Virginia taxpayers would subtract part of eligible tips from taxable income

Eligible taxpayers would subtract part of their allowed federal tip deduction when calculating income subject to Virginia income tax. The provision would cover Virginia taxpayers eligible for the federal tip deduction. The tips must be included in federal adjusted gross income, the income figure used as a starting point for Virginia taxes. The subtraction would equal a share of the tip deduction allowed under section 224 of the federal tax code. The 25% rate would apply to tax years beginning on or after January 1, 2026, but before January 1, 2027. The 50% rate would apply to tax years beginning on or after January 1, 2027.