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Taxes

Community Voice

State tax conformity with federal tax changes

Virginia's budget includes proposals to conform the state tax code to changes made by the federal reconciliation bill ('One Big Beautiful Bill'), including allowing deductions for car loan interest, tips, and overtime pay that are deductible federally. The budget also proposes to make permanent certain Virginia provisions such as the increased standard deduction and expanded Earned Income Tax Credit refundability.

Should Virginia conform its tax code to federal changes, including new deductions for tips and overtime pay?

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Sources

Governor Glenn Youngkin — https://www.vaco.org/capitol-contact/governor-youngkin-presents-budget-proposal-to-money-committees
Proposed tax policy actions incorporated in the introduced budget include substantially conforming Virginia's tax code to changes to the federal tax code in HR 1... as well as making several provisions of Virginia's tax code permanent, such as the increased standard deduction amount and the increase to the refundability of the Earned Income Tax Credit... the budget also proposes to allow Virginia taxpayers to deduct a portion of the amounts deducted on their federal taxes for car loan interest, tips, and overtime.
Positions on this issue  ·  liberal → conservative
  1. Reject federal tax conformity; Virginia should maintain its own progressive tax structure independently.
  2. Conform only to federal changes that benefit working families, like the EITC, not deductions for tips.
  3. Selectively conform to federal changes while analyzing each provision's impact on state revenues first.
  4. Conform Virginia's tax code to federal changes as proposed, including deductions for tips and overtime.
  5. Fully conform to federal tax law and also reduce Virginia's income tax rates to boost competitiveness.