New and Revised Tax Provisions Impacting Virginia Taxpayers and Businesses

Summary of Virginia’s 2025 revised tax provisions

During Virginia’s 2025 legislative session, several income tax related changes were made that impact both individual and business taxpayers. Below is a summary of the key provisions.

Temporary pause on rolling conformity to the Internal Revenue Code

Virginia’s practice of “rolling” conformity—automatically aligning state tax law with federal tax changes—has been temporarily suspended. Under the new legislation, Virginia will not automatically conform to any amendments to the Internal Revenue Code (IRC) enacted between January 1, 2025, and January 1, 2027, if those amendments have any projected effect on General Fund revenues for the year of enactment or the following four years. However, the state will continue to conform to federal tax changes that are specifically adopted by the Virginia General Assembly and to federal tax extensions.

Individual income tax rebates

The 2025 Appropriation Act authorizes an income tax rebate for the 2024 taxable year. Single filers may receive up to a $200 rebate while married couples filing jointly may receive up to a $400 rebate. To qualify, taxpayers must file their 2024 tax return by November 3, 2025. Rebates are limited to the actual tax liability remaining after applying deductions, subtractions, and credits. Refunds for those who file by July 1, 2025, will be issued between July 1 and October 15, 2025. All refunds are subject to the Setoff Debt Collection Act and will not accrue interest.

Increase in standard deduction

The standard deduction for Virginia taxpayers will increase for taxable years beginning January 1, 2025. The deduction rises from $8,500 to $8,750 for single filers, and from $17,000 to $17,500 for married filers filing jointly. This higher deduction is set to sunset after the 2026 tax year.

Pass-through entity tax: Extension of sunset date

The sunset date for Virginia’s Pass-Through Entity (PTE) Tax provisions has been extended by another year. Eligible entities may continue to utilize this tax benefit for taxable year 2026.

Qualified Equity and Subordinated Debt Investment Tax Credit repeal

The new legislation repeals the Qualified Equity and Subordinated Debt Investment Tax Credit. Taxpayers will no longer be able to claim this credit for investments made after 2025.

Expiring tax provisions

The legislation outlines several provisions that have either expired in 2025 or are set to expire by 2026. Credits that are set to expire include:

Expired as of January 1, 2025

• The Eligible Educator Expense Deduction,
• The Reforestation and Afforestation Tax Credit,
• The Worker Training Tax Credit for manufacturing orientation, instruction, and training,
• The Green and Alternative Energy Job Creation Tax Credit,
• The Research and Development Tax Credit, and
• The Major Research and Development Tax Credit.

Expires on July 1, 2025

• The Major Business Facility Job Tax Credit and
• The Worker Training Tax Credit for eligible worker training.

Expires on January 1, 2026

• The Disabled Veteran Student Loan Exclusion,
• The Out-of-State Tax Credit (“OSC”) for PTET paid to another state, and
• The Tax Credit for Participating Landlords.

Questions on how these Virginia state tax provisions impact your specific situation? Contact your Keiter Opportunity Advisor.

Source
2025 Legislative Summary | Virginia Department of Taxation