Virginia has a state income tax

Virginia charges state income tax on wages, self-employment income, interest, dividends, and other earnings. The tax rate ranges from 2% to 5.75% depending on your income bracket. Unlike some states, Virginia does not have a flat tax — the more you earn, the higher percentage you pay.

Virginia also taxes capital gains (profit from selling investments) at the same rates as ordinary income, with some exceptions for long-term gains. The state does not tax Social Security benefits, but it does tax retirement income from pensions, IRAs, and 401(k) withdrawals.

If you work in Virginia but live in another state, or live in Virginia but work elsewhere, you may owe taxes to both states. Virginia has reciprocal agreements with a few neighboring states (Washington D.C., Maryland, Pennsylvania, and West Virginia) that can reduce or eliminate double taxation, but the rules depend on where you live and work.

Key Takeaways

  • Virginia income tax rates run from 2% to 5.75% based on your income bracket, and you pay the higher rate only on income above each threshold.
  • Social Security benefits are not taxed in Virginia, but retirement account withdrawals, pensions, and investment gains are taxed as ordinary income.
  • If you live in Virginia but work in a neighboring state with a reciprocal tax agreement, you may not owe Virginia income tax on that out-of-state wage.
  • You file Virginia income tax using Form 760, which you submit to the Virginia Department of Taxation along with your federal return.

Virginia income tax brackets and rates

Virginia uses a progressive tax system with six income brackets. Your tax bracket depends on your filing status (single, married filing jointly, head of household, or married filing separately) and your total taxable income for the year.

The brackets change each year because Virginia adjusts them for inflation. For the 2024 tax year, the rates and income thresholds are set by the Virginia Department of Taxation. You can find the current brackets on the department's website or in the instructions that come with Form 760.

The tax is calculated on your Virginia taxable income, which is usually your federal taxable income with some adjustments. You do not pay the top rate on all your income — you pay the lower rate on the first portion of income, then the next rate on the next portion, and so on. This means your actual tax rate (called your effective rate) is lower than your top bracket rate.

What income Virginia taxes and what it does not

Virginia taxes wages and salaries, self-employment income, interest, dividends, capital gains, rental income, and income from partnerships or S corporations. If you receive a W-2 or 1099 from a Virginia employer or client, that income is subject to Virginia tax.

Virginia does not tax Social Security retirement benefits, even if you have other income. However, the state does tax distributions from IRAs, 401(k)s, 403(b)s, and other retirement accounts. It also taxes pension income and annuity payments. If you are over 59½ and withdraw from a retirement account, you still owe Virginia income tax on that withdrawal.

Military retirement pay is taxed in Virginia unless you are a military retiree who has established Virginia residency specifically because of military assignment. Federal employees' pensions are taxed. Long-term capital gains (assets held over one year) are taxed at the same rates as ordinary income in Virginia, unlike some states that offer preferential rates.

Filing requirements and deadlines

You must file a Virginia income tax return if your Virginia taxable income exceeds the standard deduction for your filing status. The standard deduction amounts change each year and are set by the Virginia Department of Taxation. Even if you do not owe tax, you may want to file if you had taxes withheld from your paychecks, because filing allows you to claim a refund.

Virginia income tax returns are due on the same date as your federal return, which is typically April 15. If April 15 falls on a weekend or holiday, the deadline moves to the next business day. You can request an extension, which gives you until October 15 to file, but the extension does not extend the deadline to pay any tax you owe.

You file using Form 760 (Virginia Individual Income Tax Return) or Form 760PY (for part-year residents). You submit your Virginia return along with your federal return. If you file your federal return electronically, you can also file your Virginia return electronically through an approved tax software provider or through the Virginia Department of Taxation's website.

Tax withholding and estimated payments

If you are an employee, your employer withholds Virginia income tax from your paycheck based on the Form W-4 you complete. The amount withheld depends on your income, filing status, and the number of dependents you claim. You can adjust your withholding at any time by submitting a new Form W-4 to your employer.

If you are self-employed or have income that is not subject to withholding (such as rental income or investment gains), you may need to make quarterly estimated tax payments to Virginia. Estimated payments are due on April 15, June 15, September 15, and January 15. If you do not make estimated payments and you owe more than $150 at tax time, you may owe a penalty.

You can check how much tax has been withheld from your paychecks by looking at your pay stub or by logging into your employer's payroll system. If you think too much or too little is being withheld, you can adjust your Form W-4 with your employer.

Reciprocal tax agreements with neighboring states

Virginia has reciprocal tax agreements with Washington D.C., Maryland, Pennsylvania, and West Virginia. These agreements generally mean that if you live in Virginia and work in one of these jurisdictions, you do not owe Virginia income tax on your out-of-state wages. Instead, you pay tax only to the state or district where you work.

To claim the reciprocal exemption, you must file Form 760 and include a statement showing your out-of-state wages and the taxes you paid to the other state. You will need to provide proof of residency in Virginia and proof of employment in the reciprocal state. The rules vary slightly by state, so check the Virginia Department of Taxation website for the specific requirements.

If you live in another state and work in Virginia, you generally owe Virginia income tax on your Virginia wages. However, if you live in a reciprocal state, you may not owe Virginia tax. The reciprocal agreement protects residents of the reciprocal state, not Virginia residents working out of state.

Frequently Asked Questions

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

If you moved to Virginia partway through the year, you are a part-year resident. You owe Virginia income tax only on income you earned while you were a Virginia resident. You file using Form 760PY and must show the date you established residency. Income earned before that date is not subject to Virginia tax.

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

If you owe Virginia income tax and do not file, the Virginia Department of Taxation can assess a penalty and interest on the unpaid amount. The penalty is typically 10% of the unpaid tax, and interest accrues daily. If you filed late in previous years, the department may have already filed a return on your behalf based on information from your employer or other sources.

Can I deduct federal income tax from my Virginia taxes?

No. Virginia does not allow you to deduct federal income tax paid when calculating your Virginia taxable income. However, you can deduct state and local taxes (up to $10,000) on your federal return if you itemize deductions.

Is Virginia income tax withheld from my unemployment benefits?

Unemployment benefits are subject to Virginia income tax. Your employer or the Virginia Employment Commission does not automatically withhold tax from unemployment payments, so you may owe tax when you file your return. You can request that tax be withheld by completing Form W-4V and submitting it to the Virginia Employment Commission.

Do I owe Virginia tax on income from a business I run part-time?

Yes. Self-employment income is subject to Virginia income tax. You report it on your Form 760 using Schedule C (or Schedule C-EZ for simpler businesses). You can deduct ordinary business expenses to reduce your taxable income, and you may owe quarterly estimated tax payments if your net profit is substantial.