Virginia State Tax Rulings
Free plain-English summaries of state tax letter rulings and advisory opinions issued in Virginia, with full citations and the original source on every page.
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Could a full-time worker subtract Civil Service Retirement System disability payments on a Virginia return?
No. A claimant had to receive disability income and be absent from work because of permanent and total disability. The taxpayer worked full time in competitive retail-food employment, performed ordina…
Could taxpayers deduct Schedule C expenses for an information technology activity that won no contracts, kept no separate books, and included personal purchases?
No. Virginia upheld the assessments because the taxpayers did not operate the information technology activity in a businesslike manner and claimed personal expenses as business deductions. They won no…
Could taxpayers deduct both the expenses of a construction business and the cost of renovating and landscaping their personal home?
Only in part. Virginia found that the wife's construction company was operated for profit, so eligible business expenses could be claimed. But renovation and landscaping costs for the taxpayers' perso…
Did a taxpayer establish a new domicile outside Virginia despite retaining a Virginia home, license, vehicles, and voter registration?
Yes. Although the taxpayer retained several Virginia ties, he lived and worked in the other state with his wife, used that address for federal tax and financial records, claimed it for withholding, jo…
How did Virginia tax a nonresident's S-corporation income and wages after rejecting the auditor's intercompany pricing adjustment?
Virginia overturned the auditor's claim that the related companies' service fees improperly shifted income because the out-of-state S corporation had economic substance and charged comparable fees. Bu…
Was a missionary domiciled in Virginia because she kept a Virginia driver's license, voter registration, bank account, and mailing address?
No. Virginia found that the taxpayer was domiciled in the foreign country during 2006. She had sold her former home and car, moved or stored her property, established a permanent home abroad, and rema…
Did a disabled taxpayer lose Virginia's disability-income subtraction by spending a few hours per week stocking an antique-shop stall?
No. Virginia found that the taxpayer's limited antique-stall activity was not substantial gainful activity. She spent only three to five hours per week obtaining and arranging inventory, worked irregu…
Did a couple who abandoned Virginia domicile still have to file Virginia returns because they owned rental real estate in the Commonwealth?
Yes. Virginia found that the couple abandoned their Virginia domicile in 2004 after moving for employment, selling their home, and establishing homes elsewhere. But because they continued to own Virgi…
Did a U.S. citizen living abroad become a Virginia domiciliary by using his parents' address and holding a Virginia license, voter registration, property interest, and vehicle?
No. Virginia found that the taxpayer remained domiciled abroad in 2005. He had lived there for decades, maintained a permanent home and license there, worked there full time, and visited Virginia for …
Could taxpayers obtain a Virginia refund more than one year after an IRS closing agreement by relying on later notices or equitable recoupment?
No. The taxpayers filed their amended Virginia returns more than one year after the IRS closing agreement became final. A later notice confirming the same changes and later interest notices did not cr…
Could spouses have different Virginia domicile results for the same year after moving together to another state?
Yes. Virginia found that neither spouse was an actual resident because their records supported fewer than 183 Virginia days. The wife had changed her domicile by switching her license and voter regist…
Did a taxpayer establish domicile outside Virginia even though his wife, home, vehicle, doctor, and more of his days remained tied to Virginia?
Yes. Virginia found that the taxpayer became domiciled in the other state in 2005 after his parents died and he returned there. He bought another home, maintained and renewed that state's license, vot…
Did a military spouse abandon Virginia domicile by following her active-duty husband to another state for two years?
No. Virginia found that the spouse had established Virginia domicile in 2000 and did not abandon it during the two-year duty assignment. She kept the Virginia home where her children lived, retained a…
Did a federal employee change domicile when his paid education program moved him from Virginia to college and work assignments in two other states?
Yes. Virginia found that the employee changed domicile to the college state in August 2004. Employer records showed he lived and worked in the two other states, spent little time in Virginia, and file…
How did Virginia resolve a couple's domicile, college-savings, pension, age-deduction, and appeal-interest claims for 2006 and 2007?
Virginia reached a mixed result. The couple were Virginia domiciliaries, their pension subtraction lacked federal-return and other-state tax proof, and the wife's age deductions were unavailable under…
Did foreign and out-of-state work assignments end a taxpayer's Virginia domicile when his family, home, licenses, and registrations stayed in Virginia?
No. Employment and housing abroad and in another state did not prove abandonment of Virginia domicile. The taxpayer's spouse and children stayed in the Virginia home; he retained Virginia vehicles, a …
Did a taxpayer's statement that he lived and worked outside Virginia in 2003 justify removing the state's income-tax assessment?
Not yet. The taxpayer said he lived and worked outside Virginia in 2003, but he retained a Virginia driver's license, voter registration, vehicle registration, and a Virginia address receiving federal…
Did Virginia property, vehicles, a license, and voter registration make a taxpayer living and working abroad a Virginia domiciliary in 2006?
No. The taxpayer took several steps associated with Virginia domicile, including property ownership, registered vehicles, a driver's license, and voter registration. But he remained employed full time…
Did a couple establish domicile outside Virginia despite keeping a historic Virginia home, mail address, and old driver's licenses?
Yes. The couple kept a historic Virginia home, received mail there, visited regularly, and had renewed Virginia licenses in 2003. But the husband began working in the other state in 2002, they bought …
Did years of losses make a professional bass-fishing operation a nonbusiness hobby for Virginia income-tax purposes?
No. The operation had not made a profit since starting in 2002, and both spouses had substantial full-time employment, but the full record showed a profit objective. The husband brought decades of tou…
Did stacks of statements, education records, and mileage logs substantiate a taxpayer's deductions without a reconciliation to the return?
Not yet. Credit-card and bank statements, education printouts, curricula, and mileage logs did not clearly identify which transactions supported each claimed deduction, and the taxpayer supplied no re…
How did Virginia resolve seven years of delinquent returns after comparing the taxpayers' filings with IRS records?
Virginia reached a split result. IRS return information matched the taxpayers' Virginia filings for 1999 through 2003, so those state returns were accepted and the assessments adjusted. Their 2004 and…
Could Virginia residents claim all partnership tax paid through unified returns in five states as one out-of-state credit?
No. Virginia's resident credit was the lesser of the tax actually paid to a state or the Virginia tax attributable to that state's income. When a partnership filed unified returns in five states, the …
Could a separated spouse claim half of a conservation credit when Department transfer forms named only her husband?
No. The prescribed transfer notification and Department records named the husband as the sole transferee, so Virginia properly allowed him the full credit on his separate 2006 return. The Department c…
Did five federally taxable survivor-annuity lump sums qualify for Virginia's death-benefit subtraction?
Yes. Each payment came from an annuity contract between the deceased father and an insurance company, was paid to the beneficiary as a lump sum, and was included in federal taxable income. Those facts…
Could Virginia recover a refund increase caused by itemized deductions overstated on the taxpayers' own return?
Yes. The couple had correctly stated the refund they expected, but they entered an incorrect itemized-deduction amount on the filed return. The Department processed that line and increased the overpay…
Were 1993 amended Virginia returns timely when IRS adjustments for 1984-1989 continued after the Department's claimed final date?
Yes for the 1984-1989 federal changes. IRS notices showed that adjustments continued beyond the 1992 reports, so the October 1993 amended Virginia returns preceded the relevant 1994 or 1996 final dete…
Could a taxpayer overturn a 1991 Virginia assessment in 2009 by arguing income-tax filing was voluntary and IRS data was illegal?
No. The assessment was issued April 8, 1994, but the taxpayer did not appeal until January 2009, long after even Virginia's former three-year administrative-appeal policy for pre-August 2003 assessmen…
Was a refund a Department error when the electronic return claimed an out-of-state credit that did not appear on the taxpayers' printed copy?
No. Department records showed that the electronically transmitted return included an out-of-state tax credit and North Carolina withholding data. The printed software copy showing no credit might not …
Did the 2009 Military Spouses Residency Relief Act exempt a service member's minor child from Virginia tax for 2006?
No. The minor could share her parents' out-of-state domicile yet still be a Virginia actual resident because she lived in the Commonwealth for more than 183 days. Virginia could tax all of a resident'…
Could a Virginia resident claim all joint itemized deductions when her nonresident military spouse's income funded a joint bank account?
No. A resident and nonresident spouse filing separately had to account for deductions separately or allocate inseparable items in proportion to income. Because the expenses came from a joint bank acco…
Did a missionary remain domiciled in Virginia because he kept a Virginia license, voter registration, and mailing address while living abroad?
No. The taxpayer had lived abroad since July 2003, worked there full time, rented a permanent home, lived with his spouse and children, and spent all of 2006 outside Virginia. A Virginia mailing addre…
Did moving to another state and taking a foreign assignment end Virginia domicile when the taxpayer kept his family, home, vehicles, voting, and license there?
No. Renting a room in another state, declaring it as an employer home of record, and working abroad showed some intent to move. But the taxpayer kept the Virginia home where his spouse and children li…
Could shareholders claim a recycling-equipment credit earned by a corporation in 2004 and later carried into its S-corporation years?
No. Virginia's individual recycling-equipment credit expired after 2003, while legislation allowing individuals to receive the corporate credit through pass-through entities applied only for 2008 and …
Did five months living and working in another state make a Virginia domiciliary resident a part-year resident for 2005?
No. The taxpayer said the out-of-state move was temporary, lived with relatives, returned to Virginia after the assignment, and spent 237 days in Virginia during 2005. She did not prove abandonment of…
Did a taxpayer prove she lived outside Virginia in 2004 after ignoring three Department requests for residency evidence?
Not yet. Virginia had third-party tax documents sent to a Virginia address and a Virginia license later renewed in 2007. The taxpayer claimed another-state domicile but did not provide all evidence re…
Did Virginia fixed-date conformity require a 2007 subtraction for foreign dividends included in federal adjusted gross income?
No. The foreign dividends were included in federal adjusted gross income, but Virginia's former foreign-source subtraction had been expressly repealed for tax years beginning in 2003 and later. Fixed-…
Did a military spouse remain a Virginia resident in 2003 after leaving her job and home to establish a household and employment abroad?
No. When her service-member spouse transferred abroad in 2001, she ended Virginia employment, vacated the home, moved her child, established a permanent foreign residence, enrolled the child in school…
Could Virginia waive the refund deadline because an accountant failed to prepare a return and the taxpayer later became severely disabled?
No. The 2003 return was due May 1, 2004, and the refund period expired May 1, 2007—or November 1, 2007 with an extension—before the March 31, 2008 filing. Virginia could not enlarge the statutory peri…
How did Virginia tax severance and dividends when a couple moved out of the state during 2007?
All periodic payments remained Virginia-taxable severance because the agreement expressly called them severance and assigned no consideration to the later noncompetition covenant; an unsupported one-t…
Was a military spouse still a Virginia resident in 2006 and 2007 after moving abroad with her husband and later moving to another state?
No. She ended Virginia employment, sold her Virginia home and vehicle, moved all tangible property abroad, obtained a foreign driver's license and permanent home, spent no days in Virginia during 2006…
Could a Virginia taxpayer exclude qualified dividends from 2005 federal adjusted gross income after the IRS included them?
No. Qualified dividends remained part of federal adjusted gross income even though federal law taxed them at capital-gain rates. Virginia began with the IRS-corrected federal amount and offered neithe…
Could a Virginia resident claim all mortgage deductions from a joint federal return when her spouse was a nonresident?
Yes. When the Virginia resident filed separately from her nonresident military spouse, deductions had to be separately accounted for or otherwise divided by income. Bank statements showed their wages …
Did a Virginia LLC owner remain domiciled in Virginia, and how much of his salary was Virginia-source income?
Virginia found he had abandoned Commonwealth domicile despite owning half of a Virginia LLC, working there at peak times, and retaining a Virginia house and registered vehicles. His out-of-state home,…
How should a semi-retired nonresident allocate salary and management fees for days worked in Virginia?
Both income streams were allocated by where the husband actually performed services. For this semi-retired owner who worked 140 days per year, Virginia accepted documentation supporting 10 Virginia wo…
Could Virginia allocate itemized deductions by income when a resident spouse filed separately from a nonresident service member?
Yes. A resident and nonresident spouse filing separately had to account individually for income, deductions, and exemptions. When the resident spouse could not show which deductions she paid from her …
Did a retiree change his domicile from Virginia by maintaining a home, voter registration, and resident returns in another state?
No. The taxpayer had established Virginia domicile while working at a university and did not prove that he abandoned it after retirement. His other-state home, voter registration, and resident returns…
Could an individual claim a recycling-equipment credit passed through from an S corporation for the 2005 tax year?
No. Virginia's individual recycling-equipment credit had expired after the 2003 tax year, while legislation allowing the corporate credit to pass through to individuals applied only to tax years begin…
Had the taxpayer abandoned Virginia domicile even though he kept a Virginia home, vehicles, and business interests?
Yes. After weighing all circumstances, Virginia found that the taxpayer abandoned Virginia domicile and established domicile in another state before 2005. His other-state home, driver's license, voter…
Could a Virginia resident defeat a 2005 assessment by claiming he had no 'Federal 26 CFR Income' without evidence contradicting IRS records?
No. Virginia starts with federal adjusted gross income and taxes a resident's included income unless a specific Virginia modification applies. The taxpayer did not deny receiving income and supplied n…
Could Virginia uphold estimated individual income tax assessments based on bank deposits when the taxpayer claimed she was not working?
Yes. Auditors subpoenaed corporate and personal bank records and found deposits from unreported sales in the taxpayer's accounts. Her W-2s, role as corporate president, and signatures on corporate ret…
Would Virginia accept delinquent resident income tax returns after federal records verified the reported income for 2001 through 2003?
Yes. Virginia initially issued statutory assessments because the residents' late returns lacked enough supporting documentation. During the appeal, the Department verified that federal returns had bee…
Was income earned after moving out of Virginia taxable when a former employee performed all subcontractor services for the Virginia company from another state?
No. The husband was taxable as a Virginia resident only through his May 2005 move. After becoming domiciled in State A, he contracted with his former Virginia employer but performed every service in S…
Did daily logs and receipts prove that a wife changed domicile in November 2005 and spent too few days in Virginia to be an actual resident in 2006?
Yes. Virginia accepted that the wife moved to State A in November 2005, took full-time employment, and established a home there. A daily log and receipts supported the reported number of Virginia days…
Did a husband change Virginia domicile when his employer transferred him out of state but his wife and children temporarily remained in their Virginia home?
Yes. The husband transferred to State A, rented and then bought a home, obtained its driver's license, registered a vehicle, and registered to vote. His wife and children temporarily remained in Virgi…
Did a retired business owner change domicile outside Virginia despite keeping a Virginia home, business interests, cars, and a later Virginia license renewal?
Yes. The taxpayer retired, moved to State A, obtained its license, registered to vote and register a car there, and developed community ties. He retained a Virginia home, minority business interests, …
Did buying a Virginia townhouse and obtaining a Virginia driver's license establish domicile when the taxpayer kept his spouse, home, vote, car, and license in another state?
No. The taxpayer worked in Virginia, bought a townhouse, and obtained a Virginia license, but kept his primary home and spouse in State A, returned there when possible, and maintained its license, veh…
Did shared credit-card activity prove that an out-of-state domiciliary spent more than 183 days in Virginia?
No. The auditor used credit-card activity to estimate Virginia days, but the taxpayer showed that employees of his Virginia business and a family member also used the account. That evidence refuted th…
Could one spouse be a Virginia actual resident while the other remained a nonresident when they shared a credit-card account?
Yes. The couple conceded that the wife was a Virginia actual resident, but the husband's calendar and other documentation showed fewer than 183 Virginia days. The auditor had attributed the wife's sha…
Did obtaining a Virginia driver's license and using a relative's Virginia mailing address establish domicile for a person living and working abroad?
No. The taxpayer had established Country A domicile for employment in 2000 and took no steps to abandon it in 2004. He used his sister's Virginia address because overseas mail was poor, visited the Un…
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These are official tax letter rulings and advisory opinions issued by Virginia's revenue authority in response to questions from specific taxpayers about how the tax law applies to their facts. A ruling is binding on the department only for the taxpayer who requested it and cannot be relied on by anyone else, but it is strong evidence of how the state reads the law. Every ruling above has a plain-English question and short answer, plus a link to the full original source.