Following a six-month stalemate between Democrat and Republican lawmakers, Virginia has a new budget. The 2023 budget deal features tax cuts (mostly from new Virginia tax rebates to eligible residents) and the return of a popular sales tax holiday.
Virginia Gov. Glenn Youngkin who signed the budget in September, expressed support. In an earlier statement, Youngkin pointed to billions in tax relief for Virginians, including education, law enforcement, and behavioral healthcare funding in the package.
“While the process took longer than needed, more than $1 billion in tax relief is on the way to Virginia veterans, working families and businesses,” Youngkin said.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What’s in the 2023 Virginia budget
The Virginia budget signed by Youngkin on Sept. 14 includes new tax rebates and notable investments in education and health. The package passed 86-4 in the House and 38-0 in the Senate last week and is seen as a compromise stemming from a massive multi-billion dollar surplus.
However, the Commonwealth operates on a two-year budget cycle. So, while the 2023 budget has largely been dubbed a “win-win” by lawmakers on both sides of the political aisle, operations and funding weren’t obstructed by the ongoing negotiations and months-long stalemate.
Here's more of what you need to know.
Virginia tax rebate 2023?
One-time tax rebates. The 2023 budget proposal includes about $1.05 billion in proposed tax reductions — most of which comes from one-time tax rebates that will go to eligible Virginians. Virginia issued similar rebates last year as did more than twenty other states, who returned massive budget surpluses to residents through “stimulus” checks and inflation relief payments.
Now that Youngkin has approved the budget, Virginia joins several states, sending rebate payments in 2023. Beginning in October, eligible Individual filers in the Commonwealth will receive $200, while joint filers will receive $400.
The 2023 VA tax rebates are considered a compromise. Youngkin and fellow Republicans, who control the Virginia House of Representatives, wanted more permanent income tax cuts and a reduction in the corporate tax rate. The Democrat-led Virginia Senate opposed those cuts due to concerns over potential future economic instability.
The upcoming Nov. 7 general and special elections in Virginia will be closely watched since all 140 legislative seats will be on the ballot.
Virginia’s standard deduction
Increased Virginia standard deduction. The new budget temporarily increases the Virginia standard deduction for the 2024 and 2025 tax years. For joint filers, the standard deduction in the Commonwealth will go to $17,000 (from $16,000). For single filers, the standard deduction rises by $500, from $8,000 to $8,500.
Whether the higher standard deductions remain in place will depend on Virginia meeting certain annual revenue targets.
Tax-free weekend in Virginia
Return of Virginia’s sales tax holiday. Virginia’s popular tax-free weekend sales tax holiday returned. As Kiplinger reported, Virginia shoppers initially lost the sales tax benefit after lawmakers had failed to renew a legislative provision governing the event. Sales tax holidays are popular nationwide, with a least fifteen states hosting similar events throughout the summer.
For many years, Virginia's tax-free weekend occurred in August — just in time for back-to-school shopping. Under this budget, the Virginia Sales Tax Holiday 2023 took place in late October.
How military retirement is taxed in Virginia
Military retiree tax benefit. The Virginia budget removes the 55 or older requirement for subtracting military benefits from taxable income. That change is effective beginning with the 2023 tax year.
Before the new budget, Veterans in Virginia had to be at least 55 years old to subtract up to $40,000 of military retirement income. Eligible Veterans also had to have been honorably discharged after active duty service in the U.S. Armed Forces.
Other provisions in the Virginia budget
- The Virginia budget allocates about $650 million for public education. Those funds will mostly be used for behavioral health initiatives. Virginia colleges and universities will receive close to $200 million to help deal with rising costs.
- People who work for the Commonwealth will receive a 2% raise starting in December. Virginia public school teachers will receive an additional 2% increase.
- The budget allocates millions of dollars to support economic development, including additional funding for undergraduate financial aid in Virginia.
Related Content
-
Stock Market Today: Stocks Rally Despite Rising Geopolitical TensionThe main indexes were mixed on Tuesday but closed well off their lows after an early flight to safety.
-
What's at Stake for Alphabet as DOJ Eyes Google's ChromeAlphabet is higher Tuesday even as antitrust officials at the DOJ support forcing Google to sell its popular web browser. Here's what you need to know.
-
Premium Tax Credit: Are You Eligible For This Health Insurance Tax Break?Tax Credits The tax credit can help qualifying individuals pay for coverage from the Affordable Care Act’s health insurance marketplace.
-
IRS: Here’s How to Recover Your Tax Records After a Natural DisasterTax Records Your tax documents can help you get federal relief faster, the IRS says.
-
Voters Approve New Veteran Property Tax ReliefTax Relief Thanks to the election, some Veterans will soon see expanded property tax exemptions.
-
Nevada Approves Diaper Tax Relief Amid Childcare CrisisTax Relief Nevada voters have expanded sales tax relief to diapers. But are prices still too high?
-
Earned Income Tax Credit (EITC) 2024: How Much Will You Get?Tax Credits The refundable amount for workers with or without children is slightly higher this year. Here’s what you need to know.
-
Five Cities With the Lowest Property Tax in the U.S.Property Tax Property taxes are ultra-low in these popular metro areas, but is housing affordable?
-
IRS Expands Tax Breaks for Breast Cancer Screenings, ContraceptivesHealthcare Now you can get a tax deduction or reimbursement for certain medical expenses, like over-the-counter birth control and condoms.
-
Colorado Sending Billions in TABOR RefundsState Tax Are you receiving a TABOR refund with your 2025 Colorado state income tax filing? Don’t miss the deadline.
