Virginia income taxes would use new rates and offer credits

Virginia would tax individual income using five rates, including a 7.75 percent rate on income above $1 million. The rates would apply to Virginia taxable income of individuals for tax years beginning on or after January 1, 2027. The five-rate schedule would apply for taxable years beginning on or after January 1, 2027.

Eligible taxpayers could claim a Virginia refundable credit equal to their enhanced federal health insurance premium credit. The credit would cover taxpayers whose Virginia adjusted gross income is no more than 250 percent of the federal poverty guidelines and who qualify under the federal credit rules in effect on December 31, 2025. For tax years beginning in 2026, the total credits would be capped at $50 million. Virginia residents could receive a refund for credit amounts above their tax liability. Nonresidents and people covered by the specified nonresident tax rule could use the credit only against their Virginia tax liability. The credit would not be allowed while the federal premium credit under section 36B, or a successor provision, is in effect. The credit would be available for taxable years beginning on or after January 1, 2026, and before January 1, 2031; the $50 million cap would apply only for taxable years beginning in 2026 and before January 1, 2027.

Eligible taxpayers could claim a one-time $400 credit for each dependent household member younger than 6. The credit would apply to an individual or married couple filing jointly whose family Virginia adjusted gross income does not exceed $100,000. Only one credit could be claimed for each qualifying dependent. Virginia residents could receive a refund when the credit exceeds their tax liability. Nonresidents and people covered by the specified nonresident tax rule could use the credit only against their Virginia tax liability. The credit would apply for taxable years beginning on or after January 1, 2026, and before January 1, 2031.