1. Educator Expense Deduction Returns
Virginia reinstated the deduction for eligible educator expenses for Tax Year 2026 after it was unavailable for Tax Year 2025. Eligible educators may deduct up to $500 of qualifying unreimbursed expenses, including classroom supplies, books, computer equipment, and professional development costs.
2. Cannabis Business Expense Deduction
Beginning in 2026, taxpayers may deduct ordinary and necessary business expenses related to a Virginia-licensed cannabis business that are disallowed federally under IRC §280E.
3. New IRC §179 Conformity Adjustment
Virginia does not fully conform to the expanded federal Section 179 expensing limits enacted under the 2025 federal Budget Reconciliation Act. Taxpayers claiming large federal §179 deductions may need to make a Virginia conformity adjustment.
4. Underpayment Penalty Relief
The estimated tax underpayment penalty threshold increased substantially:
- Prior threshold: $150
- New threshold: $1,000
If your estimated tax underpayment is less than $1,000, no underpayment penalty applies.
5. Wildlife Corridor Grant Fund Added
Virginia added the Wildlife Corridor Grant Fund as a new voluntary contribution option on state tax returns. Taxpayers can direct part of a refund or make an additional contribution to support wildlife habitat connectivity and wildlife crossing projects.
6. Virginia Earned Income Tax Credit Remains Enhanced
The refundable Virginia Earned Income Tax Credit remains at 20% of the federal EITC for Tax Years 2025 and 2026 (up from the previous 15%).
Credit Changes
Extended
- Motion Picture Production Tax Credit extended through January 1, 2031.
Expired or Carryover Only
- Qualified Equity and Subordinated Debt Investments Tax Credit expired January 1, 2026; unused credits may still be carried forward.
- Communities of Opportunity Tax Credit expired January 1, 2026; carryovers remain available.
- Worker Training Tax Credit expired July 1, 2025; carryovers remain available.
- Carryover periods for the Conservation Tillage Equipment Tax Credit and Precision Fertilizer and Pesticide Application Equipment Tax Credit ended January 1, 2026.
Permanent PTET Credit
The sunset date for the Pass-Through Entity Elective Tax (PTET) Credit was eliminated, allowing the credit to continue indefinitely under current law.
Deduction and Filing Threshold Updates
Standard Deduction
For 2026 returns:
- Single: $8,750
- Married Filing Jointly: $17,500
- Married Filing Separately: $8,750
Filing Thresholds
A Virginia return is generally required if VAGI is at least:
- Single: $11,950
- Married Filing Jointly: $23,900
- Married Filing Separately: $11,950
Personal Exemptions
- Standard personal/dependent exemption: $930
- Additional age 65+ or blind exemption: $800
New Deduction Added
A new deduction (Code 119) allows taxpayers to deduct certain utility interconnect triggering project upgrade expenses incurred on or after January 1, 2026.
Conformity Change to Know About
Virginia replaced suspended rolling conformity with a fixed Internal Revenue Code conformity date of December 31, 2025, while automatically conforming to certain federal extensions of provisions. This means some federal tax law changes will flow through to Virginia, while others will require state-specific additions or subtractions.