Virginia Tax Guide 2026

Income tax brackets — compressed at the top

Virginia's brackets (unchanged since 1990): • 2% — first $3,000 • 3% — $3,000–$5,000 • 5% — $5,000–$17,000 • 5.75% — over $17,000 No bracket adjustments for inflation; no MFJ doubling. A married couple making $80,000 jointly pays 5.75% on the bulk of their income. No capital gains preferential rate. No 20%-of-QBI conformity (Virginia does not piggyback §199A — adjustment on Schedule ADJ adds it back). Governor Youngkin's 2024 tax cut proposal (lowering top rate to 5.1%) did not pass; current rates expected stable through 2026.

BPOL tax — the local gross-receipts levy

Most Virginia cities and counties levy the Business, Professional, Occupational License (BPOL) tax — a gross-receipts tax on businesses operating within the jurisdiction (Va. Code §58.1-3700 enables; localities set rates). Rates vary by classification and jurisdiction: • Fairfax County — most categories 0.17%–0.31% of gross receipts • Arlington — professional 0.36%, business service 0.36%, contractor 0.16% • Alexandria — varies 0.17%–0.36% • Loudoun — 0.16%–0.33% • Some smaller jurisdictions: NO BPOL or only nominal flat fee Annual return + tax payment typically due March 1 with the prior year's gross receipts. First $100k or $200k of gross receipts often excluded depending on locality. For consultants and freelancers in Northern Virginia, BPOL is a meaningful additional cost (e.g., $250k consulting gross → ~$900 of Fairfax County BPOL annually).

Sales tax — base plus regional add-ons

Statewide base: 5.3% (4.3% state + 1% local-uniform). Regional surcharges authorized by Va. Code §58.1-603.1: • Northern Virginia (Arlington, Fairfax, Alexandria, Loudoun, Prince William, Falls Church, Fairfax City, Manassas, Manassas Park): +0.7% → 6.0% total • Hampton Roads (Chesapeake, Hampton, Newport News, Norfolk, Portsmouth, Suffolk, Virginia Beach, James City, Williamsburg, York, Poquoson, Isle of Wight, Southampton, Franklin): +0.7% → 6.0% total • Historic Triangle (James City, Williamsburg, York): +1.0% → 7.0% total (regional + state) Groceries: reduced 1% state rate + local 1% = 2% (Virginia is one of few states still taxing groceries, though at a reduced rate). Economic nexus: $100,000 OR 200 transactions (Va. Code §58.1-612.1).

PTET (Pass-Through Entity Election)

Virginia PTET (Va. Code §58.1-390.1, enacted 2022, eligible 2021 forward via retroactive election): S-corps and partnerships can elect to pay 5.75% at the entity level on PTE taxable income. Owners get a REFUNDABLE Virginia tax credit on their personal returns. Election: made on Form 502PTET, due same as the partnership/S-corp return (April 15 for calendar-year). Election is annual and irrevocable for the year. Federal benefit: high-bracket owners save ~37% federal × full state tax payment. For $200k of state-tax-equivalent flow-through, that's ~$74k federal savings vs ~$59k state — net ~$15k+ benefit per partner depending on facts. Virginia DOES NOT conform to §199A QBI — so PTET amounts paid don't carry the federal QBI haircut issue that some other states' PTETs trigger.

Property tax

Statewide average effective ~0.74% — moderate by Mid-Atlantic standards. Fairfax County ~0.91%, Arlington ~0.78%, Loudoun ~0.93%, Richmond city ~0.91%, Virginia Beach ~0.81%. All real property is assessed locally; no state property tax. Annual reassessments common in NoVA; biennial elsewhere. Vehicle personal property tax (the 'car tax') is a meaningful additional levy — assessed by city/county on the value of personally-owned vehicles. The Personal Property Tax Relief Act of 1998 partially subsidizes the first $20k of value (locally varies); the rest is owner-paid. Virginia ranks among the higher US states for vehicle-related taxes due to the local car tax.

Corporate income tax

Virginia corporate income tax: flat 6% on Virginia-source income (Va. Code §58.1-400). Apportionment: most industries use single-sales-factor since 2020 (manufacturers since earlier; retailers used three-factor until 2024 reform). No combined reporting requirement — but new election available beginning 2026 tax year for unitary groups (HB 558 of 2021, delayed implementation). Research & Development Tax Credit (Va. Code §58.1-439.12:8): 15% of incremental R&D expenses; refundable; capped at $7.7M annually statewide.

Self-employed considerations

LLC formation: $100 (State Corporation Commission). Annual fee: $50. No Virginia state-level S-corp election; conformity to federal Form 2553. Local BPOL is the meaningful ongoing burden — Northern Virginia consultants typically pay 0.31%–0.36% of gross receipts. No state-mandated paid family leave. Unemployment: 2.5%–6.2% on first $8,000 wage base. Virginia is a moderate self-employment state: low income tax burden compared to NJ/NY/CA but the 5.75% kicks in at low income, and NoVA BPOL adds up.

Worked example: Ravi Iyer, Fairfax County software consultant (single, 2026)

Ravi runs a single-member LLC, gross consulting revenue $280,000 in 2026. Net SE income after deductions: $210,000.

Federal: SE tax + ordinary federal — skipped here. Virginia personal income tax: Taxable income: ~$180,000 (after standard deduction $8,500, federal-deducted SE tax). First $17k at blended low brackets: ~$720 Remaining $163k × 5.75%: $9,373 Total VA personal: ~$10,100 Fairfax County BPOL (business service classification 0.31%): $280,000 gross × 0.31% = $868 Less first $10k exclusion (Fairfax 2026 threshold): $31 Net BPOL: ~$837 No Northern Virginia sales tax on services (services exempt). No personal property tax on intangible business assets — but Ravi's vehicle (if assessed at $25k value) faces Fairfax car tax: 4.13% × $25,000 = ~$1,032 (less PPTRA relief). Could Ravi save by electing S-corp? Reasonable comp ~$130k W-2; $80k distribution. Federal SE tax savings ~$2,300; VA tax neutral (no SE/payroll-driven differential); Fairfax BPOL still on gross receipts. Marginal benefit; reconsider above ~$350k net.

Statute references

• Personal income tax brackets — Va. Code §58.1-320
• PTET election — Va. Code §58.1-390.1, 390.2
• BPOL enabling statute — Va. Code §58.1-3700 et seq.
• Regional sales tax surcharges — Va. Code §58.1-603.1, 605.1
• Sales tax economic nexus (Wayfair) — Va. Code §58.1-612.1
• Corporate income tax — Va. Code §58.1-400
• Personal Property Tax Relief Act — Va. Code §58.1-3523 et seq.

Related pages

• PTET Analyzer →
• LLC vs S-Corp Election →
• State Tax Comparison →