Virginia’s tax changes for 2026 are a set of targeted moves rather than a broad rate hike. The standard deduction ticks up, the earned income tax credit is larger, military retirement pay is fully exempt, and businesses face a fixed federal conformity date along with a smaller subtraction for disallowed interest. Income tax brackets have not moved since 1990, and a proposal to tax streaming and other digital goods was dropped.
What’s New for Individual Filers
The standard deduction is $8,750 for single filers and $17,500 for married couples filing jointly for tax years 2025 and 2026. That’s up from $8,500 and $17,000. The statute sets these amounts for taxable years beginning on or after January 1, 2025, and before January 1, 2027, so they revert unless the General Assembly extends them.1Virginia Code Commission. Virginia Code 58.1-322.03 – Virginia Taxable Income Deductions2Virginia Department of Taxation. New Virginia Tax Laws for July 1, 2025
Virginia’s refundable earned income tax credit rose from 15% to 20% of the federal EITC for returns filed beginning in 2025, and stays there heading into 2026. Because it’s refundable, you receive the money even if your Virginia liability is zero.2Virginia Department of Taxation. New Virginia Tax Laws for July 1, 2025 A bill introduced for the 2026 session proposed raising the credit to 25% and making it permanent; confirm the current percentage with the Department of Taxation before filing.
The military retirement pay exemption is fully phased in. Starting with the 2025 tax year and continuing in 2026, retirees can exempt up to $40,000 of military retirement income from Virginia tax. Legislation passed in 2024 eliminated the age requirement, so all military retirees qualify regardless of age or retirement date. At the 5.75% top rate, that’s up to $2,300 in annual savings.3Soldier for Life. Check State Taxes Before Moving
What Isn’t Changing
The income tax brackets under Virginia Code 58.1-320 remain where they’ve been since 1990:
- 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 all income above $17,000
Because the top bracket begins at $17,000, most working Virginians pay 5.75% on the bulk of their earnings.4Virginia Code Commission. Virginia Code 58.1-320 – Imposition of Tax
Virginia still applies the Pease limitation, which phases out certain itemized deductions for higher-income filers. The federal government suspended Pease years ago, but Virginia has not conformed to that change, so higher earners who itemize can owe more to Virginia than the federal return would suggest.5Virginia Department of Taxation. Tax Bulletin 26-1
A high-profile 2024 budget proposal would have extended sales tax to digital goods, streaming subscriptions, cloud storage, and software-as-a-service. It was dropped. Electronically delivered software, data, content, and information services remain exempt from Virginia’s retail sales tax.6Virginia Department of Taxation. Rulings of the Tax Commissioner 25-87 The revenue pressure that drove the proposal hasn’t gone away, so it’s worth watching in future sessions.
Business Tax Changes for 2026
The biggest structural change for businesses is federal conformity. The General Assembly replaced Virginia’s rolling conformity with a fixed conformity date of December 31, 2025. Federal tax changes enacted after that date won’t automatically flow through to Virginia returns.5Virginia Department of Taxation. Tax Bulletin 26-1
Two specific items hit business filers hard. The Virginia subtraction for federally disallowed business interest dropped from 50% to 20% for tax years 2025 and beyond. And Virginia deconformed from several provisions of the 2025 federal tax legislation (H.R. 1), including immediate expensing of qualified production property, immediate expensing of domestic research and experimental expenditures, and the increased limits on depreciable business asset expensing. Businesses that claimed those federal deductions must add them back when computing Virginia taxable income.
Virginia’s research and development tax credits expired after the 2024 tax year. No new R&D credits can be earned, though existing carryforward balances from prior years remain usable.7Virginia Code Commission. Virginia Code 58.1-439.12:11 – Major Research and Development Expenses Tax Credit
Sales Tax Rates in 2026
Combined sales tax rates run from 5.3% to 7% depending on locality. The base rate is 5.3%. Regional add-ons push the rate to 6% in Central Virginia, Hampton Roads, and Northern Virginia; to 6.3% in parts of Southern and Southside Virginia, including Danville, Halifax County, and Henry County; and to 7% in James City County, Williamsburg, and York County. Groceries and personal hygiene items are taxed separately at a flat 1% statewide.8Virginia Department of Taxation. Retail Sales and Use Tax
Local Real Estate and Vehicle Taxes
Real estate and vehicle taxes are set locally, and the range is wide. For tax year 2025, county real estate rates per $100 of assessed value run from $0.33 in Lunenburg County to $1.123 in Fairfax County. Among independent cities, rates run from $0.62 in Williamsburg to $1.405 in Manassas Park.9Virginia Department of Taxation. Tax Rates for County, City, Town, and Districts TY 2025 Rising assessments can raise your bill even when the nominal rate doesn’t move. Some localities adopt an equalized rate to offset assessment growth; many don’t.
Vehicle personal property tax is likewise a local rate under Virginia Code 58.1-3500.10Virginia Code Commission. Virginia Code 58.1-3500 – Defined and Segregated for Local Taxation The Personal Property Tax Relief Act reimburses localities for part of the tax on qualifying vehicles, but statewide reimbursements have been capped at $950 million per year since 2006, and each locality’s share was frozen at its 2005 level.11Virginia Code Commission. Virginia Code 58.1-3524 – Tangible Personal Property Tax Relief As vehicle values rise, that fixed pool covers a shrinking share of the total tax billed.
Filing Deadlines and 2026 Estimated Payments
Virginia individual returns are due May 1, not April 15. The state grants an automatic six-month extension to file, pushing the filing deadline to November 1 with no application required. The extension is for filing only. You still need to pay at least 90% of what you owe by May 1 to avoid penalties and interest.12Virginia Department of Taxation. When to File
If your 2026 Virginia tax liability will exceed withholding and credits by more than $150, you must make quarterly estimated payments:
- May 1, 2026
- June 15, 2026
- September 15, 2026
- January 15, 2027
Underpaying estimated taxes triggers an automatic addition to tax under Virginia Code 58.1-492, so it’s worth getting the quarterly amounts right upfront.13Virginia Department of Taxation. Virginia Estimated Income Tax Payment Vouchers for Individuals