Virginia is home to one of the largest federal civilian workforces in the country, plus a massive military presence and the defense contractor ecosystem of Northern Virginia. This demographic shapes Virginia’s tax profile: a progressive income tax structure where the brackets are so compressed that effectively everyone with income above $17,000 pays the top 5.75% rate, combined with a military retirement pay subtraction (up to $40,000) and a $8,750/$17,500 standard deduction.
This guide covers Virginia’s income tax structure and why its progressivity is largely theoretical, the military pay exemption, the higher Northern Virginia sales tax, property taxes (with Fairfax County among the higher rates), the age-based deduction for seniors, and why Virginia is a popular home base for federal employees and military retirees despite a moderately high income tax rate.
Virginia uses a four-bracket progressive income tax structure, but the brackets are extremely compressed compared to other progressive states:
In practice, a Virginia resident earning $60,000 subtracts the $8,750 standard deduction and $930 personal exemption ($9,680 total) to reach $50,320 taxable income, then pays: 2% on $3,000 ($60), 3% on $2,000 ($60), 5% on $12,000 ($600), and 5.75% on the remaining $33,320 ($1,915.90). The total is $2,636 — an effective rate of 4.39%. For a $200,000 earner, the effective rate is approximately 5.3%. The compressed brackets mean the ‘progressive’ label is largely theoretical — this functions almost as a flat 5.75% tax for most working Virginians.
Virginia does not conform to the federal standard deduction. Instead, Virginia has its own standard deduction:
These deductions are smaller than the federal standard deduction, meaning Virginia taxable income is typically higher than federal taxable income for standard deduction filers.
Virginia allows subtractions for military income: up to $15,000 of military basic pay, a limited amount of National Guard pay (up to 39 days or $5,500), and, for tax year 2025 and later, up to $40,000 of military retirement benefits (phased in from 2022). Virginia’s large military presence — with bases including Joint Base Myer-Henderson Hall, Fort Belvoir, Quantico, Langley, and multiple naval installations in Hampton Roads — makes this a significant benefit for a large portion of the Virginia population.
| Annual Income | Virginia (5.75% effective) | Maryland (state tax only) | North Carolina (3.99% flat) | Tennessee (no income tax) |
|---|---|---|---|---|
| $75,000 | ~$3,498 | ~$3,197 | ~$2,484 | $0 |
| $150,000 | ~$7,811 | ~$7,040 | ~$5,476 | $0 |
| $300,000 | ~$16,436 | ~$15,440 | ~$11,461 | $0 |
| $500,000 | ~$27,936 | ~$26,940 | ~$19,441 | $0 |
Approximate estimates after standard deductions. Actual amounts depend on filing status and deductions. Maryland figures are state tax only; Maryland county income tax (2.25%–3.30%) is additional.
Virginia property taxes are administered entirely at the local level — there is no state property tax. The statewide effective average is approximately 0.82%, but Northern Virginia localities significantly exceed this:
For context: a $700,000 Fairfax County home might pay approximately $7,000–7,350/year in property tax. A $400,000 Virginia Beach home might pay approximately $3,360/year. Virginia does not offer a traditional Homestead Exemption, but localities may offer various relief programs for seniors and disabled residents.
Virginia’s general sales tax structure:
The NOVA premium means Amazon HQ2 employees, defense contractors, and government workers in Fairfax and Arlington face a slightly higher consumption tax than those in Richmond or Roanoke.
Virginia has no state estate tax and no inheritance tax. This is a significant advantage relative to neighboring Maryland, which imposes both an estate tax (above $5M) and has no portability. Virginia residents can transfer assets to heirs without any Virginia-level estate or inheritance tax, subject only to the federal estate tax (above the federal exemption threshold of $15M per person in 2026 (OBBBA — permanent)).
Virginia hosts one of the largest concentrations of federal civilian employees in the country, concentrated in Northern Virginia (Pentagon, intelligence agencies, defense contractors in the Fairfax/Arlington corridor). The federal government does not exempt its civilian employees from state income tax — federal workers pay Virginia income tax at up to 5.75% on their federal salary. However, federal workers who retire with a Civil Service Retirement System (CSRS) or Federal Employees Retirement System (FERS) pension benefit from Virginia’s age deduction for residents 65+.
Virginia residents aged 65 and older can deduct up to $12,000 of income from their Virginia taxable income — subject to an income limitation. The deduction phases out for individuals with income above $50,000 and for married couples above $75,000. This is not as generous as Colorado’s or Illinois’s retirement income exemptions, but provides meaningful relief for moderate-income retirees in Virginia.
Virginia is known for aggressively asserting income tax jurisdiction over taxpayers who have not clearly severed Virginia domicile. Virginia-domiciled taxpayers living abroad may remain subject to Virginia income tax on worldwide income. Key factors Virginia considers: maintaining a Virginia driver’s license; voter registration in Virginia; Virginia property ownership; professional licenses registered in Virginia; and the intent to return to Virginia. Military personnel with Virginia domicile who are stationed abroad generally continue to owe Virginia income tax on non-military income (military basic pay is covered by a separate subtraction of up to $15,000). Expats who have made Virginia their legal home of record should consult a tax professional before assuming they have left Virginia’s tax jurisdiction.
| Income Type | Virginia Tax Treatment |
|---|---|
| Military retirement pay | Up to $40,000 subtraction (tax year 2025+) |
| Social Security | Not taxed — taxable federal benefits are subtracted on the Virginia return |
| Federal CSRS/FERS pension | Taxed at 5.75%; partial relief via age deduction for 65+ |
| Private 401(k)/IRA | Taxed at 5.75%; partial relief via age deduction for 65+ |
| Virginia state employee pension | Taxed at 5.75%; partial relief via age deduction for 65+ |
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