Today, the Virginia House of Delegates and the Senate sent tax bills to Governor Northam for his signature. Addressing the impacts of the federal Tax Cuts and Jobs Act (TCJA) on Virginia taxpayers is one of the most pressing issues the General Assembly faced this legislative session.
I voted for this compromise $1 billion tax relief package, and it passed the House and Senate with strong bipartisan support. The bill addresses many of the concerns I have heard from constituents, and it meets my goals of giving relief to those who have been hit by the federal TCJA changes, saving for future investments, balancing the budget, and helping Virginia maintain our AAA bond rating.
Below is an overview of key changes to Virginia state taxes affecting taxpayers:
-This bill requires conformity, which means that taxpayers who chooses to itemize their deductions when filing federal taxes must also do so when filing state taxes. Likewise, taxpayers who claim the standard deduction in their federal tax returns would have to do the same on their state tax returns. Historically, Virginia has required conformity, and doing so now will help us avoid additional administrative audit costs.
-For tax year 2018, taxpayers will receive a one time refund of up to $220 for those married filing jointly and $110 for individuals. This refund will be mailed in the fall of this year.
-For tax years 2019 to 2025, there will be a 50% increase on Virginia’s standard deduction. This means the standard deduction will be $9,000 for those married filing jointly and $4,500 for individuals. The Virginia standard deduction was last raised in 2005. Increasing it now is a priority for many constituents in the 42nd District and will benefit all tax filers who take the standard deduction regardless of income level.
-Also for tax years 2019 to 2025, this bill will eliminate from state taxes the $10,000 cap on real estate and personal property taxes imposed by the TCJA. However, it keeps the cap of $313,000 on total deductions. Overall, this will bring relief to most homeowners in the 42nd District.
-The bill establishes a reserve fund to capture any additional revenue resulting from the TCJA. These funds could then be invested in priorities, such as teacher pay, or to provide further tax relief.
As I shared previously, every taxpayer will have to weigh the federal changes in the TCJA with the changes in Virginia tax policy to determine the best path forward for them and their family. Once Governor Northam signs the bills, the Department of Taxation can immediately begin processing tax returns.
I appreciate all the input I received over the past few weeks from constituents about how to address the TCJA changes in Virginia, and I look forward to continuing to dialogue about issues facing our community.