Virginia taxes for early retirees: a generous age deduction with an income test

By Tom, CPA · Updated October 27, 2026

TL;DR: Virginia taxes most income at 5.75% above $17,000, exempts Social Security, and gives people 65+ an age deduction of up to $12,000 each that phases out above $50,000 single or $75,000 married adjusted AGI. The $8,750/$17,500 standard deduction covers 2025 and 2026 only, and there is no special break for retirees under 65.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Virginia's top income tax rate of 5.75% starts at just $17,000 of taxable income, a threshold that feels like it was set when gas cost a dollar. Most retirees with any meaningful income land in it. That tells you a lot about the state's approach: the rate schedule isn't where Virginia gives retirees a break. The breaks come through deductions and subtractions, and some of them have a birthday requirement and an income test.

The good news is real: Social Security is fully exempt, people 65 and older can get an age deduction of up to $12,000 each, and the standard deduction for 2025 and 2026 is $8,750 single and $17,500 joint. The fine print matters, though. That larger standard deduction is temporary, the age deduction shrinks dollar for dollar as income rises, and there is nothing special for anyone under 65. If you retire at 50 and live on IRA withdrawals and Roth conversions, Virginia treats you much like a salaried worker who happens to be home on a Tuesday. This guide covers the rules as of October 2026 and how an early retiree can plan around them.

CPA Warning Label: Inside the age deduction phase-out, every Roth conversion dollar is taxed at 5.75% twice. Do the math before December, not after.

The rate schedule: four brackets, and you'll live in the top one

Virginia starts from federal adjusted gross income, adds and subtracts a few items to get Virginia AGI, takes off deductions and exemptions, and taxes what's left on a graduated schedule. Per the 2025 Form 760 instructions and the 2026 Form 760ES:

The instructions give an example: $90,000 of taxable income produces $720 plus 5.75% of $73,000, or $4,917.50, which rounds to $4,918. At any income you'd call comfortable, Virginia works like a flat 5.75% tax with a small discount on the first $17,000. Long-term capital gains get no lower rate; they're taxed on the same schedule as an IRA withdrawal. The only capital gains subtraction on the list is a narrow one for certain qualified business investments, which isn't the index fund you bought in 2014.

Deductions and exemptions: the generous standard deduction has an end date

For taxable years 2025 and 2026, the Virginia standard deduction is $8,750 for single filers and $17,500 for married couples filing jointly. The Virginia Tax deductions page says these amounts apply through taxable year 2026. Unless the General Assembly extends them, the deduction drops back to the base amounts of $3,000 single and $6,000 joint. If you itemize on your federal return you must itemize in Virginia, and if you take the federal standard deduction you must take Virginia's.

On top of that, each person gets a $930 personal exemption, plus an additional $800 if age 65 or older and another $800 if blind (2026 Form 760ES). A 66-year-old couple filing jointly claims $1,860 plus $1,600, or $3,460 in exemptions.

Couples where both spouses have income can also claim the Spouse Tax Adjustment, which roughly offsets the penalty of putting two incomes on one return. It needs income in each spouse's name, so it often disappears once a couple lives off one person's IRA.

Social Security: fully exempt, and it doesn't count against the age deduction

Virginia subtracts all Social Security and Tier 1 Railroad Retirement benefits included in federal AGI. Your federal return may tax up to 85% of benefits; Virginia takes that taxable portion out again.

There's a second benefit that's easy to overlook. The age deduction's income test uses adjusted federal AGI, which is federal AGI minus taxable Social Security and Tier 1 benefits. Claiming Social Security early or late has no effect on whether you qualify for the age deduction. IRA withdrawals, pensions, Roth conversions, interest, dividends and capital gains all do.

The age deduction: up to $12,000 each, with an income test

Taxpayers 65 and older can deduct up to $12,000 each. For the 2025 return, that means anyone born on or before January 1, 1961. The cutoff moves forward a year with each tax year. (The Virginia Tax subtractions web page still listed a 1960 date when we checked; the 2025 instructions are the more current source.) Two groups:

• Born on or before January 1, 1939: the full $12,000, with no income test.
• Everyone else 65+: the deduction is reduced $1 for every $1 that adjusted federal AGI exceeds $50,000 single or $75,000 married. Married couples use combined income, even if they file separate returns.

The worksheet adds the deductions for everyone claiming, subtracts the excess income, and splits what's left between spouses. A single filer's deduction is gone at $62,000 of adjusted AGI. A couple with both spouses claiming loses it at $99,000. If only one spouse is 65 or older, it's gone at $87,000.

Two other limits apply. The age deduction can't be combined with the disability income subtraction (up to $20,000) or the credits for low-income individuals and the Virginia Earned Income Tax Credit. Pick the one that saves more.

The phase-out makes your marginal rate 11.5%

Inside the phase-out range, each extra dollar of income is taxed at 5.75% and also removes a dollar of deduction, which costs another 5.75%. That's an effective Virginia rate of 11.5% on that slice of income. A 66-year-old couple adding a Roth conversion that pushes adjusted AGI from $75,000 to $99,000 pays Virginia's top rate twice on those dollars.

This is why the order of withdrawals matters in Virginia. Spending from a taxable brokerage account doesn't create a phase-out problem by itself, but realized gains count. Roth IRA withdrawals that are qualified aren't in AGI, so they don't count. Traditional IRA money and conversions count dollar for dollar. Social Security doesn't count at all. If you have flexibility, the years before 65 can be a good time for conversions, because there's no age deduction to lose yet.

Illustration: a Virginia couple at 55, at 66, and after the sunset

Illustration: Assumptions: a married couple filing jointly, no itemized deductions, all traditional IRA money in one spouse's name (so no Spouse Tax Adjustment), and no other Virginia adjustments.

At 55, tax year 2026: $70,000 of IRA withdrawals and Roth conversions. Virginia AGI $70,000, minus the $17,500 standard deduction and $1,860 in exemptions, gives taxable income of $50,640. Tax = $720 + 5.75% of $33,640 = $2,654.30.

Same couple if the standard deduction reverts to $6,000: taxable income becomes $62,140, and tax = $720 + 5.75% of $45,140 = $3,315.55. That's $661.25 more for the same lifestyle, which is 5.75% of the $11,500 deduction difference.

At 66: the same $70,000 of IRA withdrawals plus $40,000 of combined Social Security. Social Security is subtracted, so adjusted AGI is $70,000, which is under $75,000, and both spouses get the full $12,000 ($24,000). Exemptions are $1,860 + $1,600 = $3,460. Taxable income = $70,000 − $24,000 − $17,500 − $3,460 = $25,040. Tax = $720 + 5.75% of $8,040 = $1,182.30.

At 66 with a $20,000 Roth conversion added: adjusted AGI is $90,000, $15,000 over the limit, so the joint age deduction falls to $9,000. Taxable income = $90,000 − $9,000 − $17,500 − $3,460 = $60,040, and tax = $720 + 5.75% of $43,040 = $3,194.80. The conversion added $2,012.50 of Virginia tax: 5.75% on the first $5,000 and 11.5% on the next $15,000. Frugal Fran converted the same $20,000 at 63 for $1,150. Lavish Larry converted at 66 and now says "the Commonwealth" through clenched teeth.

Before 65: what an early retiree actually gets

Under 65, Virginia offers early retirees the standard deduction, the $930 exemptions, the Social Security subtraction (if you're old enough to collect), and the narrow subtractions that apply to anyone. There's no retirement income exclusion for a 52-year-old. Traditional IRA and 401(k) withdrawals, 72(t) payments, 457(b) distributions and Roth conversions are taxed at ordinary Virginia rates. A federal 10% early withdrawal penalty doesn't carry over to Virginia; Virginia just taxes the income.

A few subtractions are worth checking:

• Military retirement: up to $40,000 for taxable year 2025 and after, per eligible person.
• Retirement income already taxed by another state: if you paid another state's tax on contributions that are now coming out, you may subtract that amount.
• U.S. obligation interest: interest on Treasury bills, notes and bonds is subtracted. A Treasury-heavy bond ladder is partly exempt from Virginia tax.

Virginia uses a fixed date for conforming to the Internal Revenue Code. The 2026 General Assembly set it to December 31, 2025. Federal changes made after that date only apply in Virginia if the legislature adopts them, so check the conformity rules before assuming a new federal provision carries over.

Estimated payments: the $1,000 trigger

Retirees don't have an employer withholding Virginia tax, so the state expects you to pay during the year. The Virginia Tax estimated payments page and the 2026 Form 760ES say you must make estimated payments if your tax after withholding and credits is expected to be more than $1,000. The 2026 quarterly due dates are May 1, June 15 and September 15, 2026, and January 15, 2027. Note the first one is May 1, not April 15, which doesn't match the federal schedule.

A large December Roth conversion can push you over the threshold late in the year. One way to handle that is to request Virginia withholding on the IRA distribution, if your custodian offers it. Another is to pay estimated tax through Virginia Tax's online services. The Roth conversion ladder timeline shows where conversions usually fall in a FIRE plan.

Local taxes: real estate, the car tax, and sales tax

Virginia's income tax is statewide, but property taxes are set by each county and city. Real estate tax rates vary by locality, and so does the tangible personal property tax on vehicles, which many residents call "the car tax." Virginia Tax publishes an annual Local Tax Rates survey; check your locality before choosing a house.

Under Code of Virginia § 58.1-3210, localities may offer real estate tax exemptions or deferrals to owners 65 or older (or permanently and totally disabled) who live in the home as their only residence. Each locality sets its own income and asset limits, so a program in one county may not exist in the next.

The general sales and use tax rate is 5.3%. It's 6% in Northern Virginia, Hampton Roads and Central Virginia, 6.3% in some southside localities, and 7% in James City County, Williamsburg and York County. Food for home consumption and essential personal hygiene products are taxed at a reduced 1%.

The federal side still sets the base

Virginia begins with federal AGI, so federal decisions flow into the state return. For 2026 the federal standard deduction is $16,100 single and $32,200 joint (IRS Rev. Proc. 2025-32), and long-term gains can fall in the 0% federal bracket at lower incomes. Virginia has no 0% bracket for gains, so gain harvesting that's free federally still costs Virginia tax, generally at 5.75%. The 2027 federal figures had not been released by the IRS as of October 27, 2026.

Before Medicare, most early retirees buy coverage through the ACA Marketplace, where premium tax credits depend on household income. The same withdrawal choices that drive Virginia tax drive what you pay for insurance, so model them together. Our guides to the ACA subsidy cliff and 2026 tax brackets for FIRE go deeper.

Moving to or from Virginia

Virginia's neighbors vary a lot. North Carolina uses a flat rate, Tennessee has no wage income tax, and Washington, D.C. and Maryland both have their own rules. If you're considering moving in or out, the year of the move matters for conversions and large gains. Part-year residents are taxed on income received while they were residents, so timing a large conversion for after you leave (or before you arrive) can change which state taxes it. Our guide to changing state residency covers domicile and the documents that help, and the North Carolina guide and Tennessee guide cover two common destinations.

To compare total state tax across states for your own numbers, try the state tax move calculator. If you're weighing a no-income-tax state, see our comparison of states without an income tax.

A Virginia early-retirement checklist

1. Treat the $8,750/$17,500 standard deduction as a 2025–2026 provision. Watch the 2027 General Assembly session before assuming it continues.
2. Consider doing most Roth conversions before 65, when there's no age deduction to lose. After 65, keep adjusted AGI under $50,000 single or $75,000 married if you can.
3. Remember that Social Security doesn't count toward the age deduction income test. IRA withdrawals, conversions and realized gains do.
4. Plan for estimated payments once you expect to owe more than $1,000, and note the first due date is May 1.
5. Check your county or city's real estate tax rate, vehicle tax, and any 65+ relief program before you buy.
6. If you hold Treasuries, report that interest so you get the subtraction.

Education, not advice: Virginia changes these rules almost every legislative session. Check Virginia Tax and the current year's Form 760 instructions before acting, and consider a professional for your specific situation.