See our 2016 Legislative Summary for information about changes in Virginia tax laws.
See Guidance Documents for new tax guidelines.
Advancement of Virginia's Conformity to Federal Internal Revenue Code
Virginia's fixed date of conformity to the terms of the Internal Revenue Code (IRC) has been advanced from Dec. 31, 2015 to Dec. 31, 2016. This legislation allows Virginia to conform to federal tax legislation enacted during 2016 that would impact the filing of Virginia income tax returns, including the United States Appreciation for Olympians and Paralympians Act of 2016.
Virginia will continue to disallow federal income tax deductions for:
- bonus depreciation allowed for certain assets under IRC §§ 168(k), 168(l), 168(m), 1400L, and 1400N
- five-year carryback of federal net operating loss deductions generated in taxable year 2008 or 2009
- federal income tax deductions for applicable high yield discount obligations under IRC § 163(e)(5)(F)
- federal income tax exclusions related to cancellation of debt income realized in connection with a reacquisition of business debt at a discount after Dec. 31, 2008, and before Jan. 1, 2011.
Tax Bulletin 17-1 provides taxpayers with directions on how to reconcile this legislation with their 2016 Virginia income tax returns.
Deduction for ABLE Act Contributions
Effective for taxable years beginning Jan. 1, 2016, you can take an individual income tax deduction of up to $2,000 contributed during that year to an Achieving a Better Life Experience (ABLE) savings trust account offered by the Virginia College Savings Plan. However, you can’t take this deduction if you deducted your contributions on your federal income tax return. Any contribution over $2,000 can be carried forward and subtracted in future taxable years until the ABLE savings trust contribution has been fully deducted. If you are 70 years old, you can take a deduction for the full amount contributed to an ABLE savings trust account, less any amounts previously deducted. Distributions from an ABLE account can only be used for the specific expenses listed in § 529A of the Internal Revenue Code or in the case of the beneficiary’s death. If you take the deduction but later request a distribution from the account for any other reason, you will have to add back the amount you deducted, up to the amount of the distribution.
Starting with tax year 2016, the following organizations are eligible to receive contributions from individual income tax refunds:
- Breast and Cervical Cancer Prevention and Treatment Fund
- Community Foundations
- Federation of Virginia Food Banks
- Medicare Part D Counseling Fund
- Middle Peninsula Chesapeake Bay Public Access Authority
- Office of the Secretary of Veterans Affairs and Homeland Security
- Virginia Aquarium and Marine Science Center
- Virginia Capitol Preservation Foundation
- Virginia Foundation for Community College Education
See individual income tax instructions for a complete list of eligible organizations.
See What’s New for Tax Credits for new credits and changes that affect filing for tax year 2016.
Important Form Changes
Consumer Use Tax/Sales and Use Tax
Consumer use tax is referred to as sales and use tax on 2016 individual income tax returns. You are required to pay sales tax on internet, mail order, phone, and out-of-state purchases. If you are not charged sales tax when you make the purchase, you’re required to report it on your individual income tax return. If you don’t owe any sales tax, you must enter “00” on the 2016 return. See individual income tax form instructions for more details.
Virginia Driver’s License or Virginia Identification Card Information
To help us verify your identity, provide your 9-digit Virginia driver’s license number or Virginia identification card number and issue date on your return. If you file a joint return, enter the numbers for both spouses. Although providing this information is optional, it may help us process your return more quickly.