Virginia Retirement Income Tax Guide 2026

Virginia sits at the center of one of the largest concentrations of military retirees and federal civilian retirees in the country. Between the Pentagon, Fort Belvoir, and Quantico in Northern Virginia and the massive naval and Army presence in Hampton Roads (Norfolk, Virginia Beach, Newport News), hundreds of thousands of Virginia households collect a military pension, a federal CSRS/FERS annuity, or both — often on top of a second career. That demographic reality shapes Virginia's retirement tax rules more than in almost any other state: the legislature has spent the last several years specifically building out a military retirement pay subtraction because so many constituents depend on it.

This guide walks through exactly how Virginia taxes each type of retirement income in 2026 — Social Security, the Age Deduction for taxpayers 65 and older, the Military Benefits Subtraction (now worth up to $40,000), and ordinary private pensions, 401(k)s, and IRA withdrawals — with the current brackets, standard deduction, and worked examples including a military-retiree scenario. Given Virginia's proximity to Washington, DC, many readers here are comparing a Northern Virginia retirement to a move across the Potomac into Maryland, or south into North Carolina; that comparison is covered at the end. For a broader 50-state comparison, see the Retirement Income Tax by State Calculator.

Does Virginia Tax Social Security Benefits?

No. Virginia does not tax Social Security retirement, disability, or survivor benefits — regardless of your age or total income. If any portion of your Social Security was included in your federal adjusted gross income (which happens once your combined income crosses the federal thresholds, taxing up to 85% of benefits federally), Virginia lets you subtract that same amount back out on your state return, bringing your Virginia tax on Social Security to zero. There is no phase-out and no income cap on this subtraction — it applies to every Virginia filer who receives Social Security.

This matters for the Age Deduction discussed next: Social Security and Tier 1 Railroad Retirement benefits are specifically excluded from the income test used to phase out the $12,000 Age Deduction, so drawing Social Security does not reduce your Age Deduction eligibility.

What Is Virginia's Age Deduction for Retirees 65 and Older, and How Does the Phase-Out Work?

Virginia residents who are age 65 or older by the end of the tax year can claim an Age Deduction of up to $12,000 against their Virginia taxable income. The rules differ depending on birth date:

• Born on or before January 1, 1939: the full $12,000 deduction applies automatically, with no income test.
• Everyone else who is 65+: the $12,000 deduction is reduced dollar-for-dollar once your adjusted federal adjusted gross income (AFAGI) exceeds $50,000 for single filers or $75,000 for married filers.

The phase-out mechanic is a straight one-for-one reduction. For a single filer, every dollar of AFAGI above $50,000 reduces the deduction by a dollar, so the deduction disappears entirely once AFAGI reaches $62,000. For a married couple, the deduction phases out completely at $87,000 of combined AFAGI. Married couples where both spouses are 65+ can each claim their own $12,000 deduction (up to $24,000 combined), subject to the same joint phase-out.

Two details worth flagging for retirees: Social Security and Tier 1 Railroad Retirement income are excluded when calculating AFAGI for this test — so a retiree living mostly on Social Security plus a modest pension can retain more of the deduction than the raw income might suggest. Second, you cannot claim the Age Deduction and the separate Disability Income subtraction on the same income — it's one or the other. Virginia Tax publishes the full rules and an Age Deduction Calculator on the Virginia Tax Subtractions page to run the exact phase-out for your situation.

How Does Virginia's Military Benefits Subtraction Work in 2026?

This is the standout provision for Virginia's large military-retiree population, and the reason Virginia has become notably more competitive against neighboring states over the past few years. Virginia phased in a growing subtraction for military retirement pay:

The subtraction reached its full, permanent value of $40,000 starting with tax year 2025, and that same $40,000 cap applies for 2026 under current law. Importantly, Virginia also removed the age restriction that originally limited this benefit to retirees 55 and older — since tax year 2023, the subtraction is available to military retirees at any age, so someone who retires from active duty at 42 with 20 years of service gets the same $40,000 subtraction as a 65-year-old retiree.

What qualifies: military retirement pay for service in the U.S. Armed Forces, and Survivor Benefit Plan (SBP) payments received by a surviving spouse. The income must have been included in your federal adjusted gross income to be eligible — benefits that are already excluded from federal income (such as VA disability compensation, which is never federally taxable) don't need this subtraction because they were never taxed in the first place. Note that Thrift Savings Plan (TSP) distributions, and CSRS/FERS federal civilian pensions, are explicitly not eligible military benefits under this provision — those are taxed as ordinary pension/retirement account income (see the next section), though they may separately qualify for the Age Deduction at 65+. You also cannot double-dip: if you claim the Military Benefits Subtraction on a given dollar of income, you can't also claim another deduction, exemption, or credit on that same income. Full eligibility rules are published on tax.virginia.gov's Military Benefits Subtraction FAQ.

For a retiree with, say, $45,000 in military pension income, $40,000 is subtracted and only $5,000 remains subject to Virginia's regular income tax rates — a meaningful reduction that has made Virginia notably more attractive to career military retirees choosing where to settle after service, particularly around the Hampton Roads and Northern Virginia military communities.

How Are Private Pensions, 401(k), and IRA Withdrawals Taxed in Virginia?

Outside of the specific carve-outs above, Virginia follows federal treatment closely: with a few exceptions, if a source of retirement income is taxable at the federal level, it's taxable to Virginia at the same ordinary income tax rates. That means:

• Private-sector pensions — fully taxable as ordinary income
• Traditional 401(k) and 403(b) withdrawals — fully taxable as ordinary income
• Traditional IRA distributions — fully taxable as ordinary income
• Roth IRA and Roth 401(k) qualified withdrawals — not taxable, since you already paid tax on the contributions and federal law doesn't tax qualified Roth distributions
• Federal CSRS/FERS civilian pensions — fully taxable as ordinary income (not eligible for the Military Benefits Subtraction, since it isn't military retirement pay)
• Virginia state and local government pensions (VRS) — fully taxable as ordinary income

There is no separate blanket pension exclusion in Virginia the way some states offer (for example, Illinois exempts nearly all retirement income, and Pennsylvania exempts most pension and 401(k)/IRA income after retirement age). In Virginia, the only relief available on this income comes from the general $12,000 Age Deduction once you turn 65, subject to the income phase-out described above. Below 65 and outside the military subtraction, private retirement account withdrawals are taxed exactly like wages.

What Are Virginia's 2026 Income Tax Brackets and Standard Deduction?

Virginia uses four progressive brackets that have been unchanged (and not inflation-adjusted) for decades, which means the top rate kicks in at a very low income level:

Because the top bracket starts at just $17,000, almost every dollar of retirement income above that threshold is taxed at the 5.75% marginal rate — the brackets are progressive in name only for most retirees.

The Virginia standard deduction for 2026 is $8,750 for single filers and $17,500 for married couples filing jointly (Virginia does not use the federal standard deduction amounts). Under current law these deductions are scheduled to rise to $9,200 single / $18,400 married for tax year 2027, and again modestly for 2028, before the increases sunset after tax year 2029. Virginia also allows a $930 personal exemption per taxpayer, spouse, and dependent, on top of the standard deduction.

Worked Examples: What Would You Actually Pay in Virginia?

All examples use the 2026 brackets and standard deduction above.

Example 1 — Military retiree, age 60, single, part-time consulting income. $45,000 military pension plus $30,000 in consulting income, total $75,000. The Military Benefits Subtraction removes $40,000 of the pension, leaving $35,000 subject to tax. After the $8,750 standard deduction, taxable income is $26,250. Virginia tax: $720 (on the first $17,000) + 5.75% × $9,250 = approximately $1,252. Without the subtraction, tax on the full $75,000 (less standard deduction) would be roughly $3,552 — the subtraction saves this retiree about $2,300 a year.

Example 2 — Federal civilian retiree, age 68, single. $28,000 Social Security (untaxed) plus a $50,000 CSRS pension and a $10,000 traditional IRA withdrawal, for $60,000 in taxable pension/IRA income. AFAGI for the Age Deduction test (excluding Social Security) is $60,000 — $10,000 over the $50,000 single threshold, so the $12,000 Age Deduction is reduced to $2,000. Taxable income: $60,000 − $2,000 − $8,750 standard deduction = $49,250. Virginia tax: $720 + 5.75% × $32,250 = approximately $2,574.

Example 3 — Married couple, both 65+, both drawing pensions. $50,000 combined Social Security (untaxed) plus $80,000 in combined pension/IRA income. Joint AFAGI of $80,000 exceeds the $75,000 married threshold by $5,000, reducing the combined $24,000 Age Deduction (both spouses qualify) to roughly $19,000. Taxable income: $80,000 − $19,000 − $17,500 standard deduction = $43,500. Virginia tax: $720 + 5.75% × $26,500 = approximately $2,244.

Run your own numbers with the Retirement Income Tax by State Calculator, or get a personalized breakdown with the Retirement State Report.

Virginia vs Maryland vs North Carolina: Where Should Military and Federal Retirees Settle?

For the many DC-area retirees choosing between staying in Northern Virginia, crossing into Maryland, or heading south to North Carolina, the retirement-income rules diverge sharply:

The practical takeaway: North Carolina is the most generous of the three for career military retirees (a full exemption beats Virginia's $40,000 cap for anyone with a larger pension), while Virginia comfortably beats Maryland on the military subtraction — Maryland's cap tops out at $20,000, half of Virginia's. Maryland's county “piggyback” income tax, layered on top of the state rate in places like Montgomery and Prince George's County, also tends to push Maryland's effective retiree tax rate above Virginia's. For a full side-by-side, see the Virginia vs North Carolina comparison and Virginia vs Maryland property tax comparison.