tips owes Virginia $460 on them.

Who files

A full-year resident, anyone domiciled in Virginia or anyone who kept a place to live here for more than 183 days of the year, files Form 760 and reports all income wherever it was earned, with a credit on Schedule OSC for tax paid to another state on income taxed by both. A part-year resident files Form 760PY and a nonresident with Virginia-source income files Form 763; both are covered in Moving to Virginia. Wages earned in Virginia by residents of the District of Columbia, Kentucky, Maryland, Pennsylvania and West Virginia are generally exempt under reciprocity, and the same is true in reverse for Virginians who commute to those places.

A return is required once Virginia adjusted gross income reaches $11,950 for a single filer or someone married filing separately, or $23,900 on a joint return. Below those lines, file anyway if Virginia tax was withheld or if the refundable earned income credit is in play. Married couples generally use the status they used federally, but Virginia lets a couple who filed a joint federal return file separately on the Virginia return, Filing Status 3, which occasionally saves money when one spouse has little income and the other took a large subtraction. There is no head-of-household status in Virginia; a federal head of household files as single here and takes the $8,750 standard deduction.

Where it starts: federal AGI

Line 1 of Form 760 is federal adjusted gross income, line 11 of the 1040. Everything below that line on the federal return is invisible to Virginia: the federal standard deduction, itemized deductions, the senior deduction, the deductions for tips, overtime and car-loan interest, and the 20% qualified business income deduction. None of them need to be added back, because none of them were ever taken out. Virginia then builds its own return from AGI: a few additions, the subtractions on Schedule ADJ, the standard or itemized deduction, exemptions, and the tax table.

Virginia follows the federal definition of AGI as the Internal Revenue Code stood on December 31, 2025. That date matters this year. Until February 2026 Virginia conformed to federal law on a rolling basis; House Bill 29, signed February 20, 2026, fixed the date, which brings in the July 2025 federal law’s changes to AGI and itemized deductions for the 2026 return except where Virginia says otherwise. The exceptions are mostly for businesses: Virginia still disallows bonus depreciation, does not follow the new expensing for qualified production property, domestic research costs or the higher Section 179 limits, and cuts its subtraction for disallowed business interest from 50% to 20%. A sole proprietor, landlord or farmer who used any of these federally has a “fixed date conformity” addition on Schedule ADJ and keeps a separate Virginia depreciation schedule. See What’s new in Virginia for 2026.

The additions

For most households there is one addition or none. Interest on other states’ municipal bonds, exempt federally, is added; interest on Virginia’s own bonds stays exempt. The fixed-date conformity addition above applies to businesses that took federal deductions Virginia does not allow. A prior-year Virginia529 deduction is recaptured if the money came out for something other than education. Schedule ADJ lists the rest, and the list is short.

The subtractions

This is where the Virginia return gives money back. Each goes on Schedule ADJ with a code, and the software will not find them unless someone enters them.

Pensions, IRA withdrawals, 401(k) distributions and Roth conversions are not on the list. Virginia taxes them in full, at the regular rates. The age deduction and the military subtraction are the only cushions.

The Social Security subtraction is the one most Virginians feel. Whatever share of the benefit was taxed federally is in AGI, and Schedule ADJ takes all of it back out, at any age and any income. The military subtraction is the second most valuable: $40,000 per person of military retirement pay or survivor benefits, with no age requirement, and a couple who both served can each take it. Thrift Savings Plan withdrawals and civil-service pensions do not qualify.

The deductions: standard or itemized, and the extras

The standard deduction is $8,750 for a single or separate filer and $17,500 on a joint return, the same as 2025. The 2026–2028 budget raises it to $9,200 and $18,400 for 2027 and $9,300 and $18,600 for 2028 and 2029; after that the law reverts to $3,000 and $6,000 unless the Assembly acts again. A dependent’s standard deduction is limited to earned income.

Virginia ties the choice to the federal return. If you took the standard deduction federally, you take it in Virginia. If you itemized federally, you must itemize in Virginia, on Virginia Schedule A, starting from the federal itemized total and subtracting the state and local income taxes you deducted. That rule can hurt. A household that itemized federally because $19,000 of mortgage interest, property tax and gifts beat the federal standard deduction may find that after stripping out $5,000 of Virginia income tax its Schedule A comes to $14,000, below the $17,500 Virginia standard deduction it is not allowed to take. Run both returns before deciding to itemize federally; sometimes the federal gain is smaller than the Virginia loss.

Virginia generally applies no SALT cap on Schedule A, since income taxes are already removed and property and sales taxes are allowed in full. It does keep the old federal overall limitation on itemized deductions at higher incomes, and inside that computation it uses the federal SALT cap for the year. The 2026 Schedule A instructions, with the exact mechanics, are to come.

On top of either deduction, Virginia allows a set of its own deductions on Schedule ADJ. The ones that reach ordinary households:

These are deductions, not credits. At 5.75% the $6,000 child care deduction is worth $345 and a $4,000 Virginia529 contribution is worth $230.

The exemption is per person: $930 for the taxpayer, $930 for a spouse and $930 for each dependent claimed federally, plus $800 for each filer who is 65 or older by January 1, 2027, and $800 for each who is blind. A family of four claims $3,720; a retired couple both over 65 claims $3,460. The exemption has not been indexed and has not changed in years.

The rate

AGI, plus additions, minus subtractions, is Virginia adjusted gross income. Take off the standard or itemized deduction, the exemptions and the Schedule ADJ deductions and the result is Virginia taxable income, which goes to the tax table.

The brackets are the same for single, joint and separate filers, and they are not indexed. Above $17,000 the tax is 5.75% of taxable income minus $257.50; that $257.50 is the entire value of the lower brackets.

Capital gains, dividends, interest, rent, gambling winnings and retirement distributions are all taxed at the same rates as wages. There is no preferential rate for long-term gains. Because the return starts from federal AGI, the federal netting of gains and losses and the $3,000 capital loss limit carry through unchanged.

No Virginia city, county or town levies an income tax. Localities live on real estate tax, the personal property tax on cars, and a 1% share of the sales tax. The number on Form 760 is the whole state and local income tax bill.

The credits

Virginia’s credits are few, and the big one comes with a choice. A lower-income household claims one, and only one, of three things on Schedule ADJ: the refundable Virginia earned income credit, 20% of the federal EITC; the nonrefundable version, also 20% but limited to the tax; or the Credit for Low Income Individuals, $300 per exemption for families whose Virginia AGI is under the federal poverty guideline for their size. None of the three is available if anyone on the return took the age deduction, the $800 age or blind exemption, or the military basic pay or National Guard subtraction. The details and the arithmetic are in Credits and breaks for Virginia families.

There is no Virginia child tax credit, no renter’s credit and no property tax credit on the income tax return. Senior property tax relief is a local program, described in the retirees article.

Withholding and estimated payments

Employers withhold Virginia tax from Form VA-4, where the employee claims exemptions, one per person on the return plus the age and blind exemptions, and the withholding tables do the rest. For a wage earner with no other income the result is usually close. The VA-4 is also where a resident of a reciprocity state certifies that no Virginia tax should be withheld at all.

Anyone who expects to owe more than $1,000 after withholding and credits must make estimated payments on Form 760ES. The threshold was $150 through 2025 and rose to $1,000 for tax years beginning in 2026, so far fewer retirees and side-business owners are caught by it. Payments are due May 1, June 15, September 15 and January 15 of the following year; note that the first one lands on the return due date, not April 15. The safe harbor is 90% of this year’s tax or 100% of last year’s, and 66⅔% for farmers and fishermen, who may also make a single payment by January 15. Payments must be made electronically once any estimated or extension payment exceeds $1,500 or the year’s tax exceeds $6,000. The underpayment addition is figured on Form 760C. Pension and IRA payers will withhold Virginia tax on request, and for a retiree with a taxable pension that is simpler than four vouchers.

How and when to file

The return is due May 1, two weeks after the federal deadline. For the 2026 return, May 1, 2027 falls on a Saturday, and the Department’s rule is that a due date on a weekend moves to the next business day, Monday, May 3, 2027. Virginia grants an automatic six-month extension to November 1 with no form to file, but it is an extension to file, not to pay. At least 90% of the tax must be paid by the May due date or an extension penalty of 2% a month, up to 12%, applies; tax still unpaid when the return is filed draws a late payment penalty of 6% a month, up to 30%, plus interest at the federal underpayment rate plus 2%. Extension payments go in on Form 760IP or online.

Most returns are e-filed with the federal return through commercial software; Virginia Free File lists free offers for lower incomes, and the Department’s own online account handles payments and refund status but does not yet file the return. Dates, forms and links are in Virginia calendar and forms.

What trips people up

• Expecting the federal tips, overtime or senior deduction to reduce Virginia tax. None of them reaches Form 760, and the Virginia subtractions proposed to match them were dropped from the 2026 budget.
• Itemizing federally for a small gain and losing the $17,500 Virginia standard deduction to the forced Schedule A.
• A Virginia529 contribution nobody mentioned, or one claimed by a grandparent who is not the account owner of record.
• Social Security left in Virginia income because the software was never told the state.
• Taking the age deduction and the Virginia EITC on the same return; the law allows one or the other.
• Military retirement subtracted with no entry for the spouse who also served, or TSP withdrawals subtracted as military retirement.
• Child care expenses entered as the federal credit amount instead of the expenses.
• Treating the automatic extension as permission to pay in November.