Tax Law Changes Included in Recently Signed VA Budget

2022 One-Time Tax Rebate

Taxpayers may receive a rebate payment of up to $250 for single filers and $500 for married filers.  Eligibility is determined by your net tax liability minus any credits claimed against that liability on your 2021 tax returns.  Rebates for taxpayers that filed 2021 tax returns prior to July 1^st, 2022 will likely be issued in September or October.  Taxpayers that have filed an extension need to file their 2021 tax returns by November 1, 2022 to receive the rebate.  If you utilized direct deposit for refunds on your 2021 tax return, your rebate will likely be direct deposited to the same bank account.  Otherwise, you should receive your rebate by paper check in the mail.

Increased Standard Deduction

For tax years 2022 through 2025, the standard deduction is increased to $8,000 (from $4,500) for single filers and to $16,000 (from $9,000) for married filers.  There are revenue growth contingencies for these amounts for 2022 and 2023, that if not met, will cause a drop in the deductions to $7,500 and $15,000.

Subtraction for Military Retirement Income

Certain military benefits received by an individual age 55 or older will be allowed as a subtraction for Virginia taxable income.  The allowable subtraction follows this schedule:

• 2022 – up to $10,000 of military benefits
• 2023 – up to $20,000 of military benefits
• 2024 – up to $30,000 of military benefits
• 2025 – up to $40,000 of military benefits

“Military benefits” means any military retirement income received for service in the Armed Forces of the United States, qualified military benefits received pursuant to IRC § 134, benefits paid to the surviving spouse of a veteran of the U.S. Armed Forces 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 U.S. Armed Forces.

State Sales Tax on Groceries

On and after January 1, 2023, no state sales tax on food purchased for human consumption or essential personal hygiene products can be imposed.  Local taxes are not eliminated.