No Tax on Tips in Virginia
↻ Updated 2026 tax yearThe federal deduction for qualified tips does not reach your Virginia return. Virginia charges a graduated schedule from 2% to 5.75%, and it still taxes this money in full — about $805 on the $14,000 in the example below. You keep the $1,680 federal saving and nothing more.
Virginia starts its calculation from federal adjusted gross income. These four deductions reduce federal taxable income and never touch AGI, so they are invisible to a Virginia return — the state still taxes the income in full.
Virginia starts its calculation from federal adjusted gross income. These four deductions reduce federal taxable income and never touch AGI, so they are invisible to a Virginia return — the state still taxes the income in full.
Virginia still charges $805 of income tax on this money, and $1,071 of Social Security and Medicare applies on top. The federal deduction is the only part that moves.
Why Virginia still taxes your tips
The four OBBBA deductions are below the line. They reduce federal taxable income — Schedule 1-A totals onto Form 1040 line 13b — and they never reduce federal adjusted gross income. Virginia begins its own calculation from federal agi, which the deduction never touched.
So nothing was decoupled and no vote was held. Virginia simply carried on taxing tips the way it always had, because from the state's point of view nothing about your income changed. This is the position most American workers are in, and it is the part of "no tax on tips" that the name obscures.
Virginia charges a graduated schedule from 2% to 5.75%. On the $14,000 in the example above, the state still takes about $805 — an effective 5.75% on that income, on top of the Social Security and Medicare that no state or federal provision removes.
What $14,000 of tips is actually worth in Virginia
Take a single filer with $32,000 of other wages and $14,000 of tips — the defaults loaded in the calculator above. Federal taxable income falls by the full $14,000, worth $1,680 at this filer's bracket.
Virginia taxable income does not move at all, so the state still collects about $805 on that money. Add $1,071 of Social Security and Medicare, which no OBBBA provision reduces, and the total tax on your $14,000 falls from about $3,556 to about $1,876.
Move the sliders to your own numbers and the arithmetic follows. The two things that will not change are Virginia's treatment — the state taxes this money regardless of what your federal return says and the payroll tax, which applies to the first dollar and the last.
What tips tax relief does not do, in Virginia or anywhere
Your tips are still wages. They stay in boxes 1, 3 and 5 of your W-2 — the box 12 code TP is informational — so Social Security and Medicare are computed on exactly the same amount as before, and your employer's withholding does not change because of this deduction.
Only tips in one of the 81 occupations Treasury has published qualify, and only genuinely voluntary tips: an automatic gratuity on a large party is a service charge, which is a wage rather than a tip and is not deductible. The deduction is capped at $25,000 per return and phases out above $150,000 of MAGI ($300,000 filing jointly).
And all four OBBBA deductions expire after tax year 2028. Whatever Virginia does between now and then, the federal provision has a fixed end date.
Frequently asked questions
Do I pay Virginia state tax on tips?
Yes — in full. The federal deduction does not reach your Virginia return, because Virginia starts from federal agi and these deductions only reduce federal taxable income.
Virginia charges a graduated schedule from 2% to 5.75%. On $14,000 of tips, that is about $805 of state tax that the federal provision leaves entirely alone.
How much will the tips deduction save me in Virginia?
$1,680 on the example above — federal only. Virginia keeps taxing the $14,000, so the state bill of about $805 is unchanged by the deduction.
A deduction is worth your marginal rate, not its face value, which is why $14,000 of income produces $1,680 rather than $14,000 of relief. Enter your own figures above for a number specific to you.
Does Virginia conform to the federal OBBBA deductions?
Virginia starts its calculation from federal adjusted gross income. These four deductions reduce federal taxable income and never touch AGI, so they are invisible to a Virginia return — the state still taxes the income in full.
That determination covers the tips deduction; the senior and car loan interest deductions are tracked separately, though they usually follow the same rule because the mechanism is identical. Our conformity tracker shows all four deductions across all 50 states and DC.
Does the tips deduction reduce my Social Security and Medicare tax in Virginia?
No, and not in any state. Qualified tips remain in boxes 3 and 5 of your W-2, so the 6.2% Social Security and 1.45% Medicare are computed on the same wages as before. On the example above that is $1,071 which no OBBBA provision touches.
Combined with Virginia's income tax, which it does not, that is why the practical relief is smaller than "no tax on tips" implies.
References for Virginia
Virginia starts its income tax calculation from federal agi with static conformity to the Internal Revenue Code. That is what every status on this page is derived from.
- Starting point and IRC conformitysecondaryTax Foundation — State tax implications of the One Big Beautiful Bill ActStarting points and IRC conformity by state
- State guidance on OBBBA / IRC conformityprimaryVirginia Dept. of Taxation — Tax Bulletin 26-1Virginia replaced rolling conformity with a fixed date of 31 December 2025
- State tax agencyprimaryVirginia Department of TaxationWhere to confirm current treatment — not a source for the determination above
- ·IRS — Tipped occupations eligible for the tips deduction — The published list of 81 qualifying occupations
- ·IRS Schedule 1-A (Form 1040) — Additional Deductions — Tips Part II, overtime Part III, car loan interest Part IV, seniors Part V
- ·Tax Foundation — State tax implications of the One Big Beautiful Bill Act — Starting points and IRC conformity by state
- ·Tax Foundation — 2026 State Income Tax Rates and Brackets — State wage-tax estimate; excludes local income taxes
- ·IRS Rev. Proc. 2025-32 — 2026 inflation adjustments — Tax year 2026 brackets & standard deduction
Conformity status last reviewed July 22, 2026. State law can change — check with the Virginia revenue department before filing.
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