The Virginia Department of Taxation recently released their updated 2023 Legislative Summary, which details the state and local tax legislation enacted during the 2023 Special Session held on September 6, 2023.
Below are a few key changes of interest:
Individual Income Tax Rebates:
Taxpayers who timely file a 2022 individual return on or before November 1, 2023, will receive a rebate ($200 for single and $400 for married taxpayers) up to the amount of the taxpayer’s 2022 tax liability.
Land Preservation Tax Credit:
Increase in the VA Land Preservation Credit beginning in 2023 to $50K and $100K for married taxpayers (prior law was $20K).
Military Benefit Subtraction:
Beginning January 1, 2024, individuals no longer have to reach age 55 to be eligible for the VA subtraction.
Conformity to Internal Revenue Code:
The Legislative Summary also clarified Virginia’s conformity continues to apply to ensure alignment with the Internal Revenue Code (IRC). Governor Youngkin signed S.B. 1045 to change Virginia’s method of conformity with the IRC from fixed-date to rolling in April.
Pass-through entity tax changes:
Earlier this year, S.B.1476 was signed by Governor Youngkin, which removed the requirement that a pass-through entity (PTE) must be 100% owned by natural persons or, for an S corporation, persons eligible to be shareholders, to be able to make the Virginia PTE tax (PTET) election.
Under the new legislation, any PTE can opt for the PTET. However, to claim a refundable PTET credit, the direct owner of a PTE must be:
- A natural person who pays Virginia’s individual income tax; or
- An estate or trust that pays Virginia’s fiduciary income tax.
The legislation also clarifies that only the income portion related to the above-mentioned eligible owners will be subject to PTET. So, if a PTE has owners that are not individuals, estates or trusts, their share of the income will not be under the PTET.
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