Is my military income taxable to Virginia?

According to the Virginia website, all of your income is reported on your Virginia return regardless of where it was earned or the source. 

Resident Active Duty Military Pay

If you are a resident of Virginia and serve in the military, you may be able to subtract up to $15,000 of your basic pay from your state income tax return. To qualify:

• You must be on active duty for more than 90 days.
• It doesn’t matter if you're stationed inside or outside Virginia.

However:

• If your basic pay exceeds $15,000, the subtraction is reduced dollar-for-dollar for every dollar.
• If your military basic pay is $30,000 or more, you do not qualify for the deduction. 

How to Claim a Subtraction for Active Duty Pay (if qualified)?

To enter this subtraction in the program, follow these steps using the left-side main menu:

1. Go to State section.
2. Click the 3 dots to Edit Virginia resident return.
3. Select Subtractions From Income.
4. Choose Other Subtractions.
5. From the drop-down menu, select Basic Military Pay.
6. Enter the Subtraction Amount - only include the amount you're allowed to subtract. 
7. Click Continue to save your entries.

Nonresidents Stationed in Virginia

If you're not a Virginia resident but are stationed in Virginia on active duty, your military pay is not taxable by the state.

• Your W-2 should not have Virginia listed in Box 15. 
• If the income is not allocated to Virginia it is not included on the state return. 

Filing Virginia State Returns When One Spouse Is a Resident and the Other Is Not

If one spouse is a Virginia resident and the other is not, you would file Married Filing Separate state returns. After filing the federal return, change the filing status on the state return to Married Filing Separate. The other spouse will need to create a separate account in the program to file the Virginia return (if needed). 

If claiming a dependent, at least half of the total federal adjusted gross income must be reported on the return. If claiming itemized deductions, the spouse must be able to support the claim (show proof). 

What is the Combat Pay Deduction?

Military pay and allowances earned while stationed in a combat zone are not taxable on your return. 

Combat pay reported as "Code Q" wages on Form W-2 is excluded from federal adjusted gross income and may not be subtracted on the Virginia return.

To exclude the combat pay from the state return (that was not already excluded on the federal return), follow these steps in the program:

1. Go to the State section of your return.
2. Select the 3 dots to Edit your Virginia state tax return.
3. Virginia State Return. 
4. Subtractions from Income.
5. Other Subtractions.
6. Select Military Pay Attributable to Active Duty in Combat Zone from the drop-down menu.
7. Enter the Subtraction Amount.
8. Click Continue to save your entries.

What is the Virginia National Guard Income Subtraction?

National Guard income for persons rank O6 and below may be subtracted from the return. The amount cannot exceed $5,500 or the amount of income received for 39 days, whichever is less. This subtraction does not apply to members of the active or reserve units. 

You cannot claim a credit for Low-Income Individuals or Virginia Earned Income Credit if you take this deduction. 

To enter the subtraction, follow these steps in the program:

1. Go to the State section of your return.
2. Select the 3 dots to Edit your Virginia state tax return.
3. Choose Subtractions from Income.
4. Click Other Subtractions.
5. From the drop-down menu, select Virginia National Guard Income.
6. Enter the Subtraction Amount.
7. Click Continue to save your entries. 

Additional Information

• Military Tax Tips
• Instructions for Resident Form 760
• Instructions for Non-Resident Form 763
• Virginia Military Spouse Relief Act