State Income Tax Deductions and Credits in Virginia

If you are a resident of Virginia you must file a Virginia state income tax return if you have Virginia adjusted gross income over a certain amount based on your filing status. You can find the filing limits in the Virginia 760 Resident Individual Income Tax Booklet. You should file a Virginia income tax return if state income was withheld from your pay and you are due a refund.

If you are a resident of Virginia you are generally subject to Virginia state income tax on your earnings from all sources. If you are not a resident of Virginia you are subject to tax on your income from Virginia sources. And if you are a resident of Virginia part of the year, you are subject to Virginia state taxes on your earnings from all sources while you reside in Virginia and only on your income from Virginia sources during the part of the year you live outside Virginia.

Your Virginia state income tax is based on your federal adjusted gross income. But there are certain adjustments you must make, and there are deductions and credits you can take on your Virginia return that are different than those on your federal return.

Virginia deductions

The following are some of the deductions you can claim on your Virginia state tax return.

Age deduction

If you are age 65 or older, you can claim an age deduction up to a maximum of $12,000. The amount of the deduction depends on your age, filing status, and income. The deduction is reduced by $1 for each $1 your Virginia adjusted gross income exceeds a certain amount for your filing status. If you are married, both you and your spouse can claim the deduction.

Social security and railroad retirement

Social security and railroad retirement benefits are not taxed in Virginia, so if you had to include any of these benefits on your federal tax return, you can deduct that amount on your Virginia return.

Disability income

If you received compensation for permanent and total disability that you had to include as wages on your federal tax return, you can deduct that amount on your Virginia return, up to a maximum of $20,000. You cannot claim both the disability income deduction and the age deduction. You should determine which deduction gives you the larger tax benefit.

Income from Virginia obligations

If you included income from state and local bonds in Virginia on your federal tax return you can subtract that income on your Virginia return.

Virginia lottery prizes

If your federal income tax return includes prizes under $600 awarded by the Virginia Lottery, you can deduct the amount on your Virginia return.

Virginia National Guard

If you received income from the Virginia National Guard for active or inactive service and you are rank O3 or below, on your Virginia return you can deduct the income you received for 39 days or $3,000, whichever is less.

Military pay

On your Virginia tax return you can deduct the military pay and allowances you received while on active duty in a combat zone or qualified hazardous duty area. If you are on extended active military duty for more than 90 days, you can subtract up to $15,000 of basic military pay. If your basic pay is more than $15,000, the deduction is reduced by $1 for every $1 over $15,000. If both you and your spouse are on active duty, each of you can claim the deduction.

Federal and state employees

If you are a federal or state employee and earn $15,000 or less, you can subtract that salary on your Virginia tax return. If you claim this subtraction you cannot also claim a credit for Low Income Individuals.

Virginia College Savings Plan

If your federal adjusted gross income includes a distribution of benefits or a refund from the Virginia College Savings Plan due to the death or disability of the beneficiary or the receipt of a scholarship, you can deduct that amount on your Virginia return.

On your Virginia return you can deduct up to $4,000 in contributions to the Virginia College Savings Plan. If you age 70 or older you can deduct the entire amount you paid.

Unemployment benefits

Any unemployment benefits that you had to include as income on your federal tax return can be subtracted on your Virginia return.

Spouse tax adjustment

If you are married filing jointly and both you and your spouse have income, you can claim the spouse tax adjustment. This adjustment allows both spouses to take advantage of a lower tax rate on their separate incomes, to reduce the effect of a higher tax rate on their combined income.

Child and dependent care expenses

If you claimed a credit for child and dependent care expenses on your federal return, you can claim a deduction on your Virginia return for the amount of the expenses on which the federal credit was based. This is the amount of your qualified expenses up to $3,000 for one dependent or $6,000 for two or more dependents.

Foster care

If you are a foster parent you can claim a deduction of $1,000 on your Virginia return for each child who resides in your home under permanent foster care.

Teachers

If you are a licensed primary or secondary school teacher, you can deduct up to 20 percent of your unreimbursed tuition costs for attending continuing teacher education courses that are required as a condition of your employment, to the extent those expenses are not deducted on your federal tax return.

Long-term health care premiums

On you Virginia return you can claim a deduction for long-term health care premiums provided they are not claimed as an itemized deduction on your federal tax return. But you cannot claim a deduction for premiums that are used as the basis for claiming the Virginia Long-Term Care Insurance Credit.

Energy efficient equipment or appliances

You can claim a deduction for the sales tax you paid on certain energy efficient equipment or appliances, up to a maximum deduction of $500, or $1,000 on a joint return.

Virginia credits

The following are some of the credits you may be able to claim on your Virginia state tax return.

Credit for low income individuals or Virginia earned income credit

If your family's Virginia adjusted gross income is equal to or below the federal poverty guidelines, you may be able to claim the credit for low income individuals or Virginia earned income credit. The credit for low income individuals is $300 for each personal exemption you claim. If you claimed the earned income credit on your federal return you can claim 20% of the federal credit on your Virginia return. If you qualify for both the low income individuals credit and the Virginia earned income credit you can choose to claim the credit that benefits you most. These credits are calculated on Schedule ADJ.

You cannot claim the credit for low income individuals or the Virginia earned income credit if you are claiming the age deduction, the exemption for taxpayers who are blind or age 65 and over, the Virginia National Guard subtraction, the Basic Military pay subtraction, or the federal and state employee subtraction.

Credit for taxes paid to another state

If you paid income tax to another state on income that is included in your Virginia return, you can claim a credit for that tax. This credit is claimed on Schedule OSC. You have to attach a copy of the state tax return for which you are claiming a credit.

Political contributions credit

If you make contributions to candidates for state or local political office you can claim a credit on your Virginia state tax return for 50 percent of the amount you contributed, up to a maximum credit of $25 for individuals and $50 if you are married filing jointly.

Business credits

There are various state tax credits for business owners in Virginia. You can find more information on these credits in the Virginia Schedule CR Instructions.

Sources:
Virginia 760 Resident Individual Income Tax Booklet - Virginia Department of Taxation
Virginia Resident Form 760 - Virginia Department of Taxation
Virginia Schedule ADJ - Virginia Department of Taxation
Virginia Schedule CR Instructions - Virginia Department of Taxation
Virginia Schedule OSC - Virginia Department of Taxation