Updated October 5, 2026. Quick answer: Yes. Virginia taxes interest and dividends as part of income on a graduated schedule: “2% up to $3,000; 3% from $3,001 to $5,000; 5% from $5,001” to $17,000, and “5.75% for income over $17,000”. Virginia and U.S. obligation income can be subtracted.
Next door, the District of Columbia’s treatment of dividends and interest: does District of Columbia tax dividends and interest.
How Virginia treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule |
| 2025 rates | 2% up to $3,000, 3% to $5,000, 5% to $17,000, 5.75% over $17,000 |
| Other states’ bonds | Add back “Interest on Obligations of Other States” on Schedule ADJ, Line 1 |
| Virginia bonds | Subtract income from “Virginia state bonds or municipal obligations” |
| U.S. obligations | The Tax Department’s Subtractions page lists “income (dividends and gains) derived from the sale or exchange of obligations” |
A $20,000 example
A filer whose Virginia taxable income is already above $17,000 pays 5.75% on the whole of $20,000 in taxable dividends and interest, computed as $20,000 x 5.75% = $1,150.
What changes in 2026
The latest documents read print no 2026 change to the way dividends and interest are taxed.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Virginia taxes capital gains, whether Virginia taxes pensions, how Virginia taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Resident Individual Income Tax Instructions, Form 760 (Virginia Department of Taxation): https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2025-760-instructions.pdf
- Code of Virginia 58.1-320. Imposition of tax (Virginia General Assembly): https://law.lis.virginia.gov/vacode/title58.1/chapter3/section58.1-320/
- Subtractions from Income (Virginia Department of Taxation): https://www.tax.virginia.gov/subtractions
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.