Do Active Duty Army Personnel Have to Pay Virginia State Taxes?
The Internal Revenue Service gives military service members an automatic extension of time to file and pay their taxes in limited circumstances, and military personnel can exclude a portion of their military pay from their federal income tax liabilities. States also provide military service members with special tax incentives. In the commonwealth of Virginia, active duty army personnel are not exempt from Virginia income taxes, but they may be able to deduct a portion of their combatant pay from their state income tax liabilities.
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Overview
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In Virginia, the Department of Taxation is responsible for collecting state income taxes. The department uses special tax rules to establish the tax liabilities for armed service members. For military personnel residing in Virginia, the department requires them to pay income taxes to their home states or states in which they legally reside. Military personnel permanently residing in Virginia are subject to the commonwealth's income tax regulations.
All military personnel who are residents of Virginia must report their military income on Form 760, even if they received compensation outside of Virginia. Military personnel who are not legal residents of Virginia do not have to pay Virginia state taxes on their compensation, unless they received compensation from other sources, including part-time employment with a Virginia employer. Nonresidents are required to report their income using Form 763.
Virginia Deductions for Military Compensation
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Under Virginia law, military service members stationed inside of Virginia or outside of the commonwealth are eligible for a state deduction on their military pay. The allowance provides active military personnel with an opportunity to deduct up to $15,000 of their basic compensation annually, as long as they were on active duty for over 90 days. If an active duty service member's pay exceeds the $15,000 annual limit, the Virginia Department of Taxation reduces his deduction allowance.
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Virginia Combat Pay Deduction
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The Virginia Department of Taxation allows active duty service members to exclude their combat or hazardous duty compensation if they were deployed in a combat zone. Furthermore, Virginia law allows active duty service members to receive automatic extensions of time to file and pay their taxes if they received an exemption from the Internal Revenue Service. Taxpayers who receive an exemption from the federal government are automatically entitled to a Virginia extension of at least 15 more days. Virginia also provides a limited extension to active duty service members serving in noncombat zones.
Special Sales and Property Tax Exemptions
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Under the Virginia sales tax laws, buyers are subject to a 3 percent sales tax when purchasing vehicles from Virginia automobile dealers. However, active duty military personnel are not required to pay sales and use taxes when buying vehicles in Virginia. Furthermore, active duty nonresidents are not required to pay Virginia personal property taxes if they reside in other states.
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