DMV Real Estate & Lifestyle Blog

Virginia's proposed income Tax Rate increase 
and additional changes

The Commonwealth of Virginia's proposed Income Tax changes are a hot topic right now. Let's look at a list of the proposed Tax law changes that are included in HB 979 and HB 378.

HB 979

• Establishes two new tax brackets beginning on and after January 1, 2027: Income between $600,000 - $1,000,000 to be taxed at a rate of 8%. Income in excess of $1,000,000 to be taxed at a rate of 10%. 
• The bill provides that 50 percent of revenues generated by the new tax brackets will be dedicated to localities for maintenance, operation, capital outlays, debt and interest payments, or other expenses incurred in the operation of public schools.
• Increases the standard deduction to $10,000 for single individuals
• Increases the standard deduction to $15,000 for individuals eligible to claim head of household for federal tax purposes
• Increases the standard deduction to $20,000 for married individuals beginning in taxable year 2027 and indexes such deduction amount for inflation beginning in taxable year 2028
• Removes the aggregate amount of housing opportunity tax credits that may be claimed for qualified projects across all calendar years and exempts food purchased for human consumption and essential personal hygiene products from the local sales tax.

Click here to view Virginia House Bill 979

NOTES FOR REFERENCE: 

• According to recent IRS Tax data, households in Virginia that earned $533,000 or more annually represent approximately 5.23% of households in Virginia. These households are within the top 5% of earners in Virginia. 
• The top 1% of earners in Virginia are households that earn approximately $701,792+ annually. 
• Households that earn $1,000,000 or more annually are approximately within the top 1/2 percent of earners. 

HB 378 

Imposes a net investment income tax on individuals, Trusts, and Estates beginning in taxable year 2027. The tax is generally equal to 3.8 percent of the lesser of (i) net investment income, defined in the bill, for the taxable year or (ii) federal modified adjusted gross income, defined in the bill, for such taxable year reduced by $500,000.

Click here to view Virginia House bill 378