Virginia for NRI families: four brackets, two kinds of residency and a deduction with an expiry date

Northern Virginia is one of the largest NRI hubs in the country. This guide explains how Virginia decides who is a resident, what the rate schedule and standard deduction are for tax year 2025 and 2026, what is uncertain after 2026, and how the 529 deduction and the credit for other states work. Tax year 2025 is the return filed in 2026, and tax year 2026 is the return filed in 2027. The figures below come from the Department of Taxation's 2025 Form 760 instructions unless we say otherwise. This is general information, not advice. For the shared rules, see moving states and remote work.

Two kinds of residents

Virginia has two types of resident.

• Domiciliary resident. Your permanent home is in Virginia, the place you intend to return to whenever you are away. You have only one at a time. If you take a job outside Virginia, even abroad, but do not give up Virginia as your permanent home, you remain a domiciliary resident.
• Actual resident. You kept an abode in Virginia or were physically present in Virginia for more than 183 total days in the year, even if your domicile is elsewhere.

Residents are taxed on all income, regardless of where it was earned. Someone who is an actual resident of Virginia and a domiciliary resident of another state may owe resident tax to both, with the home state giving a credit.

Rates for 2025 and 2026

Virginia's rates are graduated but the bands are the same for every filing status.

The top rate is reached at only $17,000 of taxable income, so most working households pay 5.75% on most of their income. Virginia has no separate lower rate for capital gains. Gains flow into taxable income through federal adjusted gross income. Married couples filing jointly with two incomes can claim the Spouse Tax Adjustment, worth up to $259 for 2025, which lets both incomes use the lower bands.

The standard deduction and its sunset

For tax years 2025 and 2026 the standard deduction is $8,750 for a single filer and $17,500 for a married couple filing jointly. The 2025 instructions say that increase is scheduled to end after tax year 2026, falling back to $3,000 and $6,000. That would be a large jump in taxable income.

Reports we found after those instructions say the 2026 state budget raises the amounts to $9,200 and $18,400 for 2027, and $9,300 and $18,600 for 2028 and 2029, and moves the sunset to after 2029. We could not confirm this on an official Virginia page, so treat it as unconfirmed until the Department publishes 2027 guidance. If you claim the standard deduction on your federal return, you must claim it in Virginia too.

No credit for Indian tax

Virginia gives a credit for tax paid to other states on Schedule OSC. The instructions state that the credit applies only to income taxes paid to other states. Indian tax creditable on your federal return therefore does not reduce your Virginia tax. See the credit guide.

The 529 deduction

Virginia lets you deduct contributions to Commonwealth Savers accounts (Prepaid529, Invest529, College America, CollegeWealth). The limit is $4,000 per account per year for contributors under 70, with any excess carried forward until used. Only the owner of record can claim it. Account owners aged 70 or over can deduct the full amount contributed.

Moving in or out

If you move into Virginia, or move out and become a domiciliary resident of another state, you file Form 760PY, the part-year return. If you also had Virginia-source income while a non-resident, you may need Form 763 as well. Non-residents file Form 763 if they had Virginia-source income, such as pay for work carried on in Virginia. The standard deduction is prorated for part-year residents.

When one spouse is a Virginia resident and the other is a non-resident, for example a spouse still in India, you cannot file jointly unless both elect to compute joint Virginia taxable income as if both were residents. Otherwise the resident spouse files Form 760 or 760PY and the other spouse files Form 763 if needed.

Other taxes

We did not read official pages on Virginia estate or inheritance tax, local property or vehicle tax, or state payroll programmes for this guide, so check these before you plan around them.

Forms and dates

Residents file Form 760, with Schedule ADJ for state adjustments to federal income and Schedule OSC for the other-state credit. The calendar-year return is due on 1 May, or the next business day if that falls on a weekend. A taxpayer living or travelling outside the United States on that date has until 1 July. Virginia gives an automatic six-month extension to file, with no application, but you must pay at least 90% of the tax by 1 May, using Form 760IP, to avoid a penalty.

What to do

1. Write down the date you moved and the date your permanent home changed.
2. Plan for the deduction to fall after 2026 unless an official 2027 notice says otherwise.
3. Check 529 contributions against the $4,000 per account limit.
4. Ask for the Virginia calculation separately from the federal one.

A US CPA should be involved if you split the year between Virginia and Maryland or the District of Columbia, if a spouse lives abroad, or if you hold stock that vested while you lived in more than one state.

Source: the Department of Taxation's 2025 Form 760 instructions.