Tax Type
Individual Income Tax
Description
LLCs or S corporations are not eligible for the age deduction
Topic
Persons Subject to Tax
Taxable Income
Date Issued
07-30-2008
July 30, 2008
Re: Ruling Request:: Request for Official Tax Status Clarification
Dear *****:
This is in response to your letter of June 19, 2008, in which you requested a ruling regarding the tax treatment of persons aged 65 and over whose sole income consists of social security benefits. In addition, you inquired about the use of the $12,000.00 age deduction by those who have chose to incorporate as either a limited liability company ("LLC") or S corporation.
Under Va. Code § 58.1-322 C 4, a taxpayer is allowed a subtraction for social security benefit payments received under Title II of the Social Security Act. Social security benefits may be subtracted from Virginia taxable income provided that it is included in federal adjusted gross income ("FAGI"). Thus, if the social security benefits are the sole income source for a single person aged 65 and over and it is included in FAGI, then the benefits may be subtracted each taxable year for Virginia income tax purposes, and the taxpayer would not be required to file with the Department each year. Since many of the people who rely solely on social security benefits as income do not file tax returns with the Department, there is no reliable data for which the Department can use to determine the total number of Virginia residents that rely solely on social security benefits.
For those individual's age 65 and over who have earned income they must meet certain thresholds in order to avoid income tax from being levied or filing and income tax return. Under Va. Code § 58.1-321 A 1, when an individual's Virginia adjusted gross income ("VAGI") plus the age deduction provided in Va. Code § 58.1-322 D 5 is less than $11,250.00 for taxable years beginning on or after January 1, 2008 and before January 1, 2010, no tax is levied and a return is not required.
Under Va. Code § 58.1-322 D 5 only individuals, and not corporations, are eligible for the age deduction. Therefore, LLCs or S corporations are not eligible for the age deduction.
I trust that this reply answers your ruling request. The Code of Virginia sections cited and other reference documents are available on-line in the Tax Policy Library section of the Department of Taxation's web site located at www.tax.virginia.gov. If you should have any questions regarding this ruling, you may contact ***** in the Office of Policy and Administration, Policy Development, at *****.
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- Sincerely,
Janie E. Bowen
Tax Commissioner
- Sincerely,
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Rulings of the Tax Commissioner