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Virginia Subtractions From Income

The starting point for computing Virginia taxable income is federal adjusted gross income. Virginia law specifically exempts from income tax certain types of income that may have been reported in federal adjusted gross income. Those items should be subtracted in computing Virginia taxable income. The allowable subtractions are listed below.

Virginia law also provides for a number of deductions in computing Virginia taxable income.  Be sure to review those provisions before completing your income tax return.

Age Deduction for Taxpayers Age 65 and Over

If you or your spouse were born on or before January 1, 1948, you may qualify to claim an age deduction of up to $12,000 each. The age deduction you may claim will depend upon your birth date, filing status and income. If you were born:

  • On or before January 1, 1939: You may claim an age deduction of $12,000. If you are married, each spouse born on or before January 1, 1939 may claim a $12,000 age deduction. For individuals born after January 1, 1939, the age deduction is based on the criteria below.
  • On or between January 2, 1939, and January 1, 1948: Your age deduction is based on your income. A taxpayer's income, for purposes of determining an income-based age deduction, is the taxpayer's adjusted federal adjusted gross income or AFAGI. A taxpayer's AFAGI is the taxpayer's federal adjusted gross income, modified for any fixed-date conformity adjustments, and reduced by any taxable Social Security and Tier 1 Railroad Benefits.

This deduction shall be reduced by $1 for every $1 that the taxpayer's adjusted federal adjusted gross income exceeds $50,000 for single taxpayers or $75,000 for married taxpayers. For married taxpayers filing separately, the deduction will be reduced by $1 for every $1 the total combined adjusted federal adjusted gross income of both spouses exceeds $75,000. You may not claim the age deduction if you claim the Disability Income subtraction. Report on Form 760, line 4.

For details on how to compute, see the Age Deduction Calculator. Code of Virginia Section 58.1-322[D][5]

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Social Security Act and Equivalent Tier 1 Railroad Retirement Act Benefits

Virginia law exempts Social Security and Tier 1 Railroad Retirement benefits from taxation. If you were required to include any of your benefits in federal adjusted gross income, subtract that amount on your Virginia return. For subtracting other benefits, see Tier 2 and other Railroad Retirement and Railroad Unemployment Benefits. Report on Form 760, line 5. Code of Virginia Section 58.1-322[C][4]

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State Income Tax Refund or Overpayment Credit

Virginia law allows a subtraction for the amount of any state refund or overpayment credit included in federal adjusted gross income. The subtraction is the amount of refund or credit you reported on your federal return. Report on Form 760, line 6. Code of Virginia Section 58.1-322[C][5]

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Obligations of the U.S.

Virginia law allows a subtraction for income (interest) derived from obligations or income (dividends and gains) derived from the sale or exchange of obligations of the United States, and on obligations or securities of any authority, commission or instrumentality of the United States to the extent the income is included in federal adjusted gross income. The amount to be subtracted is the income less any related expenses already deducted on the federal return. The subtraction applies only to income from direct obligations. For information on obligations that qualify for the subtraction, see PD 94-281. Report on Schedule ADJ, Line 4. Code of Virginia Section 58.1-322 [C] [1]

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Disability Income

Up to $20,000 of disability income as defined by the Internal Revenue Code Section 22 (C ) (2) (B) (iii) can be subtracted when calculating Virginia taxable income. As defined under federal law, the subtraction applies to income received for permanent and total disability. The subtraction is equal to the amount of income received for total or permanent disability, not to exceed $20,000. You may not claim this subtraction if you claim the Age Deduction for Taxpayers Age 62 and Over. Report on Schedule ADJ, Line 5. Code of Virginia Section 58.1-322 [C] [4b]

Last Updated 3/8/2013 11:35

 

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