Bulletin Number
VTB 85-4
Tax Type
Individual Income Tax
Description
Subtraction of Railroad Retirement Benefits from Virginia Taxable Income
Topic
Taxable Income
Date Issued
02-19-1985
Virginia Department of Taxation 85-4
DATE: February 19, 1985
SUBJECT: Subtraction of Railroad Retirement Benefits
From Virginia Taxable Income
All Railroad Retirement Act benefits are exempt from state income taxes under Federal law (45 U.S.C. §231m(a)) even though portions of such benefits may be subject to federal income taxes.
Portions of Tier 1 and Tier 2 railroad retirement benefits were made subject to federal income tax in 1984, but Tier 1 railroad retirement benefits were exempted from the Virginia income tax beginning the same year. To the extent taxed for federal purposes, such benefits may be subtracted from Virginia taxable income (federal adjusted gross income) on line 31 of the 1984 Virginia Form 760 (long form).
As Federal law effectively exempts Tier 2 railroad retirement benefits from the Virginia income tax, any such benefits included in federal adjusted gross income should be subtracted from Virginia taxable income on line 35 of the 1984 Virginia Form 760. Taxpayers who have already filed 1984 Virginia income tax returns and paid state tax on Tier 2 railroad retirement benefits may file amended returns until May 1, 1988 in order to obtain refunds of such tax.
Neither Federal nor state law exempts from taxation railroad supplemental annuities received by retired rail employees under a pension plan set up by a particular railroad, whether the plan was contributory or not. However, as noted above, railroad supplemental annuities payable by the Railroad Retirement Board under the Railroad Retirement Act may be subtracted from Virginia taxable income on line 35 of the 1984 Virginia Form 760 as well as any railroad unemployment benefits included in federal adjusted gross income.
For purposes of computing the retirement income tax credit, the total amount of Social Security and Railroad Retirement Act benefits received during the taxable year must be included on line 47 of Form 760.
Married persons who file separately on a combined return and who both have received Social Security and Railroad Retirement Act benefits must allocate such benefits on a proportionate basis when filling in lines 31, 35, and 47 of Form 760. The benefits allocable to each spouse should be computed by taking the percentage that a spouse's benefits bear to the total benefits received by both spouses.
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