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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Does Virginia's military basic-pay subtraction require more than 90 consecutive days of active duty, or do nonconsecutive days count?
No -- the subtraction was denied. A married couple claimed Virginia's military basic-pay subtraction for 2016-2018, arguing the husband served more than 90 days of active duty each year even though th…
Can individuals get a 2005 Virginia refund from a 2008 casualty-loss carryback when the amended return was filed years after the federal change and the three-year limit?
Denied -- the refund is time-barred. The taxpayers suffered a 2008 casualty loss from a Ponzi scheme and, working with the Department, learned the loss had to be carried back three years (to 2005) und…
Did a retiree who registered to vote in another state, inherited a home there, and later moved his license and vehicle successfully change his domicile out of Virginia for 2014?
Won -- the assessment was abated. On reconsideration of P.D. 19-103, the Commissioner found this retiree had successfully changed his domicile to another state by the 2014 tax year. He moved there in …
Can a Virginia partner subtract the entire gain from selling a Historic Rehabilitation Tax Credit, or is the subtraction limited to net capital gain?
The entire gain is subtractable. A partner reported his share of a short-term capital gain from the partnership's sale of a Historic Rehabilitation Tax Credit and subtracted the full amount on his Vir…
Can a Virginia resident who works remotely from Virginia for an out-of-state employer claim a credit for tax paid to the employer's state?
Denied. A wife who moved to Virginia and worked remotely from her Virginia home for an employer based in another state reported that income to the other state and claimed a Virginia credit for the tax…
Can taxpayers reopen assessments after exhausting appeals, and do photographs prove the value of donated items for a charitable deduction?
Denied across the board. On reconsideration of P.D. 18-144, the Commissioner upheld every assessment. The 2010 year had already been decided in prior determinations and would not be revisited. The 201…
When is a Virginia income-tax appeal timely and complete, and may a taxpayer appeal while the audit is still being completed?
A complete appeal must be filed within 90 days after the assessment is mailed. This taxpayer's appeal was postmarked more than 90 days after the June 6, 2019 assessments, and a letter saying only that…
Did a couple who moved abroad for work change their Virginia domicile, and did rent from their retained Virginia home remain taxable?
Yes, they changed domicile before 2015. Their initially temporary 2012 assignment became indefinite in 2014; they leased a foreign residence, obtained local driver's licenses, registered a vehicle, di…
How does Virginia treat a taxpayer who is a California actual resident but retains Virginia domicile, and where is the California tax credit claimed?
The taxpayer remained a Virginia domiciliary resident because her California employment began as temporary and she retained Virginia property, voter registration, vehicle registration, and a driver's …
Can a Virginia taxpayer challenge old nonfiler assessments and recent self-reported tax bills with a general statement that the amount owed is disputed?
No. An appeal postmarked September 12, 2019 was too late for assessments issued from 2009 through 2015, because Va. Code § 58.1-1821 allows 90 days. The Department had jurisdiction only over 2017-2018…
May Virginia individual owners claim fixed-date-conformity bonus-depreciation subtractions shown on their pass-through entities' VK-1 forms when no prior addition appears on their personal returns?
Yes on these facts. The couple accurately reported 2015-2016 FDC subtractions shown on asset reports and VK-1 forms from two pass-through entities for assets placed in service earlier with federal bon…
Could Virginia tax an individual as a domiciliary resident for 2016 after a prior ruling had already concluded she did not re-establish Virginia domicile until 2017?
No. P.D. 19-83 had already concluded in the taxpayer's 2015 case that she could not have re-established Virginia domicile until she returned to the United States and began residing in Virginia in 2017…
Did working in another state and spending fewer than 183 days in Virginia change a consultant's Virginia domicile when he stayed in a hotel and kept Virginia ties?
No. The husband may not have been an actual resident under the 183-day test, but he remained a Virginia domiciliary resident. His hotel in the work state was not a permanent or indefinite residence, a…
What records must Virginia taxpayers provide to substantiate charitable gifts, unreimbursed employee expenses, and Schedule C business deductions?
They must provide records sufficient to verify each deduction under the federal rules Virginia follows. This couple failed to substantiate charitable gifts, unreimbursed employee expenses, and expense…
Could Virginia rely on federal W-2 data to add omitted wages to nonresident, part-year, and resident returns when the taxpayer offered no contrary evidence?
Yes. Wages are generally income under IRC § 61 and flow into Virginia taxable income. For 2015, Virginia could rely on the W-2 showing Virginia wages absent proof they were not Virginia-source compens…
Did Virginia's deduction for 'long-term health care insurance' also cover premiums for ordinary health insurance?
No. The phrase covered long-term care insurance for extended nursing-home or in-home care, not general medical insurance. Legislative history used 'long-term care insurance' and 'long-term health care…
Did a couple change domicile from Virginia during a two-year move when they initially stayed with a relative and retained Virginia property, licenses, and vehicles?
Yes. Although the move took two years and the couple retained Virginia ties during the transition, the evidence showed a continuing process of establishing domicile in the new state: living there, att…
Did maps, clothing lists, and phone-payment logs substantiate unreimbursed employee expenses for mileage, work clothes, laundry, phone, and internet?
No. The maps lacked exact addresses and conflicted with the employment record; the clothing list had no receipts and the contract imposed no uniform requirement; and the phone and internet logs did no…
How should Virginia taxpayers report claim-of-right income received in one year and repaid in a later year?
They should follow their federal IRC § 1341 treatment on the Virginia return for the repayment year, not revise the year the income was received. If a repayment over $3,000 qualifies, they may use the…
Was a 2019 amended Virginia return claiming a 2014 refund timely when another state had just assessed the taxpayer for 2014?
Yes. The ordinary three-year refund period had expired in May 2018, but Va. Code § 58.1-1823 A (v) gave the taxpayer one year after another state's final determination to amend the Virginia return. Sh…
Did a military couple establish Virginia domicile before the wife's active-duty assignment despite claiming another state as home of record?
Yes. They voluntarily moved to Virginia in May 2015, obtained a Virginia license and vehicle registrations, leased and later bought a home, and had no definite departure plan. The wife's active-duty a…
Could owners claim Virginia fixed-date-conformity bonus-depreciation subtractions reported on their pass-through entity forms when Virginia had no record of an earlier addition?
Yes. The couple accurately reported the 2015 and 2016 subtractions shown on the entity's Virginia asset reports and VK-1 forms, so they were entitled to claim them and the assessments were abated. If …
Is a discharged servicemember's severance pay taxable by Virginia when he received it after separation while still living in Virginia?
Yes. A servicemember was discharged in January 2015 and received his final military pay plus a severance payment in February 2015. He left those amounts out of his federal adjusted gross income, but t…
What proof did Virginia require for 2017 personal-property-tax and cash or noncash charitable deductions?
Property-tax bills alone were insufficient; the couple needed receipts, canceled checks, or other proof of payment and received 30 days to provide it. Cash gifts would be adjusted to the supplied rece…
Could taxpayers receive Virginia's Qualified Equity and Subordinated Debt Investments Tax Credit when their 2018 applications arrived after April 1, 2019?
No. The applications arrived May 8, 2019, after the hard April 1 deadline for capped credits. The taxpayers also could not move the 2018 investments into the 2019 credit pool; the 15-year carryforward…
How should a Virginia taxpayer report bonus depreciation embedded in a federally suspended passive activity loss?
The suspended loss and embedded bonus depreciation were not in federal adjusted gross income, so separate Virginia additions and subtractions were not required. The passive loss offset the bonus-depre…
Could a regulated investment company subtract undistributed capital gains from Virginia income, or could resident shareholders claim credit for Virginia tax paid by the company?
No. Federal conformity included the undistributed gains in both the RIC's Virginia taxable income and resident shareholders' FAGI. Virginia law provided neither the requested corporate subtraction nor…
Was a federal civilian employee a Virginia resident for 2015 after obtaining a Virginia license, spending less than six months abroad, and returning to Virginia?
Yes. The taxpayer established Virginia domicile in 2014 and did not prove abandonment when he lived abroad for less than six months and returned. He also spent more than 183 days in Virginia during 20…
Could medical disability, an assessment-period waiver, or an IRS credit-transfer notice extend Virginia's three-year deadline for refunds claimed on late original returns?
No. Virginia required a fiduciary or agent to file for a disabled taxpayer and did not toll the refund period. Assessment waivers did not extend original-return refund claims, and the IRS notice did n…
Could part-year Virginia residents subtract all of a spouse's 2015 wages when Form W-2 data showed he earned wages after the couple moved into Virginia?
No. Part-year residents owed tax on income attributable to their Virginia residency period. Because the husband earned wages after the August move, subtracting 100% was incorrect. The estimated assess…
Did a taxpayer abandon Virginia domicile after moving to another state for work even though she retained a Virginia driver's license and voter registration?
Yes. She leased a home, worked, registered and garaged vehicles, used the other-state address for federal tax documents, and remained there until an unexpected 2017 job loss. Considering all facts, Vi…
Could a retired federal CSRS employee claim a Virginia subtraction equivalent to the subtraction for Social Security or Railroad Retirement benefits?
No. Virginia courts had already rejected the claim that denying CSRS retirees an equivalent subtraction violated 4 U.S.C. § 111. The Commissioner found Dawson v. Steager involved a different compariso…
How did Virginia require taxpayers to apply the IRC § 163(j) business-interest limitation and the state's additional 20% deduction?
Virginia generally followed the federal limitation, allowed a current Virginia deduction equal to 20% of federally disallowed business interest, and required later reconciliation. Corporate groups had…
How would Virginia tax installment gain from an S-corporation stock sale before and after the seller became a nonresident?
Gain included in FAGI while the seller remained a Virginia resident was fully taxable. After genuine nonresidency, installments from stock not employed in a Virginia trade or business were not Virgini…
Did a worker domiciled in another state become a Virginia resident by keeping a Virginia home for at least 183 days, and could he claim credit for tax paid elsewhere?
Yes. Although the worker remained domiciled in another state, he maintained a Virginia place of abode for at least 183 days in 2015 and was therefore a Virginia actual resident subject to tax on his i…
Was a military spouse a Virginia resident in 2014, and could she avoid the assessment because Department live-chat advice told her not to file?
Yes on residency, but the assessment had to be abated. The taxpayer's Virginia license, vehicle registrations, long-term Virginia home, prior resident return, and weak evidence of a continuing domicil…
If I move to Maryland but keep my Virginia driver's license, have I abandoned my Virginia domicile for income tax?
She did not abandon it. A taxpayer who moved to Maryland still owed Virginia tax as a domiciliary resident for 2015 because she couldn't prove she had truly given up her Virginia domicile. To change d…
Can a Virginia resident claim the out-of-state tax credit for the D.C. Unincorporated Business Franchise Tax, and is denying it unconstitutional double taxation?
No. Virginia's credit for taxes paid to another state (Va. Code § 58.1-332) applies only to a broad-based income tax similar to Virginia's -- and the District of Columbia's Unincorporated Business Fra…
If a person is not a Virginia resident but works part of the week in Virginia, does he still owe Virginia income tax on his Virginia earnings?
Yes -- even as a nonresident he owed Virginia income tax on his Virginia-source income. The IRS flagged that the taxpayer may have had to file a 2016 Virginia return; when he did not respond to the De…
If the IRS never adjusted my return, can Virginia still deny my business expense, itemized, and alimony deductions?
Yes -- Virginia can adjust your deductions even if the IRS never touched your federal return. In an audit, the Department denied a taxpayer's business expense and itemized deductions for 2016 and 2017…
Did a taxpayer who kept Virginia ties and never answered the Department's domicile questionnaire remain taxable as a Virginia domiciliary resident?
Yes -- the assessment was upheld and the taxpayer remained a Virginia domiciliary resident. After the IRS flagged that the taxpayer may have owed Virginia tax for 2014 and no return was on file, the D…
Can a Virginia resident claim the foreign pension credit for withholding on returned foreign retirement contributions, and does following the tax form instructions protect them?
No, on both points. Virginia's foreign pension credit (Va. Code § 58.1-332.1) applies only to a foreign country's tax on genuine pension or retirement income included in your federal adjusted gross in…
What records do I need to keep unreimbursed employee expenses -- mileage, work clothing, cell phone -- as Virginia itemized deductions?
The taxpayers lost on the records they had, but got one more chance. A married couple's unreimbursed employee-expense itemized deductions -- vehicle mileage, work clothing and laundry, and cell phone …
Did a 5-year employer transfer to another state end my Virginia domicile if I kept my Virginia home, license, and voter registration?
No -- he remained a Virginia domiciliary resident for 2015. A taxpayer transferred by his employer to another state (State A) for about five years bought a home and built community ties there, but he …
If my W-2 shows state wages and Virginia withholding but the income is excluded difficulty-of-care pay, does Virginia tax it?
No -- and the Department reversed its adjustment and issued a refund. A care provider's Medicaid-waiver 'difficulty of care' payments are excluded from federal gross income under IRC § 131 and IRS Not…
Is a servicemember's spouse who registers to vote, gets a Virginia driver's license, and lives in Virginia still exempt from Virginia income tax under the Servicemembers Civil Relief Act?
The military spouse lost. The Servicemembers Civil Relief Act can let a servicemember's spouse keep an out-of-state domicile while stationed in Virginia, but only if the spouse actually maintains that…
Can a Virginia resident subtract an employer's moving-expense reimbursement that was already excluded from federal income?
No. Virginia has no subtraction for moving-expense reimbursements. Virginia income tax starts from your federal adjusted gross income (FAGI), and a qualified moving-expense reimbursement paid under an…
Can an S corporation shareholder claim a Virginia subtraction for the business-expense deduction the company had to give up to take the federal tip credit?
No. Shareholders of an S corporation cannot subtract, on their Virginia returns, the business-expense deduction the corporation had to give up to claim the federal tip credit under IRC Section 45B. Th…
If I work abroad on an employer-sponsored visa but keep a Virginia driver's license and voter registration, have I abandoned my Virginia domicile?
No. A Virginia taxpayer who took an indefinite executive job abroad still owed Virginia income tax as a domiciliary resident for 2014 because he couldn't prove he intended to abandon his Virginia domi…
Did a military-academy student change domicile from Virginia to another state when a parent moved there and the student stayed there temporarily during a shutdown?
No. The taxpayer's father moved to another state, and the taxpayer stayed there temporarily during a 2013 government shutdown, but he intended to return to the military academy when it reopened. Most …
Can a Virginia resident claim a state subtraction or credit for Mexican tax on Mexican rental income that was not fully usable as a federal foreign-tax credit?
No. The taxpayer conceded that Virginia's ordinary out-of-state credit and its foreign-country credit for qualifying retirement income did not apply. Virginia's federal conformity starts with federal …
Can a Virginia S corporation shareholder subtract his share of qualified research expenses that the corporation could not deduct federally because it claimed the research credit?
Yes. An S corporation claimed the federal qualified-research credit, which under IRC § 280C(c) prevented a matching federal deduction for expenses equal to the credit. Because S corporation items flow…
Does taking a job in another state for one year end Virginia domicile when the taxpayer keeps Virginia ties and shows little evidence of establishing a new permanent home?
No. The taxpayer showed employment in another state but little else demonstrating a new permanent or indefinite domicile. He kept his Virginia driver's license and filed Virginia resident returns for …
Can a Virginia resident obtain abatement of an individual income-tax assessment by broadly arguing that Virginia's tax system is discriminatory or regressive?
No. The taxpayer admitted Virginia residency and income but sought abatement of a 2013 assessment by arguing broadly that Virginia's income-tax system was discriminatory, regressive, and inequitable t…
Can Virginia resident S corporation shareholders claim the credit for tax paid to another state for D.C. corporate franchise tax paid by the corporation?
No. Although the shareholders' protective refund claims were timely, the Department denied them on the merits. Virginia's credit for tax paid to another state applies to qualifying income taxes, while…
Can Virginia licenses, vehicle registration, a home, and voter registration establish Virginia domicile when an overseas taxpayer was not yet physically living there?
No. The taxpayer had previously established domicile in State A and moved overseas for work with her spouse. Although she owned a second home in Virginia and obtained Virginia driver's licenses, vehic…
Does taxable scholarship money used for living expenses count as salary when applying Virginia's $15,000 state-employee salary subtraction limit?
No, not when the scholarship funds are not compensation for services. The taxpayer earned $10,000 in W-2 wages as a Commonwealth employee and received $17,500 in scholarships. A $1,500 tuition scholar…
Can Virginia abate resident income tax when a taxpayer remained domiciled in Virginia but reasonably relied on the Department's earlier written advice saying otherwise?
Yes. The taxpayer's long State A lease and vehicle registration did not outweigh his retained Virginia driver's license, vehicle and voter registrations, Virginia voting, and Virginia address for tax …
Can a person living and working in D.C. remain domiciled in Virginia, and which D.C. taxes qualify for Virginia's out-of-state credit?
Yes. The taxpayer lived and worked in D.C., had D.C. tax withheld, and filed a D.C. resident return, but she kept a Virginia driver's license and voter registration, received tax documents at a Virgin…
What records did Virginia require to substantiate medical, home, charity, mileage, work-clothing, and cell-phone itemized deductions?
Virginia required records that established the nature, payment, business purpose, and deductible amount of each expense. Bank or credit-card statements without medical receipts did not identify qualif…
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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.