Summary

Update the Virginia individual income tax model for tax year 2025. This includes adding 2025 references (with page numbers) to all parameters, updating parameter values where they have changed, adding new 2025 integration tests, and implementing new programs that can be modeled with existing variables.

Primary Source: 2025 Virginia Form 760 Instructions

1. Parameter Reference Updates (All Parameters Need 2025 References)

All parameters below require adding a reference to the 2025 Form 760 Instructions with the appropriate page number, regardless of whether the value changed.

Tax Rates (rates.yaml)

• Current values: 2%/3%/5%/5.75% on $0/$3,000/$5,000/$17,000
• 2025 values: No change
• Action: Add 2025 reference (page ~41)

Standard Deduction (deductions/standard.yaml)

• Current 2025 values: $8,750 (single), $17,500 (joint) - Already implemented
• Action: Add 2025 reference (page ~17)

Personal Exemption (exemptions/personal.yaml)

• Current value: $930
• 2025 value: $930 (no change)
• Action: Add 2025 reference (page ~15)

Aged/Blind Exemption (exemptions/aged_blind.yaml)

• Current value: $800
• 2025 value: $800 (no change)
• Action: Add 2025 reference (page ~15)

Age Deduction Amount (subtractions/age_deduction/amount.yaml)

• Current value: $12,000
• 2025 value: $12,000 (no change)
• Action: Add 2025 reference (page ~16)

Age Deduction Threshold (subtractions/age_deduction/threshold.yaml)

• Current values: $50,000 (single), $75,000 (joint)
• 2025 values: No change
• Action: Add 2025 reference (page ~16)

Age Deduction Birth Year Limit (subtractions/age_deduction/birth_year_limit_for_full_amount.yaml)

• Current value: 1939
• 2025 value: 1939 (no change - born on or before Jan 1, 1939)
• Action: Add 2025 reference (page ~16)

Age Minimum (subtractions/age_deduction/age_minimum.yaml)

• Current value: 65
• 2025 value: 65 (no change - born on or before Jan 1, 1960)
• Action: Add 2025 reference (page ~15-16)

Filing Requirement (filing_requirement.yaml)

• Current values: $11,950 (single), $23,900 (joint)
• 2025 values: Need to verify from instructions (page ~9)
• Action: Add 2025 reference and update values if changed

Disability Income Subtraction (subtractions/disability_income/amount.yaml)

• Current value: $20,000
• 2025 value: $20,000 (no change)
• Action: Add 2025 reference (page ~25)

Federal/State Employee Subtraction (subtractions/federal_state_employees/amount.yaml)

• Current value: $15,000
• 2025 value: $15,000 (no change)
• Action: Add 2025 reference (page ~26)

Military Basic Pay Threshold (subtractions/military_basic_pay/threshold.yaml)

• Current value: $15,000
• 2025 value: $15,000 (no change)
• Action: Add 2025 reference (page ~26)

Military Benefit Subtraction Amount (subtractions/military_benefit/amount.yaml)

• Current 2025 value: $40,000 - Already implemented
• Action: Add 2025 reference (page ~27)

Military Benefit Age Threshold (subtractions/military_benefit/age_threshold.yaml)

• Current value: 55
• 2025 value: 55 (no change)
• Action: Add 2025 reference (page ~27)

National Guard Pay Cap (subtractions/national_guard_pay/cap.yaml)

• Current value: $5,500 (since 2023)
• 2025 value: $5,500 (no change)
• Action: Add 2025 reference (page ~25)

Spouse Tax Adjustment Cap (exemptions/spouse_tax_adjustment/cap.yaml)

• Current value: $259
• 2025 value: Verify from instructions (page ~19)
• Action: Add 2025 reference and update if changed

Itemized Deduction Applicable Amount (deductions/itemized/applicable_amount.yaml)

• Current 2024 values: $323,650 (single), $388,400 (joint)
• 2025 values: Need to calculate using IRS uprating (page ~17 for Schedule A reference)
• Action: Add 2025 values using uprating formula and add reference

2. EITC Parameters (Critical 2025 Updates)

Refundable EITC Match (credits/eitc/match/refundable.yaml)

• Current 2025 value: 20% - Already implemented
• Action: Add 2025 reference (page ~31)

Non-Refundable EITC Match (credits/eitc/match/non_refundable.yaml)

• Current value: 20%
• 2025 value: 20% (no change)
• Action: Add 2025 reference (page ~31)

Low Income Tax Credit Base (credits/eitc/low_income_tax/base.yaml)

• Current value: $300
• 2025 value: $300 (no change)
• Action: Add 2025 reference (page ~31)

3. Rebate Parameter Update

Rebate Amount (rebate/amount.yaml)

• Current values: Ends at 2023 ($200/$400)
• 2024 values: $200 (single), $400 (joint) - one-time rebate for 2024 returns
• 2025 values: $0 (no rebate for 2025 tax year)
• Action:
  • Add 2024-01-01 entry: $200/$400
  • Add 2025-01-01 entry: $0
  • Add reference: https://www.tax.virginia.gov/rebate

4. New Programs to Implement (Can Model with Existing Variables)

High Priority (Commonly Claimed)

Credit for Taxes Paid to Another State

• Type: Non-refundable
• Calculation: Lesser of tax paid to other state or (VA tax x other state income / VA taxable income)
• Variables needed: state_income_tax (exists), state_taxable_income (exists)
• Reference: Form 760, Schedule OSC (page ~30)

Medium Priority (Specific Populations)

Food Donation Tax Credit

• Type: Non-refundable
• Amount: 30% of fair market value of crops donated to nonprofit food bank
• Cap: $5,000 per year
• Eligibility: Farmers who donate crops they grow
• Reference: Code of Virginia 58.1-439.12:12

Firearm Safety Device Credit (Expanded for 2025)

• Type: Non-refundable
• Amount: Credit for purchase of firearm safety devices
• 2025 Change: Now covers purchases from commercial retailers (previously only from federally licensed dealers)
• Reference: Code of Virginia 58.1-339.11

Livable Home Tax Credit

• Type: Non-refundable
• Amount: Up to $5,000 for accessibility improvements
• Eligibility: Homeowners making accessibility modifications
• Reference: Code of Virginia 58.1-339.7

5. New Tests for 2025

Unit Tests to Create/Update

1. Standard Deduction Tests (deductions/va_standard_deduction.yaml)

   • Test single filer with $8,750 deduction
   • Test joint filer with $17,500 deduction

2. EITC Tests (credits/eitc/va_refundable_eitc_if_claimed.yaml)

   • Test 20% refundable match calculation
   • Test with various federal EITC amounts

3. Military Benefit Subtraction Tests (subtractions/va_military_benefit_subtraction.yaml)

   • Test $40,000 maximum for 2025

Integration Tests to Create

Create policyengine_us/tests/policy/baseline/gov/states/va/tax/income/integration_2025.yaml:

- name: Virginia 2025 - Single filer with standard deduction and EITC
  period: 2025
  input:
    people:
      person:
        age: 35
        employment_income: 25_000
        eitc: 1_000  # Federal EITC
    tax_units:
      tax_unit:
        members: [person]
    households:
      household:
        members: [person]
        state_code: VA
  output:
    va_standard_deduction: 8_750
    va_refundable_eitc_if_claimed: 200  # 20% of $1,000

- name: Virginia 2025 - Joint filer with military benefit
  period: 2025
  input:
    people:
      person1:
        age: 56
        military_retirement_pay: 50_000
      person2:
        age: 54
    tax_units:
      tax_unit:
        members: [person1, person2]
        filing_status: JOINT
    households:
      household:
        members: [person1, person2]
        state_code: VA
  output:
    va_standard_deduction: 17_500
    va_military_benefit_subtraction: 40_000

- name: Virginia 2025 - Senior with age deduction (full)
  period: 2025
  input:
    people:
      person:
        age: 90  # Born before 1939
        pension_income: 30_000
    tax_units:
      tax_unit:
        members: [person]
    households:
      household:
        members: [person]
        state_code: VA
  output:
    va_age_deduction: 12_000

6. Documentation Updates

1. Add changelog entry for 2025 updates
2. Update any VA-specific documentation to reflect 2025 values
3. Ensure all parameter references include page numbers from 2025 instructions

Sources

• 2025 Virginia Form 760 Instructions
• New Virginia Tax Laws for July 1, 2025
• Virginia EITC & Credit for Low Income Individuals
• Virginia Tax Credits
• Virginia Subtractions
• Virginia Deductions
• 2025 Virginia Tax Rebate
• House Bill 1600 (2025 Appropriations Act)
• Code of Virginia 58.1-322.03

Checklist

• Add 2025 references (with page numbers) to all 26 parameter files
• Update itemized deduction applicable amounts for 2025
• Add 2024 rebate values ($200/$400) and 2025 values ($0)
• Verify filing requirement thresholds for 2025
• Verify spouse tax adjustment cap for 2025
• Create 2025 integration tests
• Update existing tests to cover 2025 scenarios
• Add changelog entry
• Consider implementing Credit for Taxes Paid to Another State
• Consider implementing Food Donation Tax Credit
• Consider implementing Firearm Safety Device Credit