If you’re retired or planning retirement in Virginia, understanding how the state taxes pension income and retirement account withdrawals can help you manage your tax bill.
Virginia taxes most retirement income, but it also offers age-based deductions that can reduce what you owe.
You can feel reassured knowing Virginia provides retirement income deductions that may lower state taxes for many seniors.
Virginia Income Tax Overview
Virginia uses a graduated income tax system. The state begins with your federal Adjusted Gross Income (AGI) and then applies Virginia-specific additions, subtractions, and deductions.
There are no local income taxes on retirement income in Virginia.
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Pension Income in Virginia
Virginia generally taxes pension income as ordinary income.
This includes:
• Private employer pensions
• Government pensions
• Federal civil service pensions
• Military retirement pay
However, qualifying taxpayers may reduce taxable income using Virginia’s age deduction.
Example:
If you receive $35,000 in private pension income, that amount is generally taxable in Virginia unless reduced by the age deduction.
IRA Withdrawals
Traditional IRA withdrawals are taxable in Virginia because they are included in federal taxable income.
This includes:
• Regular IRA withdrawals
• Required Minimum Distributions (RMDs)
• Early withdrawals
Roth IRA qualified distributions are generally not taxable in Virginia because they are not included in federal taxable income.
Example:
If you withdraw $20,000 from a traditional IRA, that amount is typically taxable in Virginia unless offset by a deduction.
401(k) and 403(b) Withdrawals
Distributions from 401(k) and 403(b) plans are taxed as ordinary income in Virginia if they are taxable at the federal level.
This includes lump-sum withdrawals and periodic payments.
Roth 401(k) qualified distributions are generally not taxable at the state level if they are not taxable federally.
Virginia Age Deduction
Virginia offers an age-based deduction that can reduce taxable retirement income.
For taxpayers age 65 and older, a deduction of up to a set maximum amount per person may be available, subject to income limits.
The deduction phases out for higher-income taxpayers.
Eligibility depends on:
• Age
• Federal AGI
The age deduction can help reduce the amount of pension, IRA, or 401(k) income subject to Virginia tax.
Example:A married couple, both age 67, may qualify for a combined age deduction that reduces the amount of their retirement income taxed by Virginia.
Social Security Benefits
Virginia does not tax Social Security benefits.
If your Social Security is included in your federal taxable income, Virginia allows a subtraction so it is not taxed at the state level.
Military Retirement Income
Virginia provides favorable treatment for military retirees.
Military retirement income may qualify for a subtraction, subject to annual limits that are being phased in over time.
Veterans’ disability benefits are not taxable because they are not included in federal taxable income.
Planning Tips for Virginia Retirees
• Social Security is fully exempt
• Traditional IRA and 401(k) withdrawals are taxable
• Use the age deduction to reduce taxable income
• Consider Roth withdrawals for tax efficiency
• Monitor income levels to avoid phaseout of deductions
Strategic withdrawal planning can help reduce the Virginia state income tax.
💻 Electronic Filing Recommendation
E-filing your Virginia return is recommended:
• Automatic age deduction calculations
• Built-in Social Security subtraction
• Proper integration with federal retirement income
• Reduced math errors
• Faster processing
Tax software can apply Virginia-specific deductions once your age and income are entered.
Final Thoughts
Virginia taxes pensions, IRAs, and 401(k) withdrawals as ordinary income, but retirees may reduce taxable income through the age deduction.
Social Security benefits are not taxed at the state level. With proper planning, many seniors can lower their Virginia tax liability in retirement.
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| Take advantage of this offer and save 10% on TurboTax Electronic Tax Filing! |
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