Virginia does tax retirement income, but not all of it, and not as heavily as the headline rates suggest. Social Security benefits are fully exempt. Traditional pensions, 401(k) withdrawals, and traditional IRA distributions are taxable at rates topping out at 5.75%. Between a military retirement subtraction, an age deduction worth up to $12,000 per person, an extra exemption for filers 65 and older, and a higher standard deduction, many retirees shelter a large slice of their income before the state takes a cent.
What Virginia Taxes and What It Doesn’t
Social Security benefits are not taxed by Virginia. Whatever portion the federal government taxes, you subtract on your Virginia return so none of it lands in your state taxable income. Tier 1 Railroad Retirement benefits get the same treatment.1Virginia Department of Taxation. Virginia Taxes and Your Retirement
Almost everything else on the retirement-income list is taxable. That includes distributions from traditional 401(k)s, traditional IRAs, and 403(b) plans; private-sector pensions; federal civilian pensions under CSRS and FERS; Virginia Retirement System benefits; and Tier 2 Railroad Retirement benefits.1Virginia Department of Taxation. Virginia Taxes and Your Retirement One narrow exception: VRS benefits paid as a guaranteed work-related disability retirement are exempt from both federal and Virginia tax.2Virginia Retirement System. Taxes
Roth IRA and Roth 401(k) distributions are not taxable in Virginia as long as they qualify federally, which generally means the account has been open at least five years and you’re 59½ or older. You paid tax on the contributions going in, and neither Virginia nor the IRS taxes the money coming out.1Virginia Department of Taxation. Virginia Taxes and Your Retirement
The Rates That Apply to Taxable Retirement Income
Virginia’s individual income tax has four brackets: 2% on the first $3,000 of taxable income, 3% from $3,001 to $5,000, 5% from $5,001 to $17,000, and 5.75% on everything above $17,000.3Virginia Tax. Filing Status The top bracket kicks in early. A retiree with $50,000 of taxable income pays the same 5.75% marginal rate as someone earning ten times that. The brackets have not been indexed for inflation in decades, so factor that in when projecting a retirement tax bill.
Military Retirement Pay Gets a Big Subtraction
Virginia lets veterans subtract up to $40,000 of eligible military retirement pay from taxable income beginning with tax year 2025. The cap was phased in over several years: $20,000 for 2023, $30,000 for 2024, and $40,000 from 2025 forward.4Virginia Department of Taxation. Military Benefits Subtraction FAQ
The subtraction applies to retirement pay for service in the U.S. Armed Forces and to Survivor Benefit Plan payments to a surviving spouse. It does not apply to federal civilian pensions such as CSRS or FERS, even if your military years were rolled into a civilian retirement system.4Virginia Department of Taxation. Military Benefits Subtraction FAQ If you waived military retired pay to get credit toward FERS, the resulting FERS benefit doesn’t qualify.
The Age Deduction Is Worth Up to $12,000
Virginia’s age deduction reduces taxable income by up to $12,000 per qualifying person. Whether you get the full amount depends on your birth date and income.5Virginia Department of Taxation. Subtractions
- If you were born on or before January 1, 1939, you get the full $12,000 regardless of income. A married couple both born before that date each claim $12,000.
- If you were born between January 2, 1939 and January 1, 1960, the deduction is income-based. The $12,000 shrinks by one dollar for every dollar your adjusted federal adjusted gross income (AFAGI) exceeds $50,000 single or $75,000 married. It disappears completely at $62,000 single and $87,000 married.
AFAGI is your federal AGI reduced by any taxable Social Security or Tier 1 Railroad Retirement benefits, so Social Security income doesn’t push you out of the deduction range.5Virginia Department of Taxation. Subtractions The birth date cutoff shifts forward one year annually as new cohorts of retirees reach 65, so verify the current year’s qualifying dates on the Virginia Department of Taxation’s subtractions page when you file. The deduction applies against all income, not just retirement income, so part-time wages, rental income, and investment gains all benefit.
Standard Deduction and the Senior Exemption Stack on Top
The Virginia standard deduction is $8,750 for single filers and $17,500 for married couples filing jointly, up from $8,500 and $17,000 beginning with 2025 returns.6Virginia Tax. New Virginia Tax Laws for July 1, 2025 Every filer also gets a personal exemption of $930, and anyone 65 or older by January 1 of the tax year picks up an additional $800 exemption.7Virginia Tax. Exemptions
For a married couple both 65 or older filing jointly, that runs $17,500 for the standard deduction, $1,860 for two personal exemptions, and $1,600 for two age exemptions, totaling $20,960 before the age deduction. Add two full $12,000 age deductions and the shelter reaches $44,960 of income before Virginia tax applies. For a retiree living on Social Security and a moderate pension, that math often means little or no state tax at all.
Required Minimum Distributions Can Erode the Age Deduction
Federal law requires you to start taking annual withdrawals from traditional IRAs, 401(k)s, and similar tax-deferred accounts once you turn 73.8Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs These required minimum distributions are fully taxable in Virginia, and they can push your AFAGI past $50,000 single or $75,000 married, at which point your age deduction starts shrinking dollar for dollar.
Missing an RMD triggers a federal penalty of 25% of the amount you failed to withdraw, reduced to 10% if you correct it within two years.8Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Roth IRAs carry no lifetime RMDs for the owner, which is one reason pre-73 Roth conversions are popular. Virginia taxes the conversion as ordinary income in the year you convert, but qualified withdrawals later come out free of both federal and state tax.
Withholding and Estimated Payments
When a pension or annuity starts, your payer will ask for Form VA-4P to set Virginia withholding. Skip the form and the payer withholds as though you claimed zero exemptions, which is usually more than needed. Use the form to specify exemptions, request extra withholding, or elect none if your income is below the filing threshold.
If your expected Virginia tax liability after withholding and credits exceeds $150, you owe quarterly estimated payments. Due dates are May 1, June 15, September 15, and January 15 of the following year. Virginia charges an underpayment penalty if you don’t cover at least 90% of the current year’s liability through withholding and estimated payments. You can also meet the safe harbor by paying 100% of last year’s liability in equal installments.9Virginia Tax. Individual Estimated Tax Payments Retirees with uneven income from IRA withdrawals or capital gains distributions should track this carefully.
When You Have to File
You must file a Virginia return if you’re required to file federally and your Virginia adjusted gross income is at least $11,950 (single or married filing separately) or $23,900 (married filing jointly).10Virginia Tax. Who Must File The thresholds are low enough that most retirees with meaningful taxable retirement income will need to file, even if deductions and exemptions reduce the actual tax to zero.
Residency Rules for Part-Year Retirees
Virginia taxes you as a resident if you’re domiciled in the state or if you maintain a place of residence in Virginia for more than 183 days during the tax year. Domicile is your permanent legal home, and it doesn’t shift just because you spend winters somewhere warmer. Virginia looks at voter registration, vehicle titles, bank accounts, and where your family lives. Buying a home in another state or spending time there is not enough to shed Virginia domicile.11Virginia Code Commission. Virginia Administrative Code 23VAC10-110-30 – Definitions
Return to Virginia within six months of leaving and there’s a legal presumption you never intended to abandon Virginia domicile, which means resident treatment for the entire period.11Virginia Code Commission. Virginia Administrative Code 23VAC10-110-30 – Definitions Keeping a Virginia driver’s license while claiming residency in a no-income-tax state is the kind of half-measure that keeps you on the hook.
Once you genuinely live outside Virginia, your pension payer won’t withhold Virginia tax as long as your permanent address is out of state.2Virginia Retirement System. Taxes Federal law also prohibits states from taxing nonresidents’ retirement income, so your pension is taxed only by your new state of residence.
No Estate or Inheritance Tax
Virginia imposes neither an estate tax nor an inheritance tax.12Virginia Tax. Estate and Inheritance Taxes Heirs won’t face a separate state-level tax on what they inherit from you. The federal estate tax still applies to estates exceeding $15,000,000 in 2026.13Internal Revenue Service. What’s New – Estate and Gift Tax
Local Property Tax Relief for Older Homeowners
Most Virginia cities and counties offer property tax relief to homeowners who are 65 or older or who have a disability. These programs are run locally, so specifics vary. Relief typically takes the form of either an exemption that reduces or eliminates the tax, or a deferral that postpones payment until the home is sold or the owner dies.
State law allows localities to set income limits up to $50,000 for single homeowners and $75,000 combined for married couples, and most jurisdictions set their limits below those ceilings. Apply directly with your city or county commissioner of the revenue; the application window opens early in the year. If you’re nearing 65 and own your home, contact your local tax office to find the exact income and asset thresholds where you live.