by Madison Hirneisen
Virginia lawmakers may soon consider removing the existing age restriction on people eligible for a military benefits income tax subtraction under a bill pre-filed ahead of the 2023 session.
House Bill 1436 by Del. John J. McGuire, R-Goochland, proposes removing the age 55 or older restriction, which would allow younger veterans to take advantage of income tax subtractions of up to $40,000 in military benefits in the coming years.
The proposal follows the signing of a pair of bills by Gov. Glenn Youngkin in September, which created a state income tax subtraction of up to $10,000 in military benefits for taxable year 2022, up to $20,000 in 2023, $30,000 in 2024 and $40,000 in 2025 for veterans 55 and older. The bills define military benefits as military retirement income and benefits paid to a surviving spouse of a veteran.
The pair of bills received broad bipartisan support in the General Assembly last session. When the maximum exemption takes effect in 2025, qualified veterans can expect to save between $2,000 and $2,300 annually, as previously reported by WRIC.
In an interview, McGuire told The Center Square HB 1436 aims to make Virginia more “veteran friendly” after lawmakers noticed a trend of veterans leaving for states that either do not tax or partially tax military benefits. Virginia was among just three states that offered no special tax treatment for military retirement payments before the two bills establishing the tax subtraction were signed into law in the fall.
“Up until last year, only three states out of 50 fully taxed veteran retirement pay, and that was Vermont, California and Virginia. Now there’s only two, and I’m glad that Virginia is no longer on that list,” McGuire said.
McGuire’s bill could win support from Youngkin, whose recent proposed budget amendments includes funding to do what HB 1436 proposes – lift the age restriction on individuals allowed an income tax subtraction on military benefits. The proposal is part of $1 billion in tax cuts Youngkin proposed in his amended budget plan.
McGuire, who served as a Navy Seal, said he tried to push for reduced taxes for veterans without an age restriction in the last legislative session, but negotiations between lawmakers resulted in the 55 and up age requirement. He said it’s “very promising” that the funding for his proposed legislation has already been included in Youngkin’s proposed budget amendments.
Jason Pak, deputy secretary of Veterans and Defense Affairs, told The Center Square in a statement McGuire’s proposed bill “will have a tremendous impact on the aspiration to keep and attract military veterans in the Commonwealth.”
“The vast majority of military veterans between the ages of 38-55 (as it currently stands) are fully taxed on their military retirement income,” Pak said. “This initiative will help us capture and keep that demographic in Virginia and bolster the growth of veterans with the most potential for workforce participation.”
As of fiscal year 2020, Virginia was home to more than 707,600 veterans total, according to data from the U.S. Department of Veterans Affairs. Virginia ranks as the state with the second-highest percentage of veterans, with veterans making up 9.7% of the state’s population, according to U.S. News & World Report.
The General Assembly is set to convene the 2023 legislative session Jan. 11.
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Madison Hirneisen is a staff reporter covering Virginia and West Virginia for The Center Square. Madison previously covered California for The Center Square out of Los Angeles, but recently relocated to the DC area. Her reporting has appeared in several community newspapers and The Washington Times.
Photo “John McGuire” by John McGuire.
