Virginia Additions to Income
Under legislation enacted by the General Assembly, Virginia's date of conformity to the federal tax code will advance to December 31, 2021. See Tax Bulletin 22-1 for more information.
The starting point for computing Virginia taxable income is federal adjusted gross income. Certain items of income that are either not taxable for federal purposes or are not reported in federal adjusted gross income are taxable on the Virginia return. These items, which are listed below, must be reported as additions to federal adjusted gross income on the Virginia return.
Interest on Obligations of Other States
Federal law generally exempts interest on state and local government bonds and securities from income tax. Since Virginia law exempts only income from Virginia state and local obligations, an addition is required to bring interest income from obligations of other states into Virginia taxable income. The amount to be added back on the Virginia return is the income less related expenses.
Medical and Dental Expenses
In Virginia, you can deduct the total amount of qualified medical and dental expenses that exceeds 10% of your federal adjusted gross income. On your federal return, you can deduct the amount that exceeds 7.5%. Complete Virginia Schedule A to determine the amount of medical and dental expenses you can claim on your Virginia return.
Visit www.irs.gov for more information about which medical and dental expenses are eligible for deduction.
Fixed Date Conformity Additions
Bonus Depreciation: Federal tax law allows businesses to write off the cost of certain types of assets more quickly than normal. Visit www.irs.gov information on the types of assets covered and how to depreciate them.
Virginia tax law doesn’t recognize this bonus depreciation. If you claimed a deduction that included bonus depreciation on your federal income tax return, you’ll need to recalculate depreciation on these assets to determine the amount of your Virginia deduction. If your Virginia deduction is less than your federal deduction, you’ll add back the difference to determine your Virginia adjusted gross income.
Other Fixed Date Conformity Additions
- Interest on federally exempt U.S. obligations - Enter the amount of interest or dividends exempt from federal income tax, but taxable in Virginia, less related expenses.
- Accumulation distribution income - Enter the taxable income used to compute the partial tax on an accumulated distribution as reported on federal Form 4970.
- Lump-sum distribution income - If you received a lump-sum distribution from a qualified retirement plan and used the 20% capital gain election, the 10-year averaging option, or both on federal Form 4972, complete the table below:
Enter the total amount of distribution subject to federal tax.
(ordinary income and capital gain) 1. _______________
Enter the total federal minimum distribution allowance,
federal death benefit exclusion and federal estate
tax exclusion. 2. _______________
Subtract Line 2 from Line 1. Enter this amount
on your Virginia Schedule ADJ. 3. _______________
- Income from Dealer Disposition of Property - Enter the amount that would be reported under the installment method from certain dispositions of property. If, in a prior year, the taxpayer was allowed a subtraction for certain income from dealer dispositions of property made on or after Jan. 1, 2009, in the years following the year of disposition, the taxpayer is required to add back the amount that would have been reported under the installment method. Each disposition must be tracked separately for purposes of this adjustment.
- First-Time Home Buyer Savings Accounts - To the extent excluded from federal adjusted gross income, an account holder must add any loss attributable to his or her first-time home buyer savings account that was deducted as a capital loss for federal income tax purposes. For more information, see the First-Time Home Buyer Savings Account Guidelines.
- Food Crop Donation - To the extent a credit is allowed for growing food crops in the Commonwealth and donating such crops to a nonprofit food bank an addition to the taxpayer’s federal adjusted gross income is required for any amount claimed by the taxpayer as a federal income tax deduction for such donation.
- Federal Partnership Income Addition - Income related to a federal partnership audit must be added to the owner’s income tax return if the income was not previously reported on the original Virginia return. The amount of the addition is equal to the income that was not included in Virginia taxable income. When reporting this addition, enclose the partnership’s completed Form 502FED-1.
- Others not Listed - Enter the amount of any other income not included in federal adjusted gross income, which is taxable in Virginia. Attach an explanation of the addition.