Does Virginia tax tips and overtime?

Virginia conformed to OBBBA but drew the line exactly where these deductions fall outside. Under the 2026 Amendments to the 2025 Appropriation Act (HB 29, Chapter 7 of the 2026 Acts of Assembly), Virginia replaced rolling conformity with a fixed date of December 31, 2025. Tax Bulletin 26-1 states Virginia conforms to P.L. 119-21 'to the extent that they affect the computation of: Federal adjusted gross income or federal itemized deductions for individuals.' The IRC Sec. 224 tip deduction is neither — it is a below-the-line deduction allowed to non-itemizers, reported on 2025 Form 1040 line 13b via Schedule 1-A, not as an itemized deduction and not in AGI. Virginia Tax's own Subtractions page confirms 'Federal adjusted gross income (FAGI) is the starting point for computing [Virginia taxable income],' and lists no tips subtraction. The VSCPA's analysis says it plainly: HR 1 includes provisions 'that do not flow through automatically, such as excluding tips, overtime, car loan interest, and charitable deductions for non-itemizers.'

Same limiting language in Tax Bulletin 26-1: conformity extends only to provisions affecting federal AGI or federal itemized deductions for individuals. IRC Sec. 225 affects neither. The Bulletin's individual-taxpayer discussion addresses only the Pease limitation and the SALT cap, and its deconformity lists are otherwise business provisions (Sec. 174A expensing, qualified production property, Sec. 179 limits, Sec. 163(j) subtraction cut to 20%) — no tips/overtime item appears because those deductions never entered the Virginia base. VSCPA estimated adopting them would cost Virginia over $340 million annually, and no such subtraction was enacted.