Legal changes resulting from the Tax Cuts and Jobs Act of 2017 meant that Virginia taxpayers were expecting their tax liability to increase for 2018, at least on state taxes. This blunder has now been avoided, thanks to a bill that just passed through the Virginia General Assembly.
One-time refund to offset higher state taxes
Now signed into law by Gov. Northam, the new statute will send millions of dollars back to Virginia residents. One of the key provisions is a one-time refund of $110 for individual filers and $220 for couples.
The purpose of these rebates is to compensate state residents for the higher state taxes they will have to pay as a result of the new federal law. The total amount the state government expects to distribute in these one-time gifts is around $420 million.
Changes to the Virginia standard deduction
After the federal government passed the Tax Cuts and Jobs Act, the state of Virginia was not coordinated with Washington’s new tax system. Filers who took the standard federal deduction would be required under state law to take Virginia’s much lower deduction. This, in turn, would lead to much higher state taxes being paid. Virginia’s new law eliminates this situation.
Specifically, the new tax law will raise the standard deduction on Virginia’s tax return to $4,500 for individuals and $9,000 for married couples. Another feature of the state law is the elimination of a cap on the amount of local property taxes that can be deducted on itemized returns.
Benefits for Virginia businesses
Business taxation in Virginia will also be impacted by the new law. Income received from corporate investments outside the United States will be protected. Also, businesses will be able to deduct a percentage of the interest they are unable to claim on Uncle Sam’s 1040.
Individual and business tax breaks in Virginia’s new law total nearly a billion dollars. Delegate Schuyler T. VanValkenburg (D-Henrico) summed up the legislature’s work: “We wanted tax relief for people who weren’t getting it in the federal plan and that’s what we got.”
Still have questions?
If you would like to know more about how the changes in the tax law affect you, contact an accountant at Glass Jacobson today.