Virginia Taxes for Retirees

What Virginia Residents need to know

Virginia is a wonderful state for many reasons – the beauty and variety of Virginia retirement communities is a big factor in making the state perfect for those looking to retire. For those in retirement or with limited income taxes can be a big consideration factor in choosing a retirement location.

Virginia’s basic sales and income taxes include:

• Sales tax 5% (includes statewide local tax of 1%)

• Food for home consumption 1.5%

• Fuel tax: gasoline 20 cents per gallon, diesel 20.2 cents per gallon

• Cigarette tax: 30 cents/20 pack

• Prescription and non-prescription – no tax

• Personal income tax – 4 income brackets from $3,000-17,000 and 2-5.75% - standard deduction $3,000 single and $5,000 married filing jointly.

• Retirement income tax – 65 and over eligible for a $12,000 with limitations. Adjusted for income over $50,000 for single and $75,000 for married (joint or separate filing). Social Security and Tier 1 Railroad Retirement earnings are exempt from tax.

• Property taxes are based on fair market value and handled by the city, county and town the property is located in. there may be exemptions, deferrals or a mix of both for seniors and disabled residents.

• Virginia has no inheritance tax and the estate tax has been repealed so long as the death is after July 1, 2007.

Long term health care insurance premiums may be deducted if they have not been deducted on the federal tax forms and are specific for long term health care. Only that not claimed on the federal filing can be deducted off state taxes. There is a credit that applies to supplies and items needed to make a home suitable for those with disabilities – for example the addition of ramps, stairway lifts and other alterations to the home. This also extends to businesses that increase access in the business for disabled visitors but is limited to $500 per year for new construction.

With a long military history in the state it is worth considering the advantages retiring to Virginia can offer those veterans who choose to retire here. Military and retirement pay issues depend on the type of income. For example standard retired military pay follows the rules for federal taxes, with stipulations that those earning a Medal of Honor may subtract retirement income received from the federal gross income tax reporting. Retirees who enlisted before September 24, 1975 and those who receive disability based on combat injuries are covered by disability laws as are those receiving disability payments from the VA. This also applies to most service related disability payments which is free from federal income tax. VA benefits are not subject to federal or state taxes.

More detailed information can be found at the Virginia Department of Taxation site or by calling 804-367-367-8031.

For many reasons Virginia is a good place to live but for retired military it can also be a way to hang onto more of your retirement pension income. After a lifetime of work, and with all Virginia has to offer, it makes sense to make maximum use of your retirement dollars.