Virginia Schedule ADJ: Additions, Subtractions, and Credits to Form 760

Virginia Schedule ADJ is the form you attach to Form 760 to turn your federal adjusted gross income into Virginia taxable income. Virginia taxes some income the IRS does not, and exempts some income the IRS taxes, so the schedule walks you through additions, subtractions, deductions, and two credits that reconcile the two returns. Both the schedule and Form 760 are due May 1, not April 15.¹

Additions: Income Virginia Taxes That the IRS Does Not

The first section of Schedule ADJ raises your Virginia taxable income by adding back federal-exempt items and federal deductions Virginia hasn’t adopted.²

The most common addition is interest on bonds issued by other states or their political subdivisions. That interest is federally exempt but fully taxable by Virginia.³ If you hold a multi-state municipal bond fund, only the non-Virginia portion is added back; your fund company’s year-end statement should break the interest out by state.

The other big addition is the conformity adjustment. Virginia conforms to the Internal Revenue Code as of a fixed date — currently December 31, 2025 — so any federal provision enacted after that date does not automatically apply here.⁴ If you took a federal deduction Virginia has decoupled from, the excess amount goes on the conformity addition line (Line 2a of the current form).² This trips up small business owners and landlords who used expanded federal bonus depreciation or immediate expensing rules and now need to keep a separate Virginia depreciation schedule.⁵

Missing an addition is expensive. Virginia charges 9% interest on underpayments.⁶

Subtractions: Income Virginia Excludes

The second section removes income that was taxed federally but not by Virginia.

Social Security and Tier 1 Railroad Retirement

Virginia fully subtracts Social Security benefits and equivalent Tier 1 Railroad Retirement benefits that were included in your federal AGI.⁷ Whatever share of your Social Security the federal government taxed comes off here in full. It’s one of the more valuable retiree subtractions and easy to miss if your software doesn’t prompt for it.

Interest on U.S. Government Obligations

Interest from U.S. Treasury bonds, bills, notes, and other direct federal obligations is subtracted; states cannot tax interest on federal debt.⁷ Your 1099-INT or 1099-DIV should identify the Treasury portion, and mutual funds that hold Treasuries report the percentage of income derived from government obligations. Only that percentage qualifies.

Small Virginia Lottery Prizes

Virginia lottery prizes under $600 that were included in your federal income can be subtracted at the state level.⁸ Prizes of $600 or more remain fully taxable.

Military Retirement Benefits

Starting with tax year 2025, Virginia allows a subtraction of up to $40,000 per recipient for eligible military retirement benefits. Eligible income includes military retirement pay for service in the U.S. Armed Forces and Survivor Benefit Plan payments to a veteran’s surviving spouse. Thrift Savings Plan distributions and other federal retirement plans like FERS or CSRS do not qualify. On a joint return, each spouse can claim the full subtraction if each receives eligible military benefits, and the subtraction can be stacked with the age deduction below.⁹

Deductions from Virginia Adjusted Gross Income

The third section covers deductions that reduce your Virginia adjusted gross income after additions and subtractions have been applied. These are separate from the standard or itemized deduction you claim elsewhere on Form 760.

Age Deduction

If you are 65 or older and were born after January 1, 1939, you can claim up to $12,000, subject to an income phase-out.¹⁰ The deduction drops $1 for every $1 your adjusted federal AGI exceeds $50,000 (single) or $75,000 (married filing jointly).¹¹ A single filer at $62,000 or a couple at $87,000 loses the deduction entirely. Married filing separately uses the combined income of both spouses against the $75,000 threshold. Filers born on or before January 1, 1939, get the full $12,000 with no income limit.

Virginia529 Contributions

Contributions to a Virginia529 (Invest529) account are deductible up to $4,000 per account per year, with any excess carrying forward indefinitely. Account owners age 70 and older can deduct the entire contribution in one year with no cap. Because the $4,000 limit is per account, funding three accounts in one year supports up to $12,000 in deductions.¹²

Standard Versus Itemized: The Federal Link

Your itemization choice on Virginia must match your federal return. If you took the federal standard deduction, you must take the Virginia standard deduction as well.¹³ Virginia’s standard deduction is $8,750 for single filers and $17,500 for married filing jointly. You might come out ahead itemizing on the Virginia side, but only if you itemized federally. The standard or itemized figure itself goes on Form 760, not Schedule ADJ, but the choice affects your planning around the schedule.

Credits: EITC and Tax Paid to Another State

The final section handles two credits that reduce tax dollar-for-dollar rather than reducing taxable income.

Virginia EITC or Credit for Low Income Individuals

Lower-income filers pick whichever of two credits saves more. The first is a refundable Virginia EITC equal to 20% of your federal Earned Income Credit; being refundable, it can exceed your Virginia tax and generate a refund.¹⁴ The second is a nonrefundable Credit for Low Income Individuals worth $300 per personal and dependent exemption, capped at your actual tax liability. You cannot claim both. Schedule ADJ walks you through the comparison, and the better result goes on Form 760, Line 23.² For anyone who claimed the federal EIC and has little or no Virginia tax, the refundable option is almost always the one that pays.

Credit for Taxes Paid to Another State

If you earned income in another state and paid tax there, this credit prevents double taxation. It is calculated on Schedule OSC, a separate form, and is limited to the lesser of the tax you actually paid the other state or the Virginia tax attributable to that same income.¹⁵ It cannot offset Virginia tax on Virginia-source income.

Before running that calculation, check reciprocity. Virginia has reciprocity agreements with the District of Columbia, Kentucky, Maryland, Pennsylvania, and West Virginia, under which wage and salary income is taxed only by your state of residence.¹⁶ A Virginia resident commuting to Maryland, for example, owes Virginia tax on those wages and doesn’t file a Maryland return or claim an out-of-state credit, provided the agreement’s residency and presence conditions are met.

How Schedule ADJ Totals Feed Into Form 760

Schedule ADJ is organized by labeled sections, not numbered parts, and each section’s total transfers to a specific line on Form 760:²

Additions total (Schedule ADJ Line 3) goes to Form 760 Line 2.
Subtractions total (Schedule ADJ Line 7) goes to Form 760 Line 7.
Deductions total (Schedule ADJ Line 9) goes to Form 760 Line 13.
EITC or low-income credit (Schedule ADJ Line 17) goes to Form 760 Line 23.

Items without a dedicated line — disability income, insurance premiums, the 529 deduction, and similar entries — use a code from the Form 760 instruction booklet next to the dollar amount on the appropriate “other” line.¹⁷ If you have more items than Schedule ADJ can hold, use the supplemental Schedule ADJS.

Filing and Recordkeeping

The Virginia individual income tax return is due May 1.¹ Electronic filing software integrates Schedule ADJ automatically. If you paper file, place Schedule ADJ directly behind Form 760 and don’t staple over your name, Social Security number, or signature.

Military members stationed outside the United States or Puerto Rico on May 1 get an automatic extension to July 1 for both filing and payment. Those serving in a combat zone receive the same extensions the IRS grants, plus an additional 15 days.¹

Keep your supporting documents for at least three years from the filing date: 1099s showing Treasury interest, fund statements breaking out state-by-state bond interest, 529 contribution confirmations, and any records supporting a conformity adjustment. At a 9% underpayment interest rate, accuracy at the front end is worth the paperwork.⁶

1
Virginia Tax. When to File
2
Virginia Tax. 2025 Virginia Schedule ADJ
3
Virginia Code Commission. Virginia Code 58.1-322.01 – Virginia Taxable Income Additions
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Virginia Tax. Virginia’s Rolling Conformity to the Internal Revenue Code Replaced With Fixed Date of December 31, 2025
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Virginia Department of Taxation. Tax Bulletin 26-1 – Date of IRC Conformity
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Virginia Tax. Virginia Interest Rates Remain 9% for the 1st Quarter of 2026
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Virginia Code Commission. Virginia Code 58.1-322.02 – Virginia Taxable Income Subtractions
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Legal Information Institute. 23 Va. Admin. Code 10-140-281 – Income Taxation of Lottery Prizes
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Virginia Tax. Military Benefits Subtraction FAQ
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Virginia Code Commission. Virginia Code 58.1-322.03 – Virginia Taxable Income Deductions
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Virginia Tax. Subtractions
12
Invest529. Tax Benefits
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Virginia Tax. Deductions
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Virginia Tax. Virginia Earned Income Tax Credit (EITC) and Credit for Low Income Individuals
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Virginia Code Commission. Virginia Code 58.1-332 – Credits for Taxes Paid Other States
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Virginia Tax. Reciprocity
17
Virginia Tax. 2025 Form 760 Instructions