Virginia's $12,000 age deduction (65+) shelters the first tranche of annuity income: a retiree receiving $1,650/month ($19,800/year) pays Virginia tax on roughly $7,800 after the deduction — about $450/year. Higher-income retirees see the deduction phase out, making Virginia middling on retirement tax friendliness: better than Maryland or California, less favorable than no-tax or exclusion-heavy neighbors like Tennessee or Georgia.
Annuity Calculator for Virginia Residents
Virginia Annuity Tax Treatment
Virginia taxes annuity income as ordinary income at graduated rates from 2% to 5.75% (the top rate applies above just $17,000 of taxable income, so most annuity income is effectively taxed at 5.75%). Virginia offers an Age Deduction of up to $12,000 per person for those 65 and older, income-phased for higher earners. Social Security benefits are fully exempt.
Virginia Retirement Demographics
Virginia has approximately 1.4 million residents aged 65 and older (about 16.5% of the population). Retirement markets range from high-cost Northern Virginia to affordable Richmond, Roanoke, and the Shenandoah Valley, with Virginia Beach and Williamsburg as coastal draws. Military retirees are a major demographic — Virginia phased in a military retirement subtraction (up to $40,000) on top of the age deduction.
State-Specific Planning Facts
- Graduated income tax of 2%–5.75% on annuity income; the top rate begins at just $17,000 of taxable income
- Age Deduction: up to $12,000 per person for those 65+, phased out at higher incomes (birth-year and income rules apply)
- Social Security benefits fully exempt; military retirement income subtraction up to $40,000 for eligible veterans
- State guaranty association: Virginia Life, Accident and Sickness Insurance Guaranty Association — $250,000 per insurer for annuity benefits
- No state estate or inheritance tax