Does Virginia Tax Military Retirement?
As a retiree, it’s essential to understand the tax implications of your retirement income in your home state. For military retirees, this question is particularly important, as the answer can significantly impact their financial planning and overall quality of life. In this article, we’ll explore whether Virginia taxes military retirement income and what you need to know to make informed decisions.
Direct Answer: Does Virginia Tax Military Retirement?
No, Virginia does not tax military retirement income. Virginia is one of the 7 states that does not tax military retirement pay, making it an attractive destination for military retirees.
Understanding Virginia’s Tax Policy
Virginia’s tax policy is designed to encourage individuals to retire in the state and contribute to its economy. The state recognizes the sacrifices made by military personnel and their families and has chosen not to tax military retirement income as a way to show appreciation for their service.
What is Considered Military Retirement Income?
For the purposes of Virginia taxation, military retirement income includes:
• Retirement pay: This includes monthly retirement pay from the Department of Veterans Affairs (VA) or the Department of Defense (DoD).
• Disability compensation: This includes compensation for service-connected disabilities, including the Military Disability Retirement Pay.
• Veterans’ pensions: This includes pensions provided by the VA or the DoD for veterans with service-connected disabilities or non-service-connected disabilities.
Other Sources of Income Exempt from Virginia Taxation
In addition to military retirement income, other sources of income are exempt from Virginia taxation, including:
• Social Security benefits: Social Security benefits are exempt from Virginia state income tax.
• VA disability compensation: VA disability compensation is exempt from Virginia state income tax.
• VA pension benefits: VA pension benefits are exempt from Virginia state income tax.
What About Other Forms of Income?
While military retirement income and other exempt sources are not subject to Virginia state income tax, other forms of income may be taxed. These include:
• Wages and salaries: Wages and salaries earned from employment in Virginia are subject to Virginia state income tax.
• Investment income: Investment income, such as dividends, interest, and capital gains, is subject to Virginia state income tax.
• Self-employment income: Self-employment income is subject to Virginia state income tax.
Table: Virginia Tax Rates
| Taxable Income | Tax Rate |
|---|---|
| $0 – $3,000 | 2% |
| $3,001 – $5,000 | 3% |
| $5,001 – $10,000 | 5% |
| $10,001 – $17,000 | 5.75% |
| $17,001 and above | 5.75% |
Conclusion
Virginia’s decision not to tax military retirement income makes it an attractive destination for military retirees. By understanding what is considered military retirement income and what other sources of income are exempt from taxation, retirees can make informed decisions about their financial planning and retirement strategy. Remember to also consider other forms of income that may be subject to taxation and plan accordingly.
Additional Resources
For more information on Virginia state taxes and military retirement income, visit the Virginia Department of Taxation website or consult with a tax professional.
Key Takeaways
• Virginia does not tax military retirement income.
• Military retirement income includes retirement pay, disability compensation, and veterans’ pensions.
• Other sources of income exempt from Virginia taxation include Social Security benefits, VA disability compensation, and VA pension benefits.
• Wages and salaries, investment income, and self-employment income may be subject to Virginia state income tax.
