Updated October 5, 2026. Quick answer: Yes. Virginia taxes a resident trust, defined by statute as a trust created by or “consisting of property of a person domiciled in the Commonwealth”, while a nonresident trust is reached only on income from Virginia sources.
How Virginia treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Virginia taxes trusts at the individual rates, imposing the tax “on the Virginia taxable income” of every estate and trust. |
| Who counts as a resident trust | The test turns on the domicile of the person who created the trust or whose property it holds, not on where the trustee or the beneficiaries live. A resident trust is a trust created by or “consisting of property of a person domiciled in the Commonwealth” or one created by the will of a Virginia decedent. |
| Rate on trust income | For 2025, the Form 770 instructions print a graduated schedule: 2% up to $3,000, 3% to $5,000, 5% to $17,000, and 5.75% above $17,000. |
| Distribution deduction | A resident trust starts from its federal taxable income, and Virginia modifications are shared between the trust and its beneficiaries “in proportion to their respective shares of distributable net income”. |
| Nonresident trusts | A nonresident trust files only if it “had income or gain derived from Virginia sources” and had to file federal Form 1041. |
| Return to file | A trust required to file federal Form 1041 files Form 770, and the agency states the deadline this way: “Calendar year filers must file Form 770 no later than May 1”. A six-month automatic extension applies to filing but not to payment. |
A $10,000 example
The tax on $10,000 of taxable income a trust keeps depends on the bracket it lands in. Taxed wholly at the lowest printed rate, 2%, the tax is computed as $10,000 x 2% = $200; taxed wholly at the highest, 5.75%, it is computed as $10,000 x 5.75% = $575. The state’s own schedule decides which applies. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The 2026 General Assembly replaced rolling conformity to the Internal Revenue Code with a fixed conformity date of December 31, 2025, as the 2025 Form 770 instructions describe.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Virginia taxes retirement income, whether Virginia taxes pensions, what a living trust costs in Virginia, trust income tax by state, and federal trust tax brackets.
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Answer againSources
- Instructions for Completing Form 770, Virginia Fiduciary Income Tax Returns for 2025 (Virginia Department of Taxation): https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2025-770-instructions.pdf
- Va. Code 58.1-302, Definitions (Code of Virginia): https://law.lis.virginia.gov/vacode/title58.1/chapter3/section58.1-302/
- Va. Code 58.1-360, Imposition of tax (Code of Virginia): https://law.lis.virginia.gov/vacode/title58.1/chapter3/section58.1-360/
- Va. Code 58.1-361, Virginia taxable income of a resident estate or trust (Code of Virginia): https://law.lis.virginia.gov/vacode/title58.1/chapter3/section58.1-361/
- Va. Code 58.1-320, Imposition of tax (Code of Virginia): https://law.lis.virginia.gov/vacode/title58.1/chapter3/section58.1-320/
- Fiduciary Income Tax (Virginia Department of Taxation): https://www.tax.virginia.gov/fiduciary-income-tax
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.