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Tool | August 2013

State-by-State Guide to Taxes on Retirees

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Virginia

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The Bottom Line
Map of Virginia

MIXED TAX PICTURE

The Old Dominion offers some tax breaks to retirees. It does not tax Social Security benefits. But residents are taxed on their entire incomes, including federal pensions and military pensions. Residents 65 and older can deduct up to $12,000 per person of retirement income, subject to income-eligibility limits. Real estate is assessed at 100% of fair market value.

State Sales Tax

4.3% (does not include statewide local rate of 1%). Prescription and nonprescription drugs are exempt; food purchased for home consumption is taxed at 2.5% (1.5% state tax plus 1% local tax). As of July 1, 2013, a new additional state retail sales and use tax of 0.7% has been imposed in the Northern Virginia and Hampton Roads regions (food bought for home consumption is not subject to the regional tax).

Income Tax Range

Low: 2% (on up to $3,000 of taxable income)
High: 5.75% (on taxable income over $17,000)

Social Security

Social Security benefits are not taxed.

Exemptions for Other Retirement Income

Tier I Railroad Retirement benefits are exempt. Also, a Virginia Age Deduction allows an exemption for filers who are 65 or older by January 1, and each spouse must claim his or her own age exemption. The amount of the deduction depends on birth date, filing status and income. For seniors born on January 1, 1939, or before, the age deduction is $12,000 per filer. For those born on January 2, 1939, or later, the $12,000 deduction for individual taxpayers 65 and older is reduced by $1 for every $1 that adjusted federal AGI exceeds $50,000, or $75,000 for married filers.

Property Taxes

Property taxes are administered by the state's cities, counties and towns and are based on 100% of fair market value. A new real estate transfer tax of 0.15% applies to land or property sold in the Northern Virginia Transportation Authority area. Median property tax on the state's median home value of $252,600 is $1,862, according to the Tax Foundation.

Tax breaks for seniors: A county, city or town may enact a program for senior citizens and disabled persons allowing for exemption, deferral or a combination of both for property taxes on homes owned and occupied as the sole dwelling of a person 65 or older. Annual family income is generally limited to $50,000 to qualify for a program, but it may be higher in certain Northern Virginia communities. In addition to annual family income limits, net worth limits may apply. There are no adjustments at the state level.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.

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