Virginia Military Retirement Income Subtraction: Recent Changes and What You Need to Know
By: Sheri Thomas
Virginia offers a military retirement income subtraction, allowing retired military personnel to deduct a portion of their military retirement pay from their Virginia taxable income. A recent legislative change has made this benefit even more accessible by eliminating the age 55 requirement, ensuring more veterans can take advantage of the tax break.
What is the Virginia Military Retirement Income Subtraction?
The military retirement income subtraction allows eligible military retirees to subtract up to a specified amount of their retirement pay from their Virginia state taxable income. This subtraction helps reduce state tax liability for retired service members.
Previous Eligibility Requirements
Prior to 2024, military retirees had to meet the following conditions to qualify for the subtraction:
- Be at least 55 years old
- Receive military retirement pay
- Be a resident of Virginia
Key Change: Age Requirement Eliminated
In 2024, Virginia passed legislation removing the age 55 requirement, meaning that all military retirees, regardless of age, are now eligible to claim the military retirement income subtraction as long as they meet the other qualifications. This change significantly expands tax relief for younger military retirees who may have previously been excluded.
Subtraction Limits by Tax Year
The military retirement income subtraction is phased in over several years, with increasing deduction limits each year:
| Tax Year | Maximum Subtraction |
| 2022 | $10,000 |
| 2023 | $20,000 |
| 2024 | $30,000 |
| 2025 & Beyond | $40,000 |
By 2025, eligible military retirees will be able to subtract up to $40,000 of their military retirement income from their Virginia taxable income annually.
Who Benefits from the Change?
- Younger military retirees: Those under age 55 who were previously ineligible can now claim the subtraction.
- Retirees transitioning to civilian careers: Many veterans retire from the military in their 40s or early 50s and begin second careers. The change ensures they receive the tax benefit immediately rather than waiting until age 55.
- All military retirees in Virginia: Regardless of age, all qualifying retirees can take advantage of the subtraction, easing their tax burden.
How to Claim the Subtraction
To claim the military retirement income subtraction, eligible taxpayers must:
- Report their military retirement pay on their Virginia state tax return (Form 760).
- Claim the subtraction on Schedule ADJ, listing the appropriate amount based on the tax year.
- Maintain documentation of their military retirement income, such as a 1099-R form from the Defense Finance and Accounting Service (DFAS).
Conclusion
The removal of the age 55 requirement for the Virginia military retirement income subtraction is a significant win for military retirees. It makes tax relief available to all former service members receiving retirement pay, regardless of age. With the phase-in of the full $40,000 deduction by 2025, Virginia continues to support its veteran community by reducing the tax burden on those who have served.
For additional details, visit the Virginia Department of Taxation website or contact our office to ensure you maximize your benefits.
