Renner Individual News; July 21, 2022
The Virginia General Assembly enacted legislation as of July 1, 2022, that will result in tax savings for many Virginia taxpayers for 2021 and beyond.
Here is a summary of the major updates:
- The Virginia standard deduction for 2022 increases from $4,500 to $8,000 for single filers and from $9,000 to $16,000 for married filers filing jointly. This increase is contingent on 5% annual revenue growth for July through December 2022. The increase to the standard deduction sunsets in 2025 and reverts to the old amount.
- Taxpayers that have 2021 Virginia income tax and file their returns by November 1, 2022, could qualify for a Virginia income tax rebate of up to $250 for a single taxpayer or up to $500 for married taxpayers filing joint tax returns. A refund is allowed only up to the amount of the taxpayer’s tax liability after applying any deductions, subtractions or credits to which the taxpayer is entitled. If you already filed your 2021 tax returns before July 1, then take no action to claim the tax rebate. Virginia will automatically issue the refunds to eligible taxpayers before October 17.
- Starting in 2022, certain military benefits received by individuals 55 or older can qualify for Virginia income tax subtraction. For 2022, the subtraction is up $10,000; for 2023, it will be $20,000; for 2024, it will be $30,000; and 2025, it will be $40,000. No subtraction will be allowed if a credit, exemption or deduction is claimed for the same income under Virginia or Federal law.
Military benefits that are eligible for subtraction are:
- Military retirement income received for service in the Armed Forces of the United States,
- Qualified military benefits received pursuant to a § 134 of the Internal Revenue Code regarding certain military benefits,
- Benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States under the Survivor Benefit Plan program established by the U.S. Department of Defense, and
- Military benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States.
Other Notable Updates
- Military retired pay for Medal of Honor Recipients is not taxed in Virginia and is fully subtracted from Virginia taxable income.
- The Pass-Thru Entity (PTE) SALT cap workaround passed and became effective starting tax year 2021 through 2026. Qualifying pass-through entities (partnerships and S-corporations) can elect to pay entity-level state income taxes. This shifts the burden of paying Virginia income taxes from the owner to the business entity. The entity owners receive refundable VA tax credit for the taxes paid. Due to the late implementation, the PTE cannot pay the 2021 tax by the original or extended date of the return, as the VA Department of Taxation is not equipped to accept or process the payments. This means that individuals cannot claim the PTE credit on their 2021 tax returns. The implementation of 2021 PTE credit is delayed until October 15, 2023.
- Virginia now requires that income tax payments be made online for any estimated tax payments in excess of $1,500, extension payments in excess of $1,500 and income tax liability in any taxable year in excess of $6,000. You do not need to create an online account to make the payment via the Virginia tax website.
These are just some of the major updates that affect the majority of Virginia taxpayers.
Questions? Give Us a Call
“If you want to know how the new tax law will impact your 2022 tax returns, now is the time to ask questions,” said Renner and Company Senior Tax Manager Justyna Zuchmanska, CPA. “There are tax-planning opportunities we can explore before the year-end.”
To learn more about new Virginia tax laws enacted before July 1, 2022, you can visit the VA tax website or read the 2022 Legislative Summary. If you have questions on how the new Virginia tax law will impact your tax returns, please contact our office.
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