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.

• Age Deduction for Taxpayers Age 62 and Over
• Social Security Act and Equivalent Tier 1 Railroad Retirement Act Benefits
• State Income Tax Refund or Overpayment Credit
• Obligations of the U.S.
• Disability Income
• Income from Virginia Obligations
• Federal Work Opportunity Tax Credit Wages
• Tier 2 and other Railroad Retirement and Railroad Unemployment Benefits
• Virginia Lottery Prizes
• Virginia National Guard Income
• Operation Joint Endeavor Combat Pay
• Military Pay and Allowances for Service in a Combat Zone or a Qualified Hazardous Duty Area
• Retirement Plan Income Previously Taxed by Another State
• Virginia College Savings Plan Income Distribution or Refund
• Unemployment Compensation Benefits
• First $15,000 of Basic Military Pay
• Federal and State Employees
• Income Received by Holocaust Victims
• Payments Made Under the Tobacco Settlement
• Gain on the Sale of Land for Open Space Use
• Pension income of Medal of Honor Recipients
• Fixed Date Conformity Subtractions
• Military Death Gratuity Payments
• Avian Influenza Indemnification Payments
• Gains from Peanut Quota Buyout Program
• Subtraction for Certain Death Benefits

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.

Virginia College Savings Plan Income Distribution or Refund

Income that is included in federal adjusted gross income that is attributable to a distribution of benefits or a refund from the Virginia Higher Education Tuition Trust Fund may be entered as a Virginia subtraction. The subtraction for any income attributable to a refund is limited to the amount of income attributable to a refund in the event of a beneficiary's death, disability, or receipt of scholarship. Report on Schedule ADJ, Line 6, Code 34. Code of Virginia Section 58.1-322 [C] [20]

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Unemployment Compensation Benefits

Unemployment benefits received during the taxable year and included in federal adjusted gross income may be subtracted on the Virginia return. The amount of the subtraction is the amount of unemployment benefits that were included on your federal return. Report on Schedule ADJ, Line 6, Code 37. Code of Virginia Section 58.1-322 [C] [25]

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First $15,000 of Basic Military Pay

Up to $15,000 of military basic pay received during the taxable year may be exempted from Virginia income tax. The subtraction is reduced when military pay exceeds $15,000 and is fully phased out when pay reaches $30,000 (i.e., for every dollar that military basic pay exceeds $15,000, the subtraction is reduced by one dollar). Military personnel must serve on active duty for 90 days or more, and can be stationed inside or outside of Virginia. Report on Schedule ADJ, Line 6, Code 38. Code of Virginia Section 58.1-322 [C] [23]

Last Updated 8/27/2012 8:6