Virginia State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Virginia, with full citations and the original source on every page.
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Could taxpayers challenge Virginia assessments more than 90 days after they were issued while seeking IRS reconsideration?
No. The taxpayers filed their administrative appeal well after Virginia's 90-day deadline, so the Commissioner found no basis for relief. Virginia could assess from the IRS's final figures after the t…
Could severe medical problems extend Virginia's deadline to claim a 2004 income-tax overpayment as a 2005 credit?
No. Applying an overpayment to the next year was subject to the same three-year limit as a refund. The taxpayer's missed extended filing date made the extension invalid, and the September 2008 return …
Did joint-bank records prove that a Virginia resident separately paid all itemized deductions from a nonresident spouse?
Not yet. The resident's payroll entered the joint account used for mortgage and real-estate-tax payments, but nine unexplained transfers also entered that account. Without proof that the transferred f…
Could Virginia include a nonresident servicemember spouse's federally excluded combat pay when allocating joint itemized deductions?
No. Virginia could proportionally allocate joint deductions and exemptions between the resident taxpayer and nonresident spouse when the items were not separately accounted for. But the ratio had to u…
Could a Virginia resident claim all dependent exemptions but only a proportional share of joint itemized deductions with a nonresident spouse?
Yes. Claiming all dependent exemptions on the resident's separate state return showed the spouses' mutual agreement and separate accounting, so those exemptions were allowed. But the resident did not …
Could Virginia include a nonresident servicemember spouse's federally excluded combat pay when allocating joint deductions and exemptions?
No. Virginia could proportionally allocate joint deductions and exemptions when the resident and nonresident spouses did not separately account for them, but the calculation had to use federal adjuste…
Could Virginia include a nonresident servicemember spouse's federally excluded combat pay when allocating joint itemized deductions?
No. Virginia could proportionally allocate deductions when the resident and nonresident spouses did not separately account for them, but the calculation had to use federal adjusted gross income. Comba…
Could a Virginia resident claim all dependent exemptions and itemized deductions from a joint federal return with a nonresident spouse?
The resident could claim all dependent exemptions because the nonresident spouse did not claim them on the other state return, showing separate accounting and mutual agreement. The resident had not do…
Could an employed taxpayer subtract disability payments from Virginia income because the injury arose during combat-zone training?
No Virginia subtraction was allowed on the returns as filed. The state subtraction required qualifying disability income for a period when the individual was absent from work because of permanent and …
Could a taxpayer overturn a Virginia income-tax assessment with an appeal that identified no error, relevant facts, or supporting authority?
No. A Virginia assessment was presumed correct, and the taxpayer bore the burden of showing error. His letter did not identify an alleged error, give relevant facts, state grounds for relief, cite con…
Were out-of-state domiciliaries who stayed in their Virginia home more than 183 days for medical reasons Virginia residents?
Yes, for the part of each year they lived in Virginia. Their medical reason and lack of intent to restore Virginia domicile did not prevent actual residency after they maintained a Virginia abode and …
Did an out-of-state return and voter registration overcome evidence from a Virginia driver's license and vehicle registrations?
No. The out-of-state resident return and voter card supported domicile elsewhere, but the taxpayer obtained a Virginia driver's license in March 2007, renewed it in 2010, and kept two vehicles and a t…
When spouses file separate Virginia returns and one is a nonresident, what income measure allocates shared deductions and exemptions?
Federal adjusted gross income was the example Virginia used for proportional allocation. Each spouse first had to account separately for income, deductions, and exemptions. Only items that could not b…
Could a taxpayer relitigate business deductions in Virginia after the IRS made a final 2005 itemized-deduction adjustment?
No. Virginia generally follows federal figures and does not look behind the IRS's final determination after a federal examination. The taxpayer had one year to report the federal change on an amended …
Was a worker living in Virginia over 183 days a resident, and could she deduct Virginia housing as temporary-job lodging?
Virginia treated her as an actual resident because she maintained a Virginia abode for more than 183 days, even if her domicile remained elsewhere. Housing was not deductible as temporary-job lodging …
Did a Virginia-domiciled travel nurse owe Virginia tax on wages earned in other states?
Yes. She admitted that she had not changed her Virginia residency, so Virginia taxed her as a resident on federal adjusted gross income even though she lived and worked elsewhere. She qualified for Vi…
Did a military spouse qualify for a Virginia withholding refund when she and the service member did not share the same domicile?
No. The spouse appeared to retain domicile in State A, but the service member had never been physically present there and therefore could not acquire State A domicile despite vehicle registration, vot…
Could taxpayers move a 2008 Virginia NOL deduction to 2007 because an other-state tax credit prevented a cash refund for 2006?
No. Virginia required the 2008 loss to follow the ordinary two-year federal carryback sequence after disallowing the special five-year carryback. The deduction fully reduced the taxpayers' 2006 FAGI a…
Was a separated spouse liable for a joint Virginia return her spouse electronically filed without her agreement?
No. Virginia did not generally adopt the federal innocent-spouse provision, and spouses who actually file jointly are each liable for the full return. But the evidence showed that this taxpayer never …
Which mortgage, charitable, mileage, uniform, and professional-dues deductions survived Virginia's documentation review?
Virginia adjusted second-mortgage interest to the documented amount and allowed donated furniture, books, tools, electronics, and other items individually worth $500 or less with proper receipts. It d…
Could a taxpayer overturn years of Virginia assessments by claiming he had no federal adjusted gross income under his reading of federal law?
No. Appeals for 1995, 1996, 1998-2001, and 2005 were filed after Virginia's 90-day deadline and were barred. The 2007 appeal was timely, but the taxpayer admitted receiving income and supplied no obje…
Could a Virginia National Guard captain claim combat, extended-active-duty, and Guard-pay subtractions without deducting the same income twice?
Yes, multiple military subtractions could apply, but the same income could not be subtracted twice and only compensation included in FAGI was eligible. Virginia kept the basic-pay calculations, allowe…
Did a husband become domiciled in Virginia because he spent substantial time there caring for his ill wife?
No. He kept an out-of-state driver's license, vehicles, voting, residence, and federal-return address, while his extended Virginia stays were tied to his wife's medical treatment. Although he maintain…
Could a full-year Virginia resident and part-year-resident spouse claim a credit for tax paid on wages earned in another state?
Yes. The couple supplied the other-state return, and wages or business income taxed by both states could qualify. The credit was limited to the lesser of the other-state tax actually paid or Virginia …
Did attending college, working part time, and filing a resident return in another state end a student's Virginia domicile?
No. The student attended college, worked part time, received statements, and filed a resident return in the other state, but excluded investment income from that return in a way that raised doubt abou…
Did employment and utility bills in another state prove domicile there while the taxpayer kept Virginia licenses, vehicles, and a home under construction?
No. Employment and utility bills supported presence in the other state, but the address had been reported as rental property, no 2007 federal return established a permanent abode there, and the Virgin…
Could a military spouse claim the 2009 Virginia exemption when both spouses had established Virginia domicile before moving back to another state?
No. Both spouses had established Virginia domicile through their condominium, licenses, voter registrations, and vehicle ties, and no evidence showed another domicile before December 2009. The refund …
Did buying a home and spending most of the year abroad establish a new domicile when the taxpayers kept extensive Virginia business and personal ties?
No. Although the taxpayers bought a foreign home and spent most of 2007 and 2008 there, they returned for long periods to run Virginia businesses, renewed Virginia licenses, kept registered vehicles, …
Could a military spouse claim Virginia's 2009 exemption after obtaining Virginia licenses, vehicle registration, and voter registration?
No. Virginia found that by 2008 she had abandoned relevant connections with the service member's home state and established Virginia domicile through her license, vehicle, voter registration, residenc…
Did a taxpayer establish domicile abroad with her transferred spouse when she kept a Virginia home and commuted to an adjacent-state employer?
No. Although she sold the prior home and traveled abroad with her spouse, she owned and used a Virginia home, registered a vehicle, renewed her Virginia license, and spent more days in Virginia than a…
Was a person domiciled in another state still a Virginia resident after living and working in Virginia for 190 days?
Yes. Although the taxpayer remained domiciled in another state, he lived and worked in Virginia for 190 days in 2007. Because he maintained a Virginia abode for more than 183 days, he was an actual Vi…
Did foreclosure-related loss of records excuse taxpayers from substantiating itemized and vehicle-expense deductions?
No. Virginia upheld the 2007 and 2008 assessments because the taxpayers did not provide enough support for their itemized, employee-vehicle, and business-truck deductions. Losing records during a late…
Could Virginia disregard a final IRS income adjustment because the taxpayer said the return preparer made the underlying error?
No. Once the IRS adjustment became final, Virginia used the resulting federal figures and would not revisit the taxpayer's claim that a preparer mishandled an education-expense deduction. Because the …
Did a letter and amended pass-through return satisfy Virginia's duty to report an IRS change to an individual's income?
No. The taxpayer's letter and amended pass-through entity return did not provide enough information to recompute the individual's Virginia tax and did not replace the required amended individual retur…
Did the Servicemembers Civil Relief Act exempt a military spouse who had established her own Virginia domicile?
No. Virginia denied the refund because the spouse's conduct showed that she had abandoned her prior-state domicile and established a separate Virginia domicile. Her Virginia voter registration, Virgin…
Did attending college, voting, paying in-state tuition, and interning in another state end a student's Virginia domicile?
No. Virginia found that the student had not clearly abandoned his Virginia domicile. His out-of-state tuition status, voting, internship, and part-year return supported a change, but college housing a…
Could taxpayers offset a 2006 Virginia assessment with a late 2005 refund after the IRS shifted passive losses between years?
Mostly no. Because the taxpayers did not amend their 2005 and 2006 Virginia returns within one year after the final IRS change, Virginia would not offset the 2006 assessment with the otherwise related…
Could a taxpayer deduct mortgage interest when the deed, mortgage records, and Form 1098 did not clearly distinguish him from his identically named father?
Not on the evidence submitted. Because the taxpayer and his father had the same name, the deed and payment records did not establish which man owned the home or owed the mortgages, while Form 1098 use…
Could Virginia residents claim the out-of-state tax credit for D.C. unincorporated business franchise tax paid by a single-member consulting LLC?
No. Virginia reaffirmed its longstanding position that the District of Columbia unincorporated business franchise tax did not qualify for the Va. Code § 58.1-332 credit. The Tax Commissioner declined …
Did a military spouse preserve her out-of-state domicile and qualify for a refund of 2009 Virginia wage withholding?
Yes. Although the spouse moved to Virginia and began working before her marriage, Virginia found that the full facts showed she maintained State A domicile, shared that domicile with her service-membe…
Could a nursing assistant keep unreimbursed vehicle-expense deductions without records substantiating the business use?
No. Virginia upheld the 2007 and 2008 assessments because the taxpayer did not provide the requested records substantiating business use of her personal vehicle. The assessment was presumed correct, a…
Did prior return processing or use of Virginia-approved tax software prevent a later assessment for an overstated out-of-state tax credit?
No. Virginia upheld the additional tax and interest because earlier processing did not establish that the return was correct, and software approval tested conformity with processing requirements rathe…
Could a Virginia resident defeat a 2007 nonfiler assessment by showing only that she filed a federal return?
No. Virginia did not dispute that the taxpayer filed federally, but a resident required to file a federal return generally also had to file a Virginia return. Because she did not provide the requested…
Can a Virginia taxpayer avoid assessments for incorrect itemized deductions by blaming the return preparer?
No. Virginia upheld the 2007 and 2008 assessments because taxpayers remain responsible for the accuracy of their returns, and this taxpayer knew or should have known she had not incurred the expenses …
Will Virginia cancel a resident income-tax assessment when the taxpayer does not provide the requested domicile evidence?
Not without evidence. Because the taxpayer did not provide the domicile information requested during the audit or appeal, Virginia found no basis to adjust the 2007 assessment. The Commissioner allowe…
Did temporary job transfers outside Virginia establish that a taxpayer abandoned his Virginia domicile for 2007?
No. Virginia held that temporary job assignments outside the state, even for years, did not prove the taxpayer intended to establish a permanent home elsewhere. His Virginia driver's license, Virginia…
Can a Virginia taxpayer avoid assessments for incorrect itemized deductions by blaming the return preparer?
No. Virginia upheld the 2007 and 2008 assessments because taxpayers remain responsible for the accuracy of their returns, and this taxpayer knew or should have known he had not incurred the expenses u…
Did a military spouse qualify for a 2009 Virginia withholding refund when she and the service member had different domiciles before Virginia?
No. Virginia found that the spouse maintained State A domicile, but the service member had not abandoned State B domicile before the move to Virginia. Because the 2009 military-spouse protection requi…
Could Virginia residents reopen the 2004 refund period after another state assessed tax on the same rental income in 2009?
No. The March 2009 amended Virginia return came after the general May 2, 2008 deadline, and none of the exceptions reopened 2004. The other state's assessment was not a Virginia assessment, a 2009 fed…
Were spouses full-year Virginia residents for 2006 even though one did not obtain Virginia employment until October?
Yes. Virginia found that the couple's licenses, Virginia apartments, vehicle registration, and earlier part-year filing showed Virginia domicile throughout 2006. A later Virginia job start and one par…
Could a taxpayer reduce a Virginia assessment without filing the 2007 resident, part-year, or nonresident return needed to calculate liability?
Not on the existing record. The taxpayer admitted some Virginia-source income but had not filed a return or supplied enough information to determine residency and liability, so the assessment remained…
Can Virginia residents calculate the other-state tax credit before subtracting a historic-rehabilitation credit granted by that state?
No. Virginia limited the credit to the tax actually paid to the other state after that state applied its historic-rehabilitation credit. The residents could not use the higher pre-credit liability, be…
After moving away, would sellers owe Virginia tax on contingent payments from an S-corporation sale and installments from their Virginia home?
It depended on the federal character of each payment. Gain or interest from selling S-corporation stock as an intangible not used in a Virginia business generally would not be Virginia-source after th…
Did a married couple prove their interest, dividends, and pension income was exempt because the tribal-member spouse lived on a reservation?
No. Although the wife was a tribal member and the couple lived on the reservation, Virginia found no evidence that the disputed interest or dividends came from reservation pursuits or that the pension…
Did a tribal member prove that interest, dividends, and pension income were exempt because he lived on an Indian reservation?
No. Virginia said reservation residence alone did not exempt the disputed income. The taxpayer did not show that the interest or dividends came from reservation-based institutions or pursuits, or that…
Did a couple operate their short-lived 2007 import business for profit despite losses and closing before year-end?
Yes. Virginia found the couple organized and operated a new import business with registrations, online sales accounts, supplier and reseller agreements, relevant experience, and a website. Unexpected …
Could buyers of devalued Virginia land-preservation tax credits claim additional credits that the sellers had retained instead of transferring?
No. Virginia held that only taxpayers who earn or purchase land-preservation credits may claim them. The buyers could claim only the devalued amount of the credits actually transferred in 2005 and 200…
Could recipients claim Virginia's disability-income subtraction when neither spouse was the permanently disabled individual for whom the payments were approved?
No. Virginia did not dispute that the payments were disability income under the cited federal definition, but the state subtraction also required the claimant to be absent from work because of permane…
Did notices of intent and information requests preserve appeals of Virginia nonfiler assessments without complete appeals filed within 90 days?
No. Virginia had not received complete appeals stating the taxpayer's grounds and relevant facts within 90 days of either assessment, so both appeals were barred. The taxpayer also provided no objecti…
Could a late Virginia appeal defeat assessments by arguing that wages were not taxable and no federal return meant no federal adjusted gross income?
No. The appeal was filed after the 90-day deadline, and Virginia also rejected the wage-tax and no-return arguments as having no basis in fact or state law. The 2002-2006 assessments remained due. The…
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These are official tax letter rulings and advisory opinions issued by Virginia's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.