What Does Virginia’s 2026 Budget Mean for High-Net-Worth Taxpayers?

Virginia state and local tax and investment considerations

Virginia’s newly enacted 2026-2028 budget includes several tax law changes that could affect individuals and families across the Commonwealth. While many provisions are designed to provide broad-based tax relief, high-net-worth taxpayers should consider how these changes may fit into their income tax and wealth planning strategies.

Although the legislation does not introduce new individual income tax rates or significant changes targeting higher-income earners, there are several provisions worth reviewing before year-end.

Increased standard deduction may affect planning decisions

Beginning with the 2027 tax year, Virginia’s standard deduction will increase to:

• $9,200 for single filers and married individuals filing separately (up from $8,750 for 2026)
• $18,400 for married couples filing jointly (up from $17,500 for 2026)

These amounts will increase again for tax years 2028 and 2029.

While many high-income taxpayers continue to itemize deductions, some individuals, particularly retirees, younger professionals, or taxpayers with fewer deductible expenses, may find that the higher standard deduction changes the value of certain planning strategies. Reviewing projected deductions before year-end may help determine whether accelerating or deferring deductible expenses remains beneficial.

Investment holdings continue to receive attention

The budget extends Virginia’s sales and use tax exemption for purchases of qualifying gold, silver, platinum bullion, and legal tender coins through July 1, 2028.

Although this extension primarily affects sales tax rather than income tax, taxpayers with diversified investment portfolios that include precious metals should be aware the exemption remains available for qualifying purchases.

Local tax changes may affect long-term planning

Virginia’s budget also expands the ability of counties and cities to adopt an additional local sales and use tax of up to 1%, subject to voter approval. While the direct impact on most high-net-worth taxpayers is expected to be modest, the change may influence the cost of major purchases and should be considered alongside other state and local tax factors when evaluating residency, investment properties, or business operations across multiple jurisdictions. Business owners should also monitor local referendums, as differing tax rates could introduce additional compliance and administrative considerations.

Data center tax could have indirect effects

One of the most significant provisions in the legislation is Virginia’s new electricity consumption tax on data center operators. Effective July 1, 2026, qualifying data centers will pay $0.011 per kilowatt-hour of electricity consumed through June 30, 2028.

Although this tax applies directly to data center operators rather than individual taxpayers, Virginia’s technology sector represents a significant portion of the Commonwealth’s economy. Individuals with investments in technology companies, commercial real estate, private equity, or businesses supporting the data center industry may want to monitor how companies respond to the additional operating cost.

Cannabis industry creates new investment considerations

While the new retail cannabis tax primarily affects consumers, individuals with investments in Virginia’s emerging cannabis industry should note an important state income tax change. Virginia will no longer follow the federal limitation under IRC Section 280E for licensed cannabis businesses, which allows those businesses to deduct ordinary and necessary business expenses for Virginia income tax purposes. Investors and business owners should consider how this difference between federal and state tax treatment may affect projected cash flow, entity planning, and state tax reporting.

Consumers Will Pay Higher Prices

Beginning when Virginia’s adult-use retail cannabis market launches:

• A new 6% state cannabis excise tax will apply to retail marijuana sales.
• The rate increases to 8% beginning July 1, 2029.
• Localities may impose an additional 1% to 3.5% local tax.
• These taxes are in addition to Virginia’s existing sales tax.

As a result, individuals purchasing recreational cannabis should expect higher retail prices. Medical cannabis purchases remain exempt from the new cannabis excise tax.

Planning remains important

For many high-net-worth taxpayers, this legislation is less about immediate tax increases and more about understanding how evolving state tax policy fits within a long-term financial strategy. Income timing, charitable giving, investment decisions, estate planning, and business ownership often intersect with state tax changes in ways that deserve periodic review.

As Virginia continues to refine its tax policy, proactive planning can help identify opportunities while reducing the likelihood of unexpected tax consequences.

Contact your Keiter Opportunity Advisor if you would like to discuss how Virginia’s 2026 budget changes may affect your individual tax planning strategy.