Virginia · what’s new
What’s new in Virginia for 2026: fixed-date conformity, and the federal breaks that never arrive
What the 2026 General Assembly did to the Virginia return, what the July 2025 federal law does and does not change here, why tips, overtime, car-loan interest and the $6,000 senior deduction are still taxed by Virginia, the standard deduction schedule now written into law through 2029, and the smaller changes to estimated payments, the earned income credit and educator expenses. For anyone trying to work out whether the 2026 Form 760 will look like last year’s.
By Charles Trautman, EA, editor
Need to Know Tax · written from Virginia Department of Taxation (Virginia Tax) sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a Virginia practitioner
The bottom line
- Rates are unchanged. The standard deduction is $8,750 single and $17,500 joint for 2026, and rises to $9,200 and $18,400 for 2027.
- Virginia’s link to the federal code is fixed at December 31, 2025, but the federal deductions for tips, overtime, seniors and car-loan interest come after AGI and do not reach the Virginia return.
- The refundable earned income credit is 20% of the federal credit.
- Estimated payments are required only when the tax due after withholding is more than $1,000, up from $150.
- Form 760 is due May 1. In 2027 that is a Saturday, so expect Monday, May 3, 2027.
- No statewide tax measure was on the November 3 ballot. Some localities voted on an added sales tax for school construction; check your county or city.
For most Virginians the 2026 return will look almost exactly like the 2025 return, and the reason is the design of Form 760. Virginia starts from federal adjusted gross income, so every new federal deduction that is taken after AGI, the deductions for tips, overtime, car-loan interest and the $6,000 senior deduction, passes Virginia by without an add-back and without a vote. The General Assembly considered matching a quarter of them and decided not to. What it did do, on February 20, 2026, was end Virginia’s rolling conformity to the Internal Revenue Code and fix it at December 31, 2025, which brings in nearly all of the 2025 federal law as it affects AGI and itemized deductions while keeping Virginia out of bonus depreciation and the new business expensing. The standard deduction stays at $8,750 single and $17,500 joint for 2026. The rate schedule, unchanged since 1990, stays where it was.
The smaller changes: the estimated-payment threshold rose from $150 to $1,000, the refundable 20% earned income credit runs through 2029 instead of ending after 2026, teachers get back a $500 deduction, and the budget adopted June 29, 2026 wrote the standard deduction for 2027 through 2029 into law.
The big change: a fixed conformity date
Until this year Virginia followed the federal tax code on a rolling basis: whatever Congress changed, Virginia picked up automatically unless the General Assembly decoupled. House Bill 29 (Chapter 7, 2026 Acts of Assembly), signed February 20, 2026, replaced that with a fixed date. Virginia now conforms to the Internal Revenue Code as it stood on December 31, 2025, and nothing Congress does after that date reaches Virginia until the General Assembly adopts it, except a federal law that merely extends a provision Virginia already follows.
Because the July 2025 federal law (Public Law 119-21) was on the books by December 31, 2025, the fixed date brings in nearly all of it as far as it touches federal AGI or itemized deductions. The Department of Taxation’s Tax Bulletin 26-1 lists where Virginia steps aside:
| Federal item | Virginia for 2026 | Where it shows up |
|---|---|---|
| Changes to federal AGI generally (above-the-line items) | Conforms | Flows into Form 760 line 1 automatically |
| Changes to itemized deductions generally | Conforms | Virginia Schedule A, for those who itemized federally |
| Repeal of the overall (Pease) limitation on itemized deductions and its replacement | Does not conform; Virginia keeps the old Pease limitation | Limited Itemized Deduction Worksheet in the Schedule A instructions |
| 100% bonus depreciation | Does not conform, as it never has | Schedule ADJ addition; Virginia depreciation records |
| Immediate expensing of qualified production property (IRC 168(n)) | Does not conform | Schedule ADJ addition |
| Immediate expensing of domestic research costs (IRC 174A), including the catch-up provisions | Does not conform | Schedule ADJ addition; separate Virginia amortization |
| Higher Section 179 expensing limits | Does not conform | Schedule ADJ addition |
| Business interest limit (IRC 163(j)) | Conforms, but Virginia’s own subtraction for disallowed interest falls from 50% to 20% for 2025 and later | Schedule ADJ subtraction |
| Deductions for tips, overtime, car-loan interest, seniors | Never reach Virginia: taken after AGI | Nowhere; the income stays in line 1 |
Schedule ADJ carries “fixed date conformity” addition and subtraction lines for the depreciation and expensing differences. A wage earner or retiree with no business will never use them.
Tips, overtime, car loans and the senior deduction: Virginia says no
A server who owes no federal tax on $14,000 of tips will owe Virginia on every dollar of it. So will a nurse with $9,000 of overtime, a buyer with a new car loan, and a 70-year-old couple expecting the $6,000-per-person senior deduction to help. None of those four federal deductions reduce adjusted gross income; all four come off afterward. Form 760 line 1 is federal AGI, and Virginia never asks about anything below it.
The General Assembly knew this. The budget the Governor introduced in December 2025 proposed Virginia subtractions equal to 25% of the federal deductions for tips, overtime and car-loan interest for 2026, rising to 50% from 2027. The budget adopted June 29, 2026 (House Bill 30, Chapter 1, 2026 Special Session I) dropped all three, and the Department’s 2026 Legislative Summary lists no such subtraction (verify). Nothing was proposed for the senior deduction; Virginia’s own answer to age is the $800 additional exemption at 65 and the $12,000 age deduction, neither of which changed. See Virginia for retirees.
Worked example: a server’s 2026 return, federal and Virginia
Single, under 65, $34,000 of wages and $14,000 of reported tips. The federal tips deduction removes the tips from federal taxable income. Virginia taxes them in full.
| Federal | Virginia | |
|---|---|---|
| Wages plus tips | $48,000 | $48,000 |
| Adjusted gross income | $48,000 | $48,000 (Form 760 line 1) |
| Standard deduction | −$16,100 | −$8,750 |
| Tips deduction | −$14,000 | none; below the AGI line |
| Personal exemption | none | −$930 |
| Taxable income | $17,900 | $38,320 |
| Tax | about $1,900 | $1,946 |
| Virginia tax on the tips alone, at 5.75% | $805 |
Virginia tax is $720 on the first $17,000 of taxable income plus 5.75% of the $21,320 above it. Had the 25% subtraction in the introduced budget survived, $3,500 would have come off on Schedule ADJ and saved $201. It did not. For the first time, this server’s state tax is about the same as her federal tax.
The standard deduction: flat for 2026, then a schedule
The 2025 increase to $8,750 for single and separate filers and $17,500 for joint filers was written to expire after 2026. House Bill 30 kept it for 2026 and then set the figures for the next three years, which is unusual; Virginia normally legislates one year at a time.
| Tax year | Single or married filing separately | Married filing jointly |
|---|---|---|
| 2025 and 2026 | $8,750 | $17,500 |
| 2027 | $9,200 | $18,400 |
| 2028 and 2029 | $9,300 | $18,600 |
| 2030 and later, unless extended | $3,000 | $6,000 |
The last line is not a typo. Virginia’s permanent statutory standard deduction is still $3,000 and $6,000; every figure above it has been a temporary increase renewed by each budget. The 2030 reversion is the cliff the next General Assembly will have to deal with.
Personal exemptions did not move: $930 for each filer and dependent, $800 more for age 65 or blindness. They are not indexed and have not changed in years.
Itemizers and the SALT cap
Virginia itemizers are in the murkiest spot this year. Virginia generally applies no cap on state and local taxes on Virginia Schedule A, because it strips out state and local income taxes anyway and lets real estate, personal property and sales taxes through. But Virginia did not follow the federal repeal of the overall (Pease) limitation, so filers above the Pease thresholds, $332,700 single and $399,200 joint for 2025 (verify 2026 figures), still run the Limited Itemized Deduction Worksheet, and inside that worksheet, and for anyone electing the general sales tax deduction on line 5a, the federal SALT cap applies: $40,000 for 2025 ($20,000 separate), phasing down above $500,000 of modified AGI joint and $250,000 single. The Department’s May 28, 2026 notice told 2025 filers who used the old $10,000 cap on line 5a to consider amending. The 2026 Schedule A instructions are to come; if you itemize and your income is above $250,000, wait for them. The federal side is in The SALT cap.
The smaller changes, in order of who they reach
Estimated payments: the $1,000 threshold. For tax years beginning January 1, 2026, estimated payments are required only when expected Virginia tax after withholding and credits exceeds $1,000. The old threshold was $150, which caught almost anyone with a side job or a modest brokerage account. The safe harbors are unchanged: 90% of this year’s tax or 100% of last year’s, in timely installments. Dates and mechanics are in Virginia calendar and forms.
Refundable EITC through 2029. Virginia’s earned income credit is 20% of the federal credit, and full-year residents may take it as a refundable credit instead of the nonrefundable version. The refundable option was scheduled to end after 2026; House Bill 30 extended it through tax year 2029. The choice among the two versions and the $300-per-exemption Credit for Low Income Individuals is in Credits and breaks for Virginia families.
Educator expenses, $500, back for 2026. A teacher, counselor or aide with at least 900 hours in a Virginia public or private primary or secondary school may deduct up to $500 of unreimbursed classroom expenses not deducted federally. The deduction had lapsed for 2025.
Grid-upgrade interconnection costs. A new deduction under Va. Code 58.1-322.03(19) for qualifying costs of connecting to the electric grid, from 2026 (verify scope and limit in the 2026 instructions).
Pass-through entity tax made permanent. Owners of S corporations and partnerships that elect entity-level tax keep their owner credits; the January 1, 2027 sunset is gone, and the credit for pass-through tax paid to other states continues.
Innocent spouse relief on Virginia’s terms. From July 1, 2026, a spouse who meets the federal innocent-spouse tests can ask the Department for relief from a joint Virginia liability whether or not a federal claim was filed (House Bill 716, Chapter 210), through the Department’s Offer in Compromise, doubtful liability, process.
A state free-file program, eventually. House Bill 1180 and Senate Bill 591 require the Department to offer a free electronic filing program beginning with tax year 2028 returns, repealing a 2010 law that had barred one. For the 2026 return the options are still the commercial Free File vendors and paid software; Virginia was never an IRS Direct File state.
Military Benefits Subtraction, year two at $40,000. The subtraction for military retirement pay and Survivor Benefit Plan payments reached $40,000 per person for 2025 and stays there, with no age requirement.
New online systems. The Department moved its online systems to a new platform over Labor Day weekend 2026; log-ins and payment pages changed. Anyone who scheduled estimated payments through the old system should confirm them before the January 15, 2027 installment (verify).
No ballot measure, but watch the local sales tax
None of the three constitutional amendments on the November 3, 2026 ballot (reproductive freedom, marriage, voting rights) is a tax measure, and there is no statewide tax question. The tax vote was local: 47 counties and cities, from Fairfax City to Norfolk to Richmond, asked voters to approve an additional local sales tax of up to 1% for school construction. Where it passed, the combined rate rises from 2027, to 6.3% in most of the state and 7% or more in the regions that already pay 6% (verify by locality once results are certified). Groceries and hygiene products stay at 1% statewide. This does not touch the income tax return, but it changes the sales tax figure for anyone electing the sales tax deduction on Virginia Schedule A in 2027.
The 2026 return against the 2025 return
| Item | 2025 return | 2026 return |
|---|---|---|
| Rate schedule | 2% / 3% / 5% / 5.75% | Same |
| Standard deduction, single / joint | $8,750 / $17,500 | $8,750 / $17,500 |
| Exemptions | $930; $800 age or blind | Same |
| Federal tips, overtime, car-loan, senior deductions | Taxed by Virginia | Taxed by Virginia |
| Conformity | Rolling, with decoupling | Fixed at December 31, 2025, with the same decoupling |
| Business interest subtraction (163(j)) | 20% (cut from 50%, effective 2025) | 20% |
| Estimated payment threshold | $150 | $1,000 |
| Refundable EITC | Available; set to expire after 2026 | Available; extended through 2029 |
| Educator expense deduction | None | Up to $500 |
| Military Benefits Subtraction | $40,000 per person | $40,000 per person |
| Due date | May 1, 2026 | May 1, 2027, a Saturday (verify whether it moves to Monday, May 3) |
Behind the scenes: why “no tax on tips” costs Virginia nothing to ignore
When Congress creates a deduction below the AGI line, a state that starts from AGI gains the revenue the federal government gave up, automatically. Virginia did not have to pass anything to keep taxing tips and overtime; it had to pass something to stop, and the something had a price. The introduced budget’s 25% subtractions were already a compromise, and even that did not survive the conference between the House and Senate. The Department’s 2026 Legislative Summary, which catalogs every tax change the session made, has no entry for tips, overtime or car loans. Absence is the record.
Fixed-date conformity cuts the other way. Under rolling conformity, every future federal change would have landed in Virginia the day it was signed, and the General Assembly would have had to undo the ones it did not want, sometimes after returns had been filed. With a fixed date, nothing new arrives until Richmond votes it in. From here on, the first tax bill of each session will be the one that decides which of last year’s federal changes Virginians get to use.
What to bring
- Last year’s Form 760 and Schedule ADJ, to compare line by line; almost nothing on the form moved
- W-2s showing tips and overtime, which Virginia taxes in full even though the federal return does not
- For anyone 65 or older: dates of birth and the SSA-1099, so the age deduction can be figured on adjusted federal AGI
- If you itemize: the federal Schedule A and the real estate and personal property tax bills, and patience until the 2026 Virginia Schedule A instructions are out
- For a business, farm or rental: the federal Form 4562 and any Section 179 or research-cost expensing, for the Schedule ADJ conformity additions
- Teachers: receipts for classroom expenses, up to $500, and proof of the 900 hours
- Confirmation of 2026 estimated payments from the Department’s new online system
Questions people ask
I don’t pay federal tax on my tips anymore. Why does Virginia still tax them?
Because the federal deduction comes off after adjusted gross income and Form 760 starts from AGI. The tips are in line 1 and nothing takes them out. The same is true of overtime, car-loan interest and the $6,000 senior deduction. A proposal to let Virginians subtract 25% of those federal deductions was dropped from the final 2026 budget.
Did the Virginia standard deduction go up for 2026?
No. It is $8,750 single and $17,500 joint, the same as 2025. It rises to $9,200 and $18,400 for 2027 and $9,300 and $18,600 for 2028 and 2029 under the budget signed in June 2026.
What does “fixed-date conformity” mean for my return?
Virginia now follows the federal tax code as of December 31, 2025. For the 2026 return that means nearly all of the July 2025 federal law applies in Virginia, except bonus depreciation and the new business expensing, which Virginia has always kept out, and the Pease limitation on itemized deductions, which Virginia keeps. Any federal change made after December 31, 2025 does not apply in Virginia unless the General Assembly adopts it.
Do I still have to make estimated payments?
Only if your expected Virginia tax after withholding and credits is more than $1,000. The threshold was $150 through 2025. If you were making $40 quarterly payments to cover a small amount of interest income, you can stop.
Is the Virginia earned income credit still refundable?
Yes, for full-year residents, at 20% of the federal credit, through tax year 2029. The nonrefundable version and the Credit for Low Income Individuals remain as alternatives; you pick one.
Was there a tax question on the November 2026 ballot?
No statewide one. Dozens of localities voted on an extra 1% sales tax for school construction, which, where it passed, takes effect in 2027. The income tax was not on the ballot anywhere.
Same form, same rate, same deduction; the federal breaks stop at the state line
If your 2025 Virginia return was right, the 2026 one will be nearly identical. The only people who should expect a surprise are those who read “no tax on tips” and thought it meant Virginia.
Written by Charles Trautman, EA, editor · Need to Know Tax, Lone Tree, Colorado
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Forms and official pages named in this article
- Tax Bulletin 26-1, Virginia’s Fixed Date of Conformity to the Internal Revenue Code (February 20, 2026)
- Virginia Tax 2026 Legislative Summary
- Important Update for Taxpayers Who Itemize Deductions on Tax Year 2025 Returns (May 28, 2026)
- 2025 Virginia Schedule A instructions, SALT cap and limited itemized deduction worksheet
- Individual Estimated Tax Payments, the $1,000 threshold and safe harbors
- Virginia Tax: Deductions (standard deduction, educator expenses, 529)
- Low Income Individuals Credit and Virginia Earned Income Credit
Sources and where to check
- Virginia Tax news: Rolling Conformity Replaced with a Fixed Date of December 31, 2025 (February 20, 2026)
- Virginia Tax news: New Virginia Tax Laws (July 7, 2026)
- Virginia LIS, HB 30 (2026 Special Session I) conference report, Item 4-14 #1c: standard deduction and EITC
- 2025 Form 760 instructions (What’s New: estimated tax threshold for 2026)
- Virginia Tax: Military Benefits Subtraction FAQ
- Virginia Tax news listing (Labor Day 2026 system upgrade notice)
- Virginia Department of Elections: November 2026 constitutional amendments and local referenda
- Virginia Tax: Retail Sales and Use Tax rates by region