A BILL to amend and reenact §§ 58.1-320, 58.1-322.03, 58.1-439.30, 58.1-603.1, as it is currently effective and as it may become effective, 58.1-603.2, 58.1-604.01, as it is currently effective and as it may become effective, 58.1-605.1, 58.1-606.1, and 58.1-611.1 of the Code of Virginia and to amend the Code of Virginia by adding a section numbered 58.1-320.1, relating to taxation provisions.
HB979 is a broad tax package that revises Virginia’s individual income tax structure, expands several deductions and credits, and changes the treatment of certain local sales and use taxes. The bill would keep the current graduated income tax brackets through 2026, then, beginning in tax year 2027, add higher brackets for high-income taxpayers, including new 8 percent and 10 percent rates on income above $600,000 and $1 million, respectively. It also increases the standard deduction for non-itemizers beginning in 2027 and indexes that deduction to inflation starting in 2028, while retaining and modifying a wide range of existing deductions for items such as personal exemptions, age-related deductions, long-term care premiums, college savings contributions, educator expenses, organ donation costs, and certain energy-efficient purchases.
The bill also creates a new revenue-sharing mechanism by directing 5.5 percent of individual income tax revenue to counties and cities for public school purposes, to be treated as local resources for Standards of Quality basic aid calculations. In addition, it adds a new refundable or nonrefundable child tax credit for dependents under age six, available from 2026 through 2030 for households under a $100,000 income cap. HB979 continues Virginia’s housing opportunity tax credit program, adjusts annual caps and allocation rules, and preserves local-option school construction sales and use taxes and certain regional sales/use taxes, while also extending and clarifying the sales tax exemption for food and essential personal hygiene products.
The bill’s impact on state law would be substantial. It amends multiple sections of Title 58.1 to change income tax rates, deductions, credits, and local tax administration, and it adds new sections governing the distribution of income tax revenue and the child tax credit. It would also affect local governments, school funding formulas, the Tax Commissioner, the Comptroller, and taxpayers with higher incomes, children under six, older taxpayers, low-income taxpayers, homeowners, educators, and participants in housing and savings incentive programs. Because the bill is set to become effective January 1, 2027, many of its major income tax and sales tax changes are delayed until that date.
The general sentiment reflected in the available context is limited but appears procedural rather than adversarial. The bill was advanced as a House substitute incorporating HB188, and it remained in Subcommittee #3 in both chambers, with no recorded floor votes or committee transcript debate provided. That suggests the measure was still being shaped and evaluated rather than having reached a final, clearly polarized vote stage.
The main points of contention likely center on the bill’s overall tax policy direction: it raises top marginal income tax rates for high earners while also expanding deductions and creating new credits, and it dedicates a portion of income tax revenue to local school funding. Potentially contentious provisions also include the new child tax credit’s income cap, the redistribution of state revenue to localities, and the continued use of targeted tax preferences and local-option sales taxes. Supporters would likely emphasize school funding, family tax relief, and targeted incentives, while critics may focus on higher taxes on upper-income taxpayers and the complexity of the package.
HB979 would amend Virginia’s individual income tax brackets, increase the standard deduction for non-itemizers, add a new local school funding distribution from income tax revenue, create a new child tax credit, and modify or extend several existing deductions and credits. It also preserves and adjusts the housing opportunity tax credit and local sales/use tax provisions, and it extends the sales tax exemption for food and essential personal hygiene products beginning in 2027. The bill would directly affect the Department of Taxation, local governments, school funding calculations, and a broad range of taxpayers and tax-credit recipients.
The available legislative context shows little direct debate or recorded voting, so sentiment is best characterized as cautious and still under review. The measure was presented as a House substitute and remained in subcommittee, indicating it had not yet moved through a fully resolved committee process. The structure of the bill suggests a mix of priorities—tax relief for some households, higher rates for top earners, and new school-related revenue—implying it may attract both support and criticism depending on which provisions stakeholders emphasize.
Likely points of contention include the new higher income tax brackets for high earners, the diversion of 5.5 percent of income tax revenue to local school funding, and the income cap on the new child tax credit. The bill’s broad package of deductions and credits may also draw scrutiny because it combines tax increases, tax relief, and targeted incentives in one measure. Local governments, taxpayers, and advocates for education funding or tax fairness would likely be the main groups with differing views on the bill’s design and fiscal effects.