Virginia Tax Guide for Retirees: Everything You Need to Know

1 Virginia Income Tax

Virginia uses a progressive income tax system with four brackets for 2026. Here is how the rates break down:

Virginia's 5.75% top bracket kicks in at just $17,000 of taxable income, which is the lowest top-bracket threshold in the nation. However, the standard deduction and personal exemptions reduce the effective tax burden for most retirees.

For the 2026 tax year, the standard deduction is $8,750 for single filers and $17,500 for married filing jointly. The personal exemption is $930 per person. This means a married couple over 65 with $50,000 in total income may owe little to no Virginia income tax after deductions and the Age Deduction (covered below).

2 Social Security Tax

Virginia does not tax Social Security benefits. This is one of the most significant advantages of retiring in Virginia and a major reason the state is considered tax-friendly for retirees.

All types of Social Security benefits are exempt from Virginia state income tax, including:

• Retirement (old-age) benefits
• Spousal benefits
• Survivor benefits
• Disability benefits (SSDI)

This means if Social Security is your primary income source in retirement, you will not owe any Virginia income tax on those payments. Only 11 states (including Virginia) fully exempt Social Security from taxation — most other states either partially tax it or tax it fully. This is also true at the federal level for most retirees: Social Security benefits may be partially taxable depending on your total income, but the state level exemption is a Virginia-specific benefit.

3 Retirement Income Tax

Pensions, 401(k) distributions, IRA withdrawals, and other retirement income are generally taxed as ordinary income in Virginia. However, Virginia offers a valuable deduction for qualifying taxpayers aged 65 and older.

The Age Deduction

Taxpayers aged 65 or older may claim an Age Deduction of up to $12,000 per person. For a married couple filing jointly where both spouses are 65 or older, that is up to $24,000 in total deductions against retirement and other income.

The Age Deduction phases out dollar-for-dollar when your federal adjusted gross income (AGI) exceeds certain thresholds:

• Single filers: Phase-out begins at $50,000 AGI
• Married filing jointly: Phase-out begins at $75,000 AGI

Military Retirement Income

Virginia offers a separate subtraction for military retirement income. Eligible taxpayers can subtract up to $40,000 of military retirement pay from their Virginia taxable income. This is in addition to the Age Deduction for those who qualify.

How It Works In Practice

Consider a married retiree couple both aged 68 with $55,000 total income from pensions and IRA withdrawals. After the standard deduction ($17,500), personal exemptions ($1,860 for two), and the Age Deduction ($24,000 if their AGI is under $75,000), their taxable income could be as low as $11,640. At Virginia's rates, their state tax bill would be approximately $200 to $300 — a very favorable outcome.

4 Property Taxes

Virginia does not have a statewide property tax. Instead, each county and independent city sets its own rate. For 2026, effective property tax rates range from approximately 0.33% to 1.41% of assessed value, with an average of about 0.68% statewide.

Here are current property tax rates for counties of particular interest to retirees:

On a $400,000 home, annual property taxes would range from about $3,040 in Orange County to $4,680 in Fairfax County. It is important to factor property taxes into your retirement budget — they can vary significantly between counties just a few miles apart.

5 Property Tax Relief Programs

Virginia does not have a single statewide property tax break for seniors. Instead, state law (Virginia Code Section 58.1-3210) authorizes each county and independent city to create its own property tax relief program for elderly or disabled homeowners. This means the availability and generosity of relief varies dramatically by location.

Tax Relief for the Elderly and Disabled Program

Under this program authorized by state law, localities may offer exemptions or deferrals on real estate taxes for qualifying homeowners. The general eligibility criteria are:

• Age or disability: Homeowner must be 65 or older by December 31 of the tax year, or permanently and totally disabled
• Ownership and occupancy: Must own and occupy the property as your primary residence
• Income limits: Set by each locality, typically ranging from $40,000 to $100,000+ in household income
• Asset limits: Usually $200,000 to $450,000 (excluding the home's value), set by the locality

Examples of Local Programs

Here is how some Virginia localities structure their relief:

• Fairfax County: Offers 100% relief if income is at or below $60,000; 75% relief for income between $60,001 and $70,000; and 50% relief for income between $70,001 and $80,000. Net worth (excluding home) must be under $350,000.
• Norfolk City: Requires combined income under $67,000, age 65 or disabled, and net worth under $350,000 (excluding home).
• Stafford County: Offers a tax relief program for elderly and disabled residents with income limits and asset tests. Contact the Stafford Commissioner of the Revenue for current thresholds.
• Spotsylvania County: Provides a real estate tax relief program for qualifying seniors and disabled homeowners. Apply through the Spotsylvania Commissioner of the Revenue.

Some localities also offer tax deferral programs, which allow you to defer payment of property taxes until the home is sold or transferred. Interest accrues but the deferral can significantly reduce monthly expenses for retirees on fixed incomes.

6 Sales Tax

Virginia's state sales tax rate is 5.3% on most goods and some services. An additional 1% local option tax is added in most counties and cities, bringing the total to 6.3% in most areas. In Northern Virginia, an additional regional tax may apply for transportation funding.

Important exemptions for retirees include:

• Groceries are taxed at a reduced rate of just 1% (plus local option of up to 1%)
• Prescription medications are fully exempt
• Certain medical devices and equipment may be exempt

Virginia's sales tax is moderate compared to many states. States like California (7.25%+), Washington (6.5%+ with local add-ons), and New York (8-9% in many areas) have higher rates. States like Delaware, Montana, Oregon, and New Hampshire have no sales tax at all.

7 Inheritance and Estate Tax

This is one of Virginia's most retiree-friendly tax features.

Virginia does not impose a state-level estate tax or inheritance tax. This means your heirs will not owe Virginia taxes on assets they inherit from your estate, regardless of the value.

At the federal level, the estate tax exemption (as of 2026) remains substantial, with individual estates under approximately $13-14 million generally not subject to federal estate tax. This exemption is set to change after 2025 under current law, so large estates should consult with an estate planning attorney.

8 Capital Gains Tax

Capital gains are taxed as ordinary income in Virginia, meaning they are subject to the same brackets and rates as your other income (2% to 5.75%). There is no separate capital gains rate at the state level in Virginia.

At the federal level, long-term capital gains rates are 0%, 15%, or 20% depending on your total income. For most retirees, the rate is 0% or 15%.

The Home Sale Exclusion

One of the most powerful tax benefits for retirees downsizing their home is the primary residence capital gains exclusion. Under federal law (Section 121 of the Internal Revenue Code), you can exclude up to $250,000 of capital gains (single) or $500,000 (married filing jointly) when selling your primary residence.

To qualify, you must have owned and lived in the home for at least two of the past five years. The exclusion can be used once every two years. For most Virginia homeowners, especially those who have owned their homes for many years, this means the gain from selling is entirely tax-free at both the federal and state levels.

Since Virginia taxes capital gains as ordinary income, the home sale exclusion also applies to state taxes — Virginia follows the federal exclusion rules for primary residences.

9 Comparison to Other States

How does Virginia's tax burden for retirees compare to other popular retirement destinations? Here is a quick overview:

States with no income tax at all (Florida, Tennessee, Texas, Nevada) have a clear advantage on retirement income taxation. However, they often have higher property taxes, sales taxes, or other costs that offset the benefit. For example, Florida's average effective property tax rate is approximately 0.83% (slightly higher than Virginia's 0.68% average), and Florida's sales tax is 6% (plus local add-ons).

Compared to Maryland and DC, Virginia is significantly more tax-friendly for retirees, especially those with moderate to high retirement income. The lack of an estate tax and the generous Age Deduction make Virginia particularly attractive for those planning their estate as well as their retirement budget.

10 Best Virginia Counties for Tax-Friendly Retirement

Based on property tax rates, the availability of senior tax relief programs, and overall cost of living, here are some of the most tax-friendly counties for Virginia retirees:

1. Orange County — Property tax rate of approximately $0.76 per $100 of assessed value, one of the lowest in the region. Located near Culpeper and Fredericksburg with access to healthcare and amenities.
2. Culpeper County — Rate of approximately $0.78 per $100. Growing retirement community with a charming downtown and excellent medical access.
3. Spotsylvania County — Rate of $0.81 per $100. Offers senior tax relief programs. Convenient to Fredericksburg's hospitals and shopping.
4. King George County — Rate of $0.82 per $100. Lower property taxes with a rural feel, close to the Potomac River and Dahlgren.
5. Stafford County — Rate of $0.91 per $100. Slightly higher taxes but excellent services, schools, and access to I-95 and commuter rail.
6. Chesterfield County — Rate of $0.91 per $100. Near Richmond with strong senior services and affordable housing options.
7. Henrico County — Rate of $0.85 per $100. Excellent healthcare (VCU Medical Center), senior programs, and cultural amenities.
8. Fredericksburg City — Rate of $0.85 per $100. Walkable historic downtown, strong healthcare access, and active senior community.

11 How to File

Virginia's tax filing process is straightforward, but there are some special considerations for retirees.

Filing Requirements

You must file a Virginia income tax return if you are a Virginia resident and your Virginia adjusted gross income exceeds the standard deduction plus personal exemptions for your filing status. For most retirees, this threshold is approximately $11,000 to $12,000 for single filers and higher for married couples, depending on deductions.

Residency Rules

You are considered a Virginia resident for tax purposes if you maintain your domicile (permanent home) in Virginia, or if you spend more than 183 days of the tax year in Virginia. Many retirees who split their time between Virginia and another state need to understand the residency rules carefully.

Part-Year Residency

If you moved to Virginia during the year, you are a part-year resident. You only owe Virginia income tax on income earned while you were a Virginia resident. You file a part-year resident return and must allocate income between states.

Filing Forms

• Form 760 — Full-year resident individual income tax return
• Form 760PY — Part-year resident return
• Schedule ADJ — For claiming the Age Deduction and other adjustments

Virginia allows free electronic filing through the Virginia Department of Taxation website (iFile) for most taxpayers. Many commercial tax preparation software packages also support Virginia state filing.

12 Tax Planning Tips

Maximizing your tax efficiency in retirement requires strategic planning. Here are actionable strategies for Virginia retirees.

1. Roth Conversions

Converting traditional IRA funds to a Roth IRA allows you to pay income tax now at a known rate and enjoy tax-free withdrawals later. This is especially valuable for retirees who expect to be in a higher tax bracket later, or who want to minimize RMDs (Required Minimum Distributions) that could push them above the Age Deduction phase-out threshold.

2. Manage Your AGI to Preserve the Age Deduction

Since the Age Deduction phases out at $50,000 (single) or $75,000 (married) of federal AGI, managing your reported income to stay under these thresholds can save you up to $690 per person (12,000 x 5.75%) in Virginia taxes. Strategies include drawing from Roth accounts instead of traditional accounts, using appreciated assets for charitable giving, and timing capital gains.

3. Strategic Charitable Giving

Qualified Charitable Distributions (QCDs) from IRAs allow you to donate directly to charity without counting the distribution as income. For retirees over 70.5, QCDs can satisfy RMD requirements while keeping your AGI lower — potentially preserving more of the Age Deduction and reducing Medicare premium surcharges.

4. Tax-Loss Harvesting

If you have taxable investment accounts, selling losing positions to offset capital gains can reduce your tax burden. Any excess losses (up to $3,000 per year) can offset ordinary income. This is a year-round strategy that requires careful tracking.

5. Consider County Location Carefully

As shown in Section 10, property tax rates and senior relief programs vary dramatically by county. A move of 20 miles can save you $1,000 or more per year in property taxes. Before buying a retirement home, research the specific tax situation in your target county and check whether senior relief programs are available.

6. Plan for the Home Sale Exclusion

If you are downsizing, the $250,000/$500,000 home sale exclusion is one of the most valuable tax breaks available. Document your capital improvements (receipts, permits, before/after photos) to increase your cost basis and minimize any taxable gain above the exclusion threshold.

7. Work With Professionals

Virginia tax laws for retirees are moderately complex, and the interaction between federal and state rules adds another layer. A CPA or tax professional who specializes in retirement planning can help you optimize your strategy and avoid costly mistakes. As a real estate advisor specializing in retirment transitions, I can connect you with trusted professionals who understand both the real estate and tax dimensions of your move.