A BILL to amend and reenact § 58.1-322.02 of the Code of Virginia, relating to individual income tax; subtractions; military benefits.
HB588 amends Virginia’s individual income tax subtraction statute, § 58.1-322.02, to expand the list of income items that may be subtracted from federal adjusted gross income when calculating Virginia taxable income. The bill’s central change is to allow taxpayers to subtract all military benefits, as defined in the bill, beginning with taxable years on and after January 1, 2026. The existing statute already phases in a broader military-benefits subtraction over prior years, and this bill completes that phase-in by making the subtraction equal to the full amount of military benefits for 2026 and later tax years.
The measure leaves the rest of the subtraction framework intact, including numerous existing exclusions for Social Security, disability income, National Guard pay, certain retirement income, and other specialized categories. In practical terms, the bill would reduce Virginia taxable income for eligible taxpayers receiving military retirement income, qualified military benefits, and certain survivor benefits, thereby lowering state income tax liability for those households. The bill is a targeted tax preference rather than a broad-based rate change, and it applies only to income already included in federal adjusted gross income.
HB588 would amend § 58.1-322.02 of the Code of Virginia, which governs subtractions used to compute Virginia taxable income under the individual income tax. Its principal legal effect is to broaden the military-benefits subtraction so that, for taxable years beginning on and after January 1, 2026, taxpayers may subtract the full amount of qualifying military benefits from Virginia taxable income, subject to the statute’s existing anti-double-benefit rule. This would directly affect military retirees, recipients of qualified military benefits, and certain surviving spouses receiving survivor benefits, while leaving the broader structure of Virginia’s income tax subtraction provisions unchanged.
The available legislative history shows little recorded debate or vote detail, but the bill’s subject matter and sponsor list suggest a generally favorable posture toward tax relief for military families. Because the bill was referred to the House Committee on Finance and then left in Finance, the recorded history indicates it did not advance out of committee. There are no transcript excerpts or roll-call votes provided, so sentiment can only be inferred from the bill’s purpose: it appears designed as a supportive, targeted tax benefit for service members and survivors.
No specific points of contention are documented in the provided materials, but the likely policy issue is the revenue impact of expanding a military-related tax subtraction to its full amount. Supporters would be expected to emphasize fairness to veterans, retirees, and surviving spouses, while any opposition would likely focus on the cost to state revenues and the cumulative effect of adding or enlarging tax preferences. Because the bill was left in Finance and no committee transcript is available, it is not possible to identify any particular member or stakeholder as having raised objections.