Virginia 2022 Tax Rebate and Legislative Update

Updated on: July 6, 2022

Authored By Jim Wilhelm | Director, SC&H Tax Services

Virginia’s Governor, Glenn Youngkin, just signed into law several provisions that will decrease taxes for many individual taxpayers. For 2022, some highlights include a one-time tax rebate, increased standard deduction, and a cut in the state’s grocery tax. Earlier in 2022, Virginia announced they are adopting an entity level tax election regime for certain partnerships and S corporations.

One-Time Tax Rebate

Virginia individual taxpayers who had a tax liability in 2021 will receive a rebate payment this fall:

  • Single filers will receive a $250 payment
  • Joint filers will receive a $500 payment

The payments will be made starting in September of 2022. There are no income limits or other restrictions, you simply needed to have filed a return in 2021 with a gross liability of at least the amount of your relevant rebate. Your 2021 Virginia return must be filed by November 1, 2022, in order to be eligible for payment.

To find more information about payment timing, updating your address, and the mechanics of receiving the payment, visit the Virginia tax website.

Deduction and Reduction

  • Standard Deduction for 2022 – For tax years 2022-2025, lawmakers have increased the Virginia standard deduction to $8,000 for single filers and $16,000 for joint filers. This is an 80% increase over existing amounts.
  • Grocery Tax Reduction – The 2.5% Virginia grocery tax has been reduced to 1%, effective July 1, 2022.

Virginia PTE Tax Regime

In April of this year, an elective pass-through entity (“PTE”) regime was created. Virginia joins two dozen other states in creating a workaround for pass-through entity business owners (partnerships and S corporations) to avoid the $10,000 cap on state taxes created by the 2017 Tax Cuts and Job Act.

While the regime is effective for tax year 2021, an amended return would need to be filed this fall after regulations are promulgated.

Like many states, this is an elective option. There are some more restrictive aspects to the Virginia regime, in that PTEs must have either only:

  • Natural persons as owners, or
  • Eligible S Corporation shareholders as owners.

Partnerships with any corporate owners will not be able to avail themselves of this beneficial election.

In our view, this election will be beneficial starting in the 2022 tax year, when one can plan to utilize the election. This regime will expire after 2025. Virginia provides more information in its 22-6 tax bulletin.

If you have any questions or would like to speak with one of our team members, please do not hesitate to reach out to the SC&H tax team.

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