Updated October 16, 2026. Quick answer: Virginia gives a beneficiary no retirement income exclusion in the documents read: its subtraction for death benefit payments applies to annuity contracts and, in the Form 760 instructions’ words, is not permitted for payments from a retirement plan.
Virginia at a glance
| Item | What the documents say |
|---|---|
| How the state taxes retirement-account income | Taxed as income, starting from federal adjusted gross income; no general retirement income exclusion, only narrow subtractions such as military benefits and retirement income previously taxed by another state |
| Do the state’s documents address beneficiaries? | Addressed narrowly: the death benefit subtraction is not permitted for payments from a retirement plan |
| Retirement exclusion or credit | A general age deduction of up to $12,000 each for 2025 for taxpayers born on or before January 1, 1961, reduced for higher income, and not tied to retirement income |
| Rate in the documents read | 2% up to $3,000; 3% from $3,001 to $5,000; 5% from $5,001 to $17,000; 5.75% over $17,000 |
| State inheritance or estate tax | No estate tax for decedents dying on or after July 1, 2007 |
| Changed for 2026? | The 2026 General Assembly set a fixed conformity date of December 31, 2025; no retirement change is stated |
What the Virginia documents say
The Form 760 instructions start from “Enter the federal adjusted gross income from your federal return”. They describe an age deduction of up to $12,000 each for 2025 for taxpayers born on or before January 1, 1961, reduced $1 for every $1 of income over $50,000 for single filers or $75,000 for married taxpayers for those born after January 1, 1939. It is a general age deduction, not a retirement income exclusion.
The beneficiary wording is the subtraction for death benefit payments from an annuity contract with an insurance company, paid to a beneficiary in a lump sum, and a military benefits subtraction that includes Survivor Benefit Plan payments to a veteran’s surviving spouse; the instructions say the death benefit subtraction is not permitted for payments from a retirement plan. Va. Code 58.1-322.02 lists the subtraction as “death benefit payments from an annuity contract that are received by” a beneficiary.
The instructions print the rates: 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. The Form 770 instructions say Virginia law does not currently impose an estate tax on decedents dying on or after July 1, 2007.
The federal 10-year rule and your Virginia tax year
IRS Publication 590-B says a beneficiary may be required to take the entire account balance by the “end of the 10th year following the year of the owner’s death”, with exceptions for certain beneficiaries. Because the balance generally has to come out within that window, the timing of each withdrawal decides which tax year it lands in. See the 10-year rule and annual RMDs, lump sum versus spreading withdrawals and inherited IRA rules.
Withholding and other state taxes
Whether a state withholds from a withdrawal is a separate rule: see state withholding on retirement withdrawals. For Virginia’s own death taxes, see Virginia inheritance tax.
What the documents do not say
- The documents read do not mention inherited IRAs by name.
- They do not say whether a beneficiary’s own age qualifies for the age deduction on inherited income.
- They say nothing about a deduction or credit for estate tax or income in respect of a decedent.
Common mistakes
- Assuming Virginia’s rule for your own retirement income also covers an account you inherited: read whether its documents address beneficiaries, and confirm the point with a Virginia preparer.
Related: state tax on inherited IRA withdrawals, state by state, whether Virginia taxes 401(k) and IRA withdrawals, Virginia retirement taxes, Virginia inheritance tax, inherited IRA rules, spouse versus non-spouse beneficiary rules, and state withholding on retirement withdrawals.
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Answer againSources
- 2025 Form 760 Resident Individual Income Tax Instructions: https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2025-760-instructions.pdf
- Instructions for Completing Form 770, Virginia Fiduciary Income Tax Returns for 2025: https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2025-770-instructions.pdf
- Code of Virginia § 58.1-322.02 Virginia taxable income; subtractions: https://law.lis.virginia.gov/vacode/title58.1/chapter3/section58.1-322.02/
- IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs): https://www.irs.gov/pub/irs-pdf/p590b.pdf
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.