Overview of Virginia Retirement Tax Friendliness
Social Security retirement benefits are not taxed in Virginia. Other types of retirement income, such as pension income and retirement account withdrawals, are deductible up to $12,000 for seniors. Property and sales tax rates are low.
Annual Social Security Income
Annual Retirement Account Income
Year of Birth
Annual Income from Private Pension
Annual Income from Public Pension
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|Social Security income is taxed.|
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|Wages are taxed at normal rates, and your marginal state tax rate is %.|
- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
Virginia Retirement Taxes
The Commonwealth of Virginia is known for its rich history (eight presidents have hailed from Virginia) and diverse landscape. It stretches from the Blue Ridge Mountains across the Chesapeake Bay to the Atlantic coast. Retirees in Virginia can enjoy sandy beaches, one of the state’s 400 golf courses and a hike in the mountains – all in one weekend.
Virginia also has relatively low retirement taxes. Social Security retirement benefits are not taxed in Virginia. Other types of retirement income, such as pension income and retirement account withdrawals, are deductible up to $12,000 for seniors. As described below, Virginia’s sales taxes and property taxes are also quite low.
A financial advisor in Virginia can help you plan for retirement and other financial goals. Financial advisors can also help with investing and financial plans, including taxes, homeownership, insurance and estate planning, to make sure you are preparing for the future.
Is Virginia tax-friendly for retirees?
Virginia has a number of exemptions and deductions that make the state tax-friendly for retirees. It exempts all Social Security income from the state income tax. It also provides seniors with a deduction of up to $12,000 per year against all other forms of retirement income. Seniors who rely solely on Social Security and other retirement income totaling less than $12,000 do not have to pay state taxes on retirement income in Virginia.
Senior homeowners fare well in Virginia, as the state has very low property tax rates. Likewise, the average state and local sales tax rate is 5.65%, among the lowest in the U.S.
Is Social Security taxable in Virginia?
The state of Virginia exempts all Social Security income from taxation. Some Social Security retirement benefits may still be taxed at the federal level, however.
Are other forms of retirement income taxable in Virginia?
Income from retirement accounts like a 401(k) or an IRA is taxable, as is any pension income. Much of that income is also deductible, however. Virginia offers an age deduction of up to $12,000 for persons age 65 and older. The deduction phases out by $1 for every $1 that the taxpayer's federal AGI surpasses $50,000 for single filers and $75,000 for married filers.
The deduction above can be applied to any retirement income, whether from a pension, 401(k) or IRA. If total retirement income is less than $12,000, it is essentially tax-free. Above that limit, income is taxed at the rates shown in the table below.
Income Tax Brackets
|Virginia Taxable Income||Rate|
|$0 - $3,000||2.00%|
|$3,000 - $5,000||3.00%|
|$5,000 - $17,000||5.00%|
How high are property taxes in Virginia?
The average effective property tax rate in Virginia is 0.80%. This is the 20th-lowest in the country. Property values in Virginia vary significantly between different parts of the state. In the cities and counties that are part of the Washington, D.C. metro area, median home values are typically higher than $200,000 and most homeowners pay over $2,000 annually in property taxes. In western Virginia, home values and property taxes are much lower, meaning most homeowners pay less than $1,000 each year.
What property tax relief is available to seniors in Virginia?
Most counties and independent cities in Virginia offer some form of property tax relief to seniors who own a home in their jurisdiction. Eligibility requirements vary by area, but, in general, seniors must be at least 65 years old. In many counties, low-income earners are entirely exempted from property taxes.
How high are sales taxes in Virginia?
Virginia has among the lowest sales taxes in the country. The general sales tax rate in the state is 5.3%. Additionally, some counties and independent cities collect a tax of 0.7%, which means the total sales tax paid in most of Virginia will be either 5.3% or 6%. Some places do have a 7% sales tax rate, though.
Groceries are not exempt from sales tax, but they do face a lower rate of 2.5%. Sales tax exemptions that could help retirees in Virginia include prescription drugs and most over-the-counter medicine.
What other Virginia taxes should I be concerned about?
Capital gains in Virginia are taxed as regular income. If, for example, you have an investment property that you intend to sell during retirement, it’s important to remember than any gains made on that property will face tax rates of up to 5.75%.
Most Tax Friendly Places for Retirees
SmartAsset’s interactive map highlights the places in the country with tax policies that are most favorable to retirees. Zoom between states and the national map to see the most tax-friendly places in each area of the country.
Methodology To find the most tax friendly places for retirees, our study analyzed how the tax policies of each city would impact a theoretical retiree with an annual income of $50,000. Our analysis assumes a retiree receiving $15,000 from Social Security benefits, $10,000 from a private pension, $10,000 in wages and $15,000 from a retirement savings account like a 401(k) or IRA.
To calculate the expected income tax this person would pay in each location, we applied the relevant deductions and exemptions. This included the standard deduction, personal exemption and deductions for each specific type of retirement income. We then calculated how much this person would pay in income tax at federal, state, county and local levels.
We calculated the effective property tax rate by dividing median property tax paid by median home value for each city.
In order to determine sales tax burden we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a city by the household income after subtracting income tax. This product is then multiplied by 35% to estimate the sales tax paid.
For fuel taxes, we first distributed statewide vehicle miles traveled to the city level using the number of vehicles in each county. We then calculated miles driven per capita in each city. Using the nationwide average fuel economy, we calculated the average gallons of gas used per capita in each city and multiplied that by the fuel tax.
For each city we determined whether or not Social Security income was taxable.
Finally, we created an overall index weighted to best capture the taxes that most affect retirees. The income tax category made up 40% of the index, property taxes accounted for 30%, sales taxes 20% and fuel taxes 10%.
Sources: Internal Revenue Service, Social Security Administration, state websites, local government websites, US Census Bureau 2018 American Community Survey, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration