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Is military retirement taxed in Virginia?

Is Military Retirement Taxed in Virginia?

Introduction

As a member of the military, retirement is a significant milestone. However, when it comes to taxes, military retirement pay can be complex. Virginia, like many other states, has its own rules regarding the taxation of military retirement pay. In this article, we will delve into the details of how military retirement is taxed in Virginia and provide guidance on what you need to know.

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Is Military Retirement Taxed in Virginia?

The short answer is yes, military retirement pay is taxable in Virginia. However, the amount of tax owed depends on the type of retirement pay received and the individual’s filing status.

Types of Military Retirement Pay

There are two main types of military retirement pay: Retired Pay and Separation Pay.

  • Retired Pay: This is the regular monthly pension paid to retired military personnel. It is calculated based on years of service and final pay grade.
  • Separation Pay: This is a one-time payment made to service members who are discharged or separated from the military due to a service-connected injury or illness.

Taxation of Military Retirement Pay in Virginia

Federal Taxation

Under federal law, military retired pay is taxable as ordinary income. This means that 25% of military retired pay is exempt from federal income tax, and the remaining 75% is subject to federal income tax.

Virginia State Taxation

Virginia also taxes military retired pay, but with some exceptions. Virginia exempts the first $10,000 of military retired pay from state income tax. This means that the first $10,000 of military retired pay is not subject to Virginia state income tax.

Filing Status

The filing status of the military retiree can affect the amount of tax owed. Single military retirees will pay more taxes than married military retirees, as married filing jointly allows for a larger exemption.

Tax Withholding

The military pension office withholds federal taxes from military retired pay, but not state taxes. Virginia military retirees are responsible for paying state income tax on their military retired pay. To avoid penalties and interest, military retirees should file a Virginia state income tax return and pay any owed taxes.

Tax Credits and Deductions

Military retirees may be eligible for tax credits and deductions that can help reduce their tax liability. These include:

  • Military Retirement Pay Exclusion: The first $10,000 of military retired pay is exempt from Virginia state income tax.
  • Standard Deduction: Military retirees can claim the standard deduction, which is $12,000 for single filers and $24,000 for joint filers.
  • Itemized Deductions: Military retirees can claim itemized deductions, such as mortgage interest, property taxes, and charitable donations.

Table: Virginia Tax Rates

Filing StatusVirginia State Tax Rate
Single5.75%
Married Filing Jointly5.25%
Married Filing Separately5.75%

Conclusion

In conclusion, military retirement pay is taxable in Virginia, but the amount of tax owed depends on the type of retirement pay received and the individual’s filing status. Virginia military retirees should take advantage of the $10,000 exemption and claim tax credits and deductions to reduce their tax liability. By understanding the taxation of military retirement pay in Virginia, military retirees can plan and budget accordingly to ensure a smooth transition into retirement.

Additional Resources

Disclaimer

The information provided in this article is for general guidance only and is not intended as tax or legal advice. Military retirees should consult with a tax professional or financial advisor to determine their individual tax situation and plan accordingly.

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