You’ve worked hard, and now you’re ready to move on to the next chapter of your life. As you enter retirement, don’t let confusion about your taxes keep you from enjoying everything Virginia has to offer.
With a few exceptions, if a source of income is taxable at the federal level, it’s taxable to Virginia as well. This includes most sources of retirement income, including:
- Pensions
- 401(k), 403(b), and similar investments
- Tier 2 Railroad Retirement
- Traditional IRAs
Individual Retirement Accounts (IRAs)
With a traditional IRA, you usually can deduct the amount you contributed to the account from your federal taxes. Therefore, your distributions are usually taxable.
A Roth IRA is a little bit different. With a Roth IRA, you pay taxes on the money you add to your account when you earn it. Since you’ve already paid the tax due, you usually don’t pay tax on your distributions.
Social Security
Virginia does not tax Social Security benefits. If any portion of your Social Security benefits are taxed at the federal level, you can subtract that amount on your Virginia return. This also applies to Tier 1 Railroad Retirement.
Age Deduction
Virginia offers qualifying individuals ages 65 and older a subtraction that reduces the amount of their income subject to Virginia income tax:
- If you were born on January 1, 1939, or earlier, you can subtract $12,000
- If you were born on January 2, 1939, or later, the amount of allowed subtraction is based on your income.
For more information, see Age Deduction for Taxpayers Age 65 and Over.
Personal Property and Real Estate Taxes
Many Virginia cities and counties offer a break on their personal property tax or real estate tax to citizens who meet certain criteria. Check with the Commissioner of the Revenue or Director of Finance office in your locality to see if you qualify.