Virginia HB 1074: State taxation; numerous changes to the Commonwealth's tax structure.

Bill Text

2026 SESSION

INTRODUCED

26105169D

HOUSE BILL NO. 1074

Offered January 14, 2026

Prefiled January 14, 2026

A BILL to amend and reenact §§ 58.1-320, 58.1-322.02, 58.1-322.03, and 58.1-339.8 of the Code of Virginia and to amend the Code of Virginia by adding in Article 3 of Chapter 3 of Title 58.1 sections numbered 58.1-339.15 and 58.1-339.16, relating to state taxation in the Commonwealth.

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Patrons—Hernandez and Tran

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Referred to Committee on Finance

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Be it enacted by the General Assembly of Virginia:

1. That §§ 58.1-320, 58.1-322.02, 58.1-322.03, and 58.1-339.8 of the Code of Virginia are amended and reenacted and that the Code of Virginia is amended by adding in Article 3 of Chapter 3 of Title 58.1 sections numbered 58.1-339.15 and 58.1-339.16 as follows:

§ 58.1-320. Imposition of tax.

A tax is hereby annually imposed on the Virginia taxable income for each taxable year of every individual as follows:

Two 1. For taxable years beginning before January 1, 2027, two percent on income not exceeding $3,000;

Three three percent on income in excess of $3,000, but not in excess of $5,000;

Five percent on income in excess of $5,000, but not in excess of $12,000 for taxable years beginning before January 1, 1987;

Five percent on income in excess of $5,000 but not in excess of $14,000 for taxable years beginning January 1, 1987, through December 31, 1987;

Five percent on income in excess of $5,000 but not in excess of $15,000 for taxable years beginning January 1, 1988, through December 31, 1988;

Five percent on income in excess of $5,000 but not in excess of $16,000 for taxable years beginning January 1, 1989, through December 31, 1989;

Five five percent on income in excess of $5,000 but not in excess of $17,000 for taxable years beginning January 1, 1990;

Five and three-quarters percent on income in excess of $12,000 for taxable years beginning before January 1, 1987;

Five and three-quarters percent on income in excess of $14,000 for taxable years beginning January 1, 1987, through December 31, 1987;

Five and three-quarters percent on income in excess of $15,000 for taxable years beginning January 1, 1988, through December 31, 1988;

Five and three-quarters percent on income in excess of $16,000 for taxable years beginning January 1, 1989, through December 31, 1989; and

Five and five and three-quarters percent on income in excess of $17,000 for taxable years beginning on and after January 1, 1990.

2. For taxable years beginning on and after January 1, 2027, two percent on income not exceeding $3,000; three percent on income in excess of $3,000 but not in excess of $5,000; five percent on income in excess of $5,000 but not in excess of $17,000; five and three-quarters percent on income in excess of $17,000 but not in excess of $1,000,000; and seven and three-quarters percent on income in excess of $1,000,000.

§ 58.1-322.02. Virginia taxable income; subtractions.

In computing Virginia taxable income pursuant to § 58.1-322, to the extent included in federal adjusted gross income, there shall be subtracted:

1. Income derived from obligations, or on the sale or exchange of obligations, of the United States and on obligations or securities of any authority, commission, or instrumentality of the United States to the extent exempt from state income taxes under the laws of the United States, including, but not limited to, stocks, bonds, treasury bills, and treasury notes but not including interest on refunds of federal taxes, interest on equipment purchase contracts, or interest on other normal business transactions.

2. Income derived from obligations, or on the sale or exchange of obligations, of the Commonwealth or of any political subdivision or instrumentality of the Commonwealth.

3. Benefits received under Title II of the Social Security Act and other benefits subject to federal income taxation solely pursuant to § 86 of the Internal Revenue Code.

4. Up to $20,000 of disability income, as defined in § 22(c)(2)(B)(iii) of the Internal Revenue Code; however, any person who claims a deduction under subdivision 5 of § 58.1-322.03 may not also claim a subtraction under this subdivision.

5. The amount of any refund or credit for overpayment of income taxes imposed by the Commonwealth or any other taxing jurisdiction.

6. The amount of wages or salaries eligible for the federal Work Opportunity Credit which was not deducted for federal purposes on account of the provisions of § 280C(a) of the Internal Revenue Code.

7. Any amount included therein less than $600 from a prize awarded by the Virginia Lottery.

8. The wages or salaries received by any person for active and inactive service in the National Guard of the Commonwealth of Virginia, (i) for taxable years beginning before January 1, 2023, not to exceed the amount of income derived from 39 calendar days of such service or $3,000, whichever amount is less; however, only those persons in the ranks of O3 and below shall be enti