Ezel / Tax Rulings / VA
VA P.D. 08-145 Individual Income Tax 2008-07-30

Could an LLC or S corporation claim Virginia's age deduction, and did a senior living only on Social Security need to file?

Short answer: No entity could claim the age deduction because it was limited to individuals. A person age 65 or older whose sole income was Social Security could subtract benefits included in federal adjusted gross income and generally would not need to file.

Apply this to your situation

This page answers the general question as of 2008. Ezel answers yours, under current Virginia tax law, with citations.

Currency note: this ruling is from 2008
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official published Ruling of the Virginia Tax Commissioner (Virginia Department of Taxation), issued as a redacted public document. It is based on the specific facts the taxpayer presented and the law in effect when issued; different facts or later changes in the law can change the result, and another taxpayer should not assume it applies to their situation. Virginia's retail sales and use tax is administered by the Department, but many Virginia local taxes, including the business license (BPOL) tax, business tangible personal property tax, and machinery and tools tax, are administered by local commissioners of the revenue. This summary is informational only and is not legal or tax advice. Consult a licensed Virginia tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Subject

LLCs or S corporations are not eligible for the age deduction

Plain-English summary

Virginia said the age deduction was available only to individuals, not LLCs or S corporations. Choosing an entity form did not let the entity claim the owner's personal age-based deduction.

For a person age 65 or older whose only income was Social Security, benefits included in federal adjusted gross income could be subtracted from Virginia taxable income. On those facts, the person generally would not have Virginia tax or an annual filing requirement.

The ruling also described a historical $11,250 Virginia adjusted-gross-income threshold for 2008-2009 when considering earned income and the age deduction. That amount and the deduction rules are period-specific.

What this means for you

  • Personal age deductions do not transfer to an LLC or S corporation.
  • Social Security treatment depends on whether benefits enter federal adjusted gross income.
  • Business income passed through to an owner can change the individual's filing and tax result.
  • Confirm current thresholds and deduction amounts before using this 2008 guidance.

Common questions

Q: Could an S corporation claim its shareholder's age deduction?
A: No. The ruling limited the deduction to individuals.

Q: Did a senior with only Social Security need to file?
A: Generally no on the facts described, because the benefits included in federal adjusted gross income could be subtracted for Virginia purposes.

Q: Is the $11,250 threshold current?
A: The ruling expressly applied it to taxable years beginning in 2008 and 2009; current law must be checked.

Citations and references

  • Va. Code §§ 58.1-322 C 4, 58.1-321 A 1, and 58.1-322 D 5.

Source

Original ruling text

July 30, 2008

Re: Ruling Request:: Request for Official Tax Status Clarification

Dear *:

This is in response to your letter of June 19, 2008, in which you requested a ruling regarding the tax treatment of persons aged 65 and over whose sole income consists of social security benefits. In addition, you inquired about the use of the $12,000.00 age deduction by those who have chose to incorporate as either a limited liability company ("LLC") or S corporation.

Under Va. Code § 58.1-322 C 4, a taxpayer is allowed a subtraction for social security benefit payments received under Title II of the Social Security Act. Social security benefits may be subtracted from Virginia taxable income provided that it is included in federal adjusted gross income ("FAGI"). Thus, if the social security benefits are the sole income source for a single person aged 65 and over and it is included in FAGI, then the benefits may be subtracted each taxable year for Virginia income tax purposes, and the taxpayer would not be required to file with the Department each year. Since many of the people who rely solely on social security benefits as income do not file tax returns with the Department, there is no reliable data for which the Department can use to determine the total number of Virginia residents that rely solely on social security benefits.

For those individual's age 65 and over who have earned income they must meet certain thresholds in order to avoid income tax from being levied or filing and income tax return. Under Va. Code § 58.1-321 A 1, when an individual's Virginia adjusted gross income ("VAGI") plus the age deduction provided in Va. Code § 58.1-322 D 5 is less than $11,250.00 for taxable years beginning on or after January 1, 2008 and before January 1, 2010, no tax is levied and a return is not required.

Under Va. Code § 58.1-322 D 5 only individuals, and not corporations, are eligible for the age deduction. Therefore, LLCs or S corporations are not eligible for the age deduction.

I trust that this reply answers your ruling request. The Code of Virginia sections cited and other reference documents are available on-line in the Tax Policy Library section of the Department of Taxation's web site located at www.tax.virginia.gov. If you should have any questions regarding this ruling, you may contact * in the Office of Policy and Administration, Policy Development, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

Get today's answer for your situation

You just read a 2008 ruling on this question. Ezel checks current Virginia tax law and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.