Do I Have to Pay Virginia State Taxes If I Live in Another State?

An individual’s requirement to pay Virginia state income tax while living in another state is determined by two factors: residency status and whether the income originates from within Virginia.

Determining Your Virginia Residency Status

Virginia law classifies individuals into three categories for tax purposes: resident, part-year resident, and nonresident. A resident is someone who lives in Virginia or maintains a legal (domiciliary) residence in the state. A part-year resident is an individual who moves into or out of Virginia during the tax year to change their permanent residence. A nonresident is anyone who does not meet the definitions of a resident or part-year resident but has income from Virginia sources.

To determine your status, Virginia uses two primary tests. The first is the concept of domicile, which refers to your permanent legal home. This is the place you consider your primary base and where you intend to return after any absence. Factors that help establish domicile include where you are registered to vote, hold a driver’s license, have family and social ties, and conduct your personal and financial affairs.

The second test is statutory residency, which is based on physical presence. An individual who spends more than 183 days in Virginia during the tax year is considered a statutory resident, regardless of where their domicile is. This rule means that even if your permanent home is in another state, extended stays within Virginia can subject your entire income to its state tax.

Identifying Virginia-Source Income for Nonresidents

Once classified as a nonresident, you must identify your Virginia-source income, which is the only portion of your income the state can tax. Income is sourced to the location where the work is performed or where the property generating it is located.

Wages and Salaries

For employees, income is sourced to the location where services are physically performed. If a nonresident travels to a Virginia office to work, the wages earned for those days are taxable by Virginia.

Income from a Business, Trade, or Profession

Income earned from operating a business, trade, or profession within Virginia is considered Virginia-source income. This applies to profits from a sole proprietorship, partnership, or S corporation that conducts its operations in the state. The amount of income attributable to Virginia is determined by an apportionment formula that considers the business’s property, payroll, and sales within the state.

Rental and Royalty Income

Income generated from real property, such as a rental house, located in Virginia is taxable by the state. This rule also extends to income from tangible personal property with a taxable location in Virginia. Royalty income from patents or copyrights is also sourced to Virginia if the intellectual property is used within the state.

Capital Gains

Gains from the sale of real property located in Virginia are subject to Virginia income tax, regardless of where the owner resides. This includes the sale of a second home, a rental property, or undeveloped land. The same principle applies to gains from the sale of tangible personal property that has a connection to the state.

Special Rules for Border State Residents

Virginia has tax reciprocity agreements with Kentucky, Maryland, Pennsylvania, West Virginia, and Washington, D.C. These agreements apply only to income from wages and salaries and allow residents of these jurisdictions to be taxed only by their home state, provided certain conditions are met.

For residents of Kentucky and the District of Columbia, this exemption is available if they commute daily to their job in Virginia. For residents of Maryland, Pennsylvania, and West Virginia, the exemption applies as long as they are present in Virginia for 183 days or less and do not maintain a place of abode in the state. To prevent Virginia income tax from being withheld from your paycheck, you should file Form VA-4 with your Virginia employer.

Reciprocity applies exclusively to wage and salary income. If you have any other type of Virginia-source income, such as from a rental property or a business operating in Virginia, that income remains fully taxable by Virginia and must be reported on a nonresident tax return.

Filing Requirements and Tax Credits

After determining your residency status and identifying your taxable Virginia income, you must follow the correct filing procedures. Nonresidents are required to file Form 763, Nonresident Income Tax Return, while part-year residents must file Form 760PY, Part-Year Resident Income Tax Return. You will need any W-2 forms that show Virginia income and tax withheld, along with records of other Virginia-source income, such as statements from a rental property or a Schedule K-1 from a business.

In situations where tax reciprocity does not apply, you may be eligible for a credit for taxes paid to another state to prevent double taxation. For instance, if you are a resident of a state without a reciprocity agreement and have Virginia rental income, both your home state and Virginia may tax that income. Virginia allows you to claim a nonrefundable credit on your nonresident return using Schedule OSC, which directly reduces the amount of tax you owe to Virginia.