Is Virginia Tax Friendly for Retirees? Social Security and Pensions

Virginia is moderately tax friendly for retirees. The Commonwealth fully exempts Social Security, offers an Age Deduction of up to $12,000 per person, and imposes no estate or inheritance tax. On the other side of the ledger, pensions and withdrawals from 401(k)s and IRAs face a graduated income tax that reaches 5.75 percent quickly, and locally assessed real estate and vehicle taxes can add real cost depending on where you settle.

Social Security Is Fully Exempt

Virginia does not tax Social Security. If any portion of your benefits was included in your federal adjusted gross income, you subtract the full amount on your Virginia return.¹ The exemption covers retirement, survivor, and Title II disability benefits, and Tier 1 Railroad Retirement benefits get the same treatment.²

The exemption does more than lower your tax bill directly. Virginia also strips Social Security out of the income figure it uses to test eligibility for the Age Deduction below, so retirees with high total income often still qualify for that additional relief.

How Pensions, 401(k)s, and IRAs Are Taxed

Distributions from private pensions, 401(k)s, traditional IRAs, and similar accounts flow through Virginia’s regular income tax brackets:³

2% on the first $3,000 of taxable income
3% on income from $3,001 to $5,000
5% on income from $5,001 to $17,000
5.75% on income above $17,000

The brackets are narrow. Any retiree with meaningful pension or investment income lands in the 5.75 percent bracket well before their return is complete. What matters, then, is what you can subtract before the brackets bite.

The Age Deduction Most Retirees Underestimate

If you are 65 or older at year-end, you can claim an Age Deduction of up to $12,000 that reduces your Virginia taxable income directly. Each qualifying spouse claims it separately, so a couple where both are 65 or older can subtract up to $24,000.⁴

Two rules apply depending on when you were born:

Born on or before January 1, 1939: the full $12,000 is available at any income level. No phase-out.
Born after January 1, 1939: the full $12,000 is available if your adjusted federal adjusted gross income (AFAGI) is under $50,000 (single) or $75,000 (married). Above those points, the deduction drops one dollar for every dollar of excess income, and disappears at $62,000 single or $87,000 married.¹

Here’s the wrinkle. AFAGI for this test is your federal AGI minus Social Security and Tier 1 Railroad Retirement benefits.⁴ A single retiree with $70,000 in federal AGI that includes $25,000 of Social Security has an AFAGI of $45,000, comfortably under the $50,000 threshold, and qualifies for the full deduction. Many retirees who assume they earn too much do not.

Standard Deduction and Personal Exemptions

The Virginia standard deduction is $8,750 for single filers and $17,500 for married couples filing jointly.⁵ You also get a $930 personal exemption for each exemption claimed on your federal return, plus an extra $800 exemption if you are 65 or older or blind, whether you itemize or not.⁴

These stack. A married couple filing jointly, both 65 or older, can combine the $17,500 standard deduction, up to $24,000 in Age Deductions, $1,860 in base personal exemptions, and $1,600 in additional aged exemptions before any retirement income is exposed to the brackets.

Military Retirement Pay

Virginia offers a separate subtraction for military retirement income. Beginning with tax year 2025, eligible veterans can subtract up to $40,000 of military retirement pay from Virginia taxable income.⁶ The subtraction covers retirement income for U.S. Armed Forces service and Survivor Benefit Plan payments to a veteran’s surviving spouse.⁷

Because the military subtraction is separate from the Age Deduction, a veteran 65 or older who qualifies for both could subtract up to $52,000 of retirement income in a single year.

Medical Expenses and Long-Term Care Premiums

If you itemize on your Virginia return, you can deduct unreimbursed medical expenses that exceed 10 percent of your federal AGI. Virginia holds this threshold at 10 percent regardless of what the federal rules allow in a given year.⁸

Virginia also allows a deduction for long-term care insurance premiums, with one strict condition: you cannot have claimed any part of those premiums as a deduction on your federal return. Claim anything federally and the Virginia deduction is disallowed entirely.⁵ Retirees with large premiums sometimes benefit from skipping the federal deduction and taking the Virginia one instead.

Sales Tax, Groceries, and Prescriptions

Virginia’s combined sales tax rate depends on locality. The statewide base is 5.3 percent, but several regions charge more:⁹

6% in Northern Virginia, Hampton Roads, and Central Virginia (Richmond metro)
6.3% in Halifax, Henry, and Pittsylvania counties, among others
7% in James City County, Williamsburg, and York County

Many of the state’s popular retirement destinations sit in the 6 or 7 percent zones, so the 5.3 percent headline number can mislead.

Groceries bought for home consumption are taxed at just 1 percent statewide, following the January 1, 2023 elimination of the higher state-level food tax.¹⁰ Hot prepared foods, alcohol, and tobacco are excluded from that lower rate. Prescription drugs, hearing aids, eyeglasses, and other medical items dispensed on a licensed practitioner’s prescription are fully sales-tax exempt.¹¹

Real Estate and Vehicle Property Taxes

Virginia real estate taxes are assessed and collected locally, so there is no single statewide rate. Many counties and independent cities run property tax relief programs for older residents that provide partial exemptions or deferrals, typically requiring an annual application with proof of income and sometimes net worth. Your local commissioner of the revenue can confirm the thresholds where you live.

Virginia also levies an annual personal property tax on registered motor vehicles, which surprises retirees moving from states that don’t tax vehicles this way. The Personal Property Tax Relief Act reduces the tax on the first $20,000 of a qualifying vehicle’s value. Vehicles assessed at $1,000 or less get full relief and owe nothing. Value above $20,000 is taxed at the full local rate.¹²

Estate and Inheritance Taxes

Virginia imposes no estate tax and no inheritance tax. Beneficiaries owe the state nothing on transfers from a Virginia estate. Federal estate tax may still apply if the estate exceeds the federal exemption, but Virginia adds no state-level layer.

When You Have to File a Virginia Return

You must file a Virginia return if you are required to file federally and your Virginia adjusted gross income reaches $11,950 (single or married filing separately) or $23,900 (married filing jointly).¹³ Virginia does not raise those thresholds for seniors. In practice, because Social Security is subtracted before Virginia AGI is computed, many retirees whose only income is Social Security fall below the thresholds and have no state filing obligation. If you add pension or investment income to the mix, run the numbers before assuming you can skip.

1
Virginia Department of Taxation. Subtractions
2
Virginia Code Commission. 23VAC10-110-142 Virginia Taxable Income Subtractions
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Virginia Department of Taxation. Filing Status
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Virginia Code Commission. Virginia Code 58.1-322.03 – Virginia Taxable Income Deductions
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Virginia Department of Taxation. Deductions
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Virginia Department of Taxation. Military Benefits Subtraction FAQ
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Virginia Department of Veterans Services. Tax Exemptions
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Virginia Department of Taxation. Virginia Schedule A Itemized Deductions Instructions
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Virginia Department of Taxation. Retail Sales and Use Tax
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Virginia Department of Taxation. Grocery Tax Reduced to 1% Beginning Jan 1 2023
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Virginia Code Commission. 23VAC10-210-940 Medicines Drugs Eyeglasses and Related Items
12
Virginia Code Commission. Code of Virginia – Personal Property Tax Relief
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Virginia Department of Taxation. Who Must File