Virginia State Tax ― Individual Income Tax
Virginia first adopted the individual income tax in 1926. Today it is a major component of Virginia’s tax structure and accounts for about 30% of the state’s tax revenue. In general, all residents and nonresidents with Virginia taxable income are required to file a state tax return.
A taxpayer’s Federal adjusted gross income (AGI) is the starting point for determining their Virginia adjusted gross income (VAGI). Federal AGI is modified by certain additions and subtractions specific to the Code of Virginia. VAGI does not include the standard deduction, itemized deductions, the child and dependent care expense deduction, personal exemptions, or other tax deductions from income.
The following individuals must file a Virginia income tax return:
- “Single” filers with VAGI of $11,250 or more
- “Married filing separately” filers with VAGI of $11,250 or more
- “Married filing jointly” filers with combined VAGI of $22,500 or more
The filing status you use on your Virginia tax return will typically reflect the status used on your federal return. For married taxpayers, filing status partly depends on their residency status. In general, a resident and a nonresident cannot file a joint Virginia return.
Virginia income tax (along with federal tax) is typically withheld from an individual’s paycheck. The amount of tax withheld generally depends on which tax bracket the individual falls under. There are 4 tax brackets for Virginia’s individual income tax.
For “single” and “married filing separately” taxpayers, the tax rates are as follows:
- 2% on the first $3,000 of taxable income
- $60 plus 3% on taxable income between $3,001 and $5,000
- $120 plus 5% on taxable income between $5,001 and $17,000
- $720 plus 5.75% on taxable income of $17,001 or more
For “married filing jointly” taxpayers, the tax rates are the same (as above) but the income brackets are doubled, as follows:
- 2% on the first $6,000 of taxable income
- $60 plus 3% on taxable income between $6,001 and $10,000
- $120 plus 5% on taxable income between $10,001 and $34,000
- $720 plus 5.75% on taxable income of $34,001 or more
Residents of Virginia, including students and dependents, must file Form 760 (Resident Individual Income Tax Return) if their VAGI meets the filing thresholds above.
A part-year resident is any individual who has moved into or out of Virginia during the tax year and received taxable income from Virginia sources. The VAGI for a part-year resident includes a subtraction for income received while living in another state. Part-year residents should file Form 760PY (Part-Year Resident Individual Income Tax Return). An individual may file Form 760 (Resident Individual Income Tax Return) if all of their income is from Virginia sources.
Nonresidents with Virginia-sourced income are subject to the same filing requirements as residents. The VAGI for a nonresident includes income from all sources, from inside and outside of the state. Nonresidents with Virginia taxable income must file Form 763 (Nonresident Individual Income Tax Return). Note that there are exceptions for the wages/salaries of certain nonresidents of Kentucky, Maryland, Pennsylvania, Washington DC, and West Virginia.
Calendar year taxpayers must file their Virginia returns by May 1st. (Those who are filing on a basis other than the calendar year, such as fiscal year filers, must file by the 15th day of the 4th month, following the close of the tax year.) If tax is owed, it should be paid in full when the return is filed.
Individuals who cannot file by the due date are permitted an automatic 6-month extension. However, at least 90% of the tax due must be paid by the original due date or penalties will apply. Tax due can be paid online or by using Form 760IP (Virginia Automatic Extension Payment Voucher for Individuals).
If you need to make a change to your filed tax return, you must file Form 760 (Resident Individual Income Tax Return) and fill in the oval next to “Amended Return” at the top of the first page. In general, if you file an amended Federal return, you must also file an amended Virginia return.
Virginia State Tax ― Corporate Income Tax
The corporate income tax rate is 6% of Virginia taxable income, and it is imposed on the following corporations:
- Domestic corporations (i.e. any corporation that is organized/chartered under Virginia law)
- Foreign corporations that have registered with the State Corporation Commission for the privilege of conducting business in Virginia
- Every corporation that receives income from Virginia sources
All domestic and registered foreign corporations are required to file a corporate income tax return every year, even if there is no Virginia income to report. Every corporation that has to file a return must be registered with the Department of Taxation. This can be done online or by filing Form R-1 (Business Registration Application).
Every corporation with tax liability that is expected to exceed $1,000 (reduced by allowable tax credits) for the taxable year must make estimated tax payments online or with Form 500ES (Corporation Estimated Income Tax Payment Vouchers). Corporations with an average monthly tax liability that exceeds $20,000 are required to pay their taxes by Electronic Funds Transfer (EFT).
Most corporations must file Form 500 (Corporation Income Tax Return), including nonprofit organizations that incur unrelated business taxable income at the federal level. S corporations whose “S status” is recognized by the federal government are automatically treated as S corporations for Virginia purposes, and must file Form 502 (Pass-Through Entity Return of Income and Return of Nonresident Withholding Tax). Corporations conducting business in more than one state must use Schedule 500A (Multistate Corporation) to allocate and apportion their income.
All corporate returns are due by the 15th day of the fourth month, following the end of the taxable year ― except for nonprofit organizations which file by the 15th day of the sixth month. An automatic 6-month extension is granted for corporations filing late, although at least 90% of the tax owed must be paid by the original due date. This payment can be submitted online or with Form 500CP (Automatic Extension Voucher).
Virginia State Tax ― Sales & Use Tax
Virginia’s Retail Sales Tax is imposed on the gross receipts of retail sales (i.e. sales made for any purpose other than resale) of tangible personal property. The general rate is 5% (4% state tax plus a 1% local tax), with the tax being collected from the consumer by the seller on each sale. This tax may apply to the lease/rental of personal property and the furnishing of temporary accommodations ― however, separately stated labor charges, separately stated shipping charges, magazine or newspaper subscriptions, and prescription and nonprescription drugs are exempt. Store-bought food is taxed at a lower rate of 2.5% (1.5% reduced state tax plus the 1% local tax).
Virginia’s Use Tax is a component of the sales tax and has the same rate of 5% (4% state tax plus 1% local tax). The use tax is imposed on the use, consumption, or storage of tangible personal property in Virginia when sales tax was not properly charged. Residents are generally required to pay Consumer Use Tax if they purchase over $100 worth of items for which sales tax was not paid. This typically applies to purchases made outside of Virginia and brought into the state, as well as transactions made via Internet, mail-order catalogues, and home shopping channels.
Virginia residents who owe use tax may elect to have it deducted from their Individual Income Tax refund. Use tax may also be paid on Form 760 (Resident Income Tax Return) or Form 760PY (Part-Year Resident Income Tax Return). If an individual prefers to file using a separate form, they must submit Form CU-7 (Virginia Consumer’s Use Tax Return for Individuals) by May 1st.
In order to file and pay sales/use tax, businesses must register with the Virginia Department of Taxation. Registered businesses must file a monthly return and pay the tax online or by submitting Form ST-9 (Virginia Retail Sales and Use Tax Return).
Virginia State Tax ― Property Tax
Property tax in Virginia is administered by localities (counties, independent cities, and incorporated towns) with rates that vary throughout the state. There are 2 main types of property subject to taxation: real property and tangible personal property.
Real property (or real estate) generally includes land, and anything built or installed on the land. It is taxed based on 100% of fair market value, with rates that are set and collected by locality.
Local tax assessors determine the value of real property and local officials set the tax rates. Some counties assess property (both residential and commercial) on an annual basis. Assessment values may change from year to year because of economic conditions, land rezoning, surrounding neighborhoods, or physical/structural changes. Notices of assessment are sent to property owners, who may make an appeal if they disagree with the assessed value of their property.
Tangible personal property generally refers to moveable private property (as opposed to “intangible” property). It is taxed based on a percentage of the original cost, with rates that are set and collected by locality. To report this type of property, residents of Virginia must file Form 762 (Return of Tangible Personal Property, Machinery and Tools, and Merchant’s Capital) by May 1st. Items classified as tangible personal property include the following:
- Machinery and Equipment
- Furniture, fixtures, and other household goods
- Motor vehicles (automobiles, motorcycles, trucks, tractors, trailers, mobile homes), boats, campers, and aircrafts
- Clothing, jewelry, and art
- Livestock and agricultural products
Other Virginia State Taxes
Cigarette Tax ― The cigarette excise tax is imposed at a rate of 1.5 cents per cigarette ― 30 cents per standard pack of 20 cigarettes, or $3.00 per carton of cigarettes.
Communications Tax ― The communications sales/use tax is imposed at a rate of 5% on communications services (such as telephone, radio, video programming, and cable television). It is generally collected from customers by their service providers, who remit the tax each month to the Department of Taxation. In 2007, a uniform statewide E-911 tax also took affect at a rate of $0.75 per line.
Litter Tax ― The litter tax is imposed at a rate of $10.00 per business establishment. Businesses subject to this tax include manufacturers, wholesalers, distributors, and retailers. An additional $15 tax is imposed on any business that manufactures, sells, or distributes groceries, carbonated drinks, beer, and other malt beverages.
Motor Vehicle Fuel Sales Tax ― The motor vehicle fuel sales tax is imposed at a rate of 2% on the retail sale of fuels sold within every county/city that is a member of the “Northern Virginia Transportation District” or the “Potomac and Rappahannock Transportation District.” This tax is generally included in the price at the pump.
Tobacco Products Tax ― This tax is imposed at a rate of 10% of the distributor’s purchase price (i.e. the manufacturer’s sales price) of tobacco products.
Withholding Tax ― Employers are required to withhold income tax from any payment. They must register with the Virginia Department of Taxation and file withholding returns on a quarterly, monthly, or semi-weekly basis (depending on the employer’s tax liability). All filers must submit Form VA-6 (Employer’s Annual or Final Summary of Virginia Income Tax Withheld Return) by February 28th of the following year, or within 30 days after the final payment of wages.
Virginia State Tax Forms
Form 760 (Virginia Resident Individual Income Tax Return)
Form 760PY (Virginia Part-Year Resident Income Tax Return)
Form 763 (Virginia Nonresident Income Tax Return)
Form 760ES (Virginia Estimated Income Tax Payment Vouchers for Individuals)
Form 760IP (Virginia Automatic Extension Payment Voucher for Individuals)
Schedule ADJ (Virginia Adjustments to Income)
Schedule OSC (Virginia Credit for Tax Paid to Another State)
Schedule CR (Virginia Credit Computation Schedule)
Form CU-7 (Virginia Consumer’s Use Tax Return for Individuals)
Virginia State Tax Resources
Virginia Department of Taxation: www.tax.virginia.gov
Download or request a Virginia state tax form online: www.tax.virginia.gov/NeedAForm
VA Department of Taxation “Online Services” center: www.tax.virginia.gov/OnlineServices
VA TAX Online for Individuals (electronic filing and payment options): www.individual.tax.virginia.gov/VTOL/Ind
Virginia Tax Web Upload (file sales/use tax and withholding tax): www.webupload.tax.virginia.gov
VA TAX QuickPay for Businesses and Individuals: www.quickpay.tax.virginia.gov/VTOL/Quickpay
Check the status of your Virginia state tax refund: www.tax.virginia.gov/WhereIsMyRefund
Virginia Tax Facts (booklet): www.tax.virginia.gov/webPDFs/taxfacts
VA TAX e-Subscriptions (sign up for e-mail notifications about tax changes and filing reminders): www.tax.virginia.gov/esubscriptions
Alphabetical Listing of Virginia Localities (contact information for property tax assessment and collection agencies): www.dmv.state.va.us/locality
Virginia Tax Policy Library: www.policylibrary.tax.virginia.gov
Virginia Department of the Treasury: www.trs.virginia.gov
Virginia’s Tax Freedom Day is April 16th.