State-by-State Guide to Taxes on Retirees

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NICKNAME
The Old Dominion

BOTTOM LINE: MIXED TAX PICTURE
Virginia 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% (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).

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 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.

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. Net-worth limits may apply. There are no adjustments at the state level.

INHERITANCE AND ESTATE TAXES
There is no inheritance tax and no estate tax.

Visit RetirementLiving.com for a complete rundown of taxes in Virginia.

States More Tax-Friendly for Retirees

• Our picks of the 10 most tax-friendly states for retirees
• The nine states with no income tax
• The five states with no sales tax
• The five states with the lowest sales taxes (including averages of county/city sales taxes)
• The 36 states that don't tax Social Security benefits

States Less Tax-Friendly for Retirees

• Our picks of the 10 least tax-friendly states for retirees
• The seven states with the highest income tax rate (based on highest tax bracket)
• The five states with the highest sales taxes (including average county/city sales taxes)
• The 22 states that impose their own estate taxes or inheritance taxes