Following a six-month stalemate between Democrat and Republican lawmakers, Virginia has a new budget. The 2023 budget deal features tax cuts (mostly from new Virginia tax rebates to eligible residents) and the return of a popular sales tax holiday.
Virginia Gov. Glenn Youngkin who signed the budget in September, expressed support. In an earlier statement, Youngkin pointed to billions in tax relief for Virginians, including education, law enforcement, and behavioral healthcare funding in the package.
“While the process took longer than needed, more than $1 billion in tax relief is on the way to Virginia veterans, working families and businesses,” Youngkin said.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What’s in the 2023 Virginia budget
The Virginia budget signed by Youngkin on Sept. 14 includes new tax rebates and notable investments in education and health. The package passed 86-4 in the House and 38-0 in the Senate last week and is seen as a compromise stemming from a massive multi-billion dollar surplus.
However, the Commonwealth operates on a two-year budget cycle. So, while the 2023 budget has largely been dubbed a “win-win” by lawmakers on both sides of the political aisle, operations and funding weren’t obstructed by the ongoing negotiations and months-long stalemate.
Here's more of what you need to know.
Virginia tax rebate 2023?
One-time tax rebates. The 2023 budget proposal includes about $1.05 billion in proposed tax reductions — most of which comes from one-time tax rebates that will go to eligible Virginians. Virginia issued similar rebates last year as did more than twenty other states, who returned massive budget surpluses to residents through “stimulus” checks and inflation relief payments.
Now that Youngkin has approved the budget, Virginia joins several states, sending rebate payments in 2023. Beginning in October, eligible Individual filers in the Commonwealth will receive $200, while joint filers will receive $400.
The 2023 VA tax rebates are considered a compromise. Youngkin and fellow Republicans, who control the Virginia House of Representatives, wanted more permanent income tax cuts and a reduction in the corporate tax rate. The Democrat-led Virginia Senate opposed those cuts due to concerns over potential future economic instability.
The upcoming Nov. 7 general and special elections in Virginia will be closely watched since all 140 legislative seats will be on the ballot.
Virginia’s standard deduction
Increased Virginia standard deduction. The new budget temporarily increases the Virginia standard deduction for the 2024 and 2025 tax years. For joint filers, the standard deduction in the Commonwealth will go to $17,000 (from $16,000). For single filers, the standard deduction rises by $500, from $8,000 to $8,500.
Whether the higher standard deductions remain in place will depend on Virginia meeting certain annual revenue targets.
Tax-free weekend in Virginia
Return of Virginia’s sales tax holiday. Virginia’s popular tax-free weekend sales tax holiday returned. As Kiplinger reported, Virginia shoppers initially lost the sales tax benefit after lawmakers had failed to renew a legislative provision governing the event. Sales tax holidays are popular nationwide, with a least fifteen states hosting similar events throughout the summer.
For many years, Virginia's tax-free weekend occurred in August — just in time for back-to-school shopping. Under this budget, the Virginia Sales Tax Holiday 2023 took place in late October.
How military retirement is taxed in Virginia
Military retiree tax benefit. The Virginia budget removes the 55 or older requirement for subtracting military benefits from taxable income. That change is effective beginning with the 2023 tax year.
Before the new budget, Veterans in Virginia had to be at least 55 years old to subtract up to $40,000 of military retirement income. Eligible Veterans also had to have been honorably discharged after active duty service in the U.S. Armed Forces.
Other provisions in the Virginia budget
- The Virginia budget allocates about $650 million for public education. Those funds will mostly be used for behavioral health initiatives. Virginia colleges and universities will receive close to $200 million to help deal with rising costs.
- People who work for the Commonwealth will receive a 2% raise starting in December. Virginia public school teachers will receive an additional 2% increase.
- The budget allocates millions of dollars to support economic development, including additional funding for undergraduate financial aid in Virginia.
Related Content
-
Stock Market Today: Stocks Stable as Inflation, Tariff Fears EbbConstructive trade war talks and improving consumer expectations are a healthy combination for financial markets.
-
What Trump’s 'Big Beautiful Bill' Means for Your Utility BillsIf passed, the 'Big Beautiful Bill' could make home energy upgrades more expensive and raise monthly costs. Here's how much more you might pay and how to prepare.
-
Homeschoolers Could Soon Save on Expenses With 529 PlansSavings Accounts A new House GOP bill could change how you save for your child's homeschool education. Find out how.
-
Ohio Announces Two-Week Sales Tax Holiday Amid Tariffs, High PricesState Tax Ohioans won't want to miss out on savings as pressure from tariffs spikes prices.
-
Five ‘Big Beautiful Bill’ Tax Changes to Watch in the SenateTax Policy The House passed its version of Trump’s "One Big, Beautiful Bill." Here’s what to look for as Senate Republicans take up the mega legislation.
-
New GOP Car Loan Tax Deduction: Which Vehicles and Buyers QualifyTax Breaks To fulfill Trump's campaign promise, House GOP lawmakers want to offer a tax deduction for car loan interest. How would it work?
-
Big GOP Tax Bill Could Change Your Estate Planning for 2025Tax Law The GOP might extend and increase the higher estate and gift tax exemption and AMT thresholds. What might this mean for your estate plan?
-
New 'No Tax on Tips' Bill Approved: What to Know NowIncome Taxes Will you stop paying taxes on your tip income this year?
-
Millions Could Lose SNAP Food Benefits Under Trump Tax Cut PlanTax Policy The House Agriculture Committee approved nearly $300 billion in cuts to SNAP benefits, putting many at risk of hunger.
-
Missouri Leads Capital Gains Tax Repeal: Will Your State Follow?State Tax As one state becomes a test case, policymakers and taxpayers across the U.S. will be watching closely to see what happens next.
