Virginia has made the following changes for the upcoming 2021 tax year:
Deductions & Subtractions:
- Increased Standard Deduction- For taxable years beginning January 1, 2019 to January 1, 2026, the standard deduction has increased from $3,000 to $4,500 for individuals and married filing separate returns and increased from $6,000 to $9,000 for married filing joint returns.
- Changes to Certain Itemized Deductions- beginning on or after January 1, 2019, taxpayers may claim a deduction for the actual amount of real and personal property taxes imposed by Virginia or any other taxing jurisdiction not otherwise deducted solely on account of the $10,000 annual limitation on the federal deduction for state and local taxes paid. Virginia also deconforms from the suspension of the overall limitation on itemized deductions, commonly known as
the Pease limitation. For tax year 2021, Virginia will deconform from the increase in medical expense deduction.
- Virginia's Fixed Date Conformity with the IRS Code was advanced from December 31, 2019 to December 31, 2020 with certain exceptions. Virginia will continue to deconform from the following: bonus depreciation allowed for certain assets under federal law; the five-year carryback of certain federal net operating loss (NOL) deductions generated in the 2008 or 2009 taxable years; the federal income treatment of applicable high yield discount obligations; and the federal income tax treatment of cancellation of debt income realized in connection with certain business debts.
- Taxpayer's may take a subtraction from income regarding an investment in a Virginia real estate investment trust made on or after January 1, 2019 but before December 31, 2024.
- For tax years after January 1, 2020, if the federal government made an adjustment to your income via an audit the partner may need to file an amended return if income was not reported on the additional return.
- For taxable years beginning on and after January 1, 2021, but before January 1, 2025, a refundable tax credit is available for the purchase of certain types of conservation tillage and precision agricultural application equipment.
- The credit equals 25% of all expenditures made by the taxpayer for the purchase of certain agricultural equipment certified by the Virginia Soil and Water Conservation Board. The credit amount cannot exceed $17,500 in the year of purchase.
- The Conservation Tillage Equipment Tax Credit and Precision Fertilizer and Pesticide Application Equipment Tax Credit expired effective January 1, 2021. Any unused balance can be carried over for 5 years or until the entire credit amount has been taken, whichever is first.
- For taxable years beginning on and after January 1, 2021, but before January 1, 2026, taxpayers may claim a Virginia tax credit in an amount substantially similar to the amount of the federal low-income housing tax credit allocated or allowed by the Virginia Housing Development Authority to such projects.
- There has been an extension to the sunset date of the Major Business Facility Job Tax Credit. The credit is now set to sunset for taxable years beginning on or after July 1, 2022.
- Any taxpayer holding a Port Volume Increase Tax Credit issued in taxable years beginning on and after January 1, 2018, but before January 1, 2022, may transfer unused but otherwise allowable credits to another taxpayer for use on the Virginia income tax return.
- Taxpayers may claim the Recyclable Materials Tax Credit beginning January 1, 2020 but before January 25, 2025 for machinery and equipment used mostly in facilities that perform advanced recycling. See Schedule CR.
- Taxpayers may claim a Motion Picture Tax Credit in future fiscal years other than the year they were performed starting on July 1, 2020, but before January 1, 2027. See Schedule CR.
- Changes have been made to the Research and Development tax credit for tax years beginning after July 1, 2020 the application due date for the forms MRD and RDC has been extended from July 1 to September 1 of the year following the incurred expenses.
- The sunset date for the Green Job Creation tax credit has been extended from January 1, 2021 to January 1, 2025.
- Communities of Opportunity Tax Credit added an additional area located within the Washington Arlington-Alexandria Metropolitan Area may now qualify for the credit when before they did not qualify before. Only the Richmond Metropolitan or Virginia Beach-Norfolk-Newport News area qualified for the credit. This applies to taxable years beginning on or after January 1, 2020, but before January 1, 2025.
- The sunset date for three Port of Virginia Tax Credits has been extended to tax years beginning before January 1, 2025. These credits include Barge and Rail Usage Tax Credit, International Trade Facility Tax Credit, and Port Volume Increase Tax Credit.
- For taxable years beginning on and after January 1, 2021, but before January 1, 2025, the Agricultural Best Management Practices Tax Credit has increased to 25% of the first $100,000 expended for agricultural best management practices.
- Taxpayers that need to file amended returns must now use codes to indicate the reason the return is being amended.