State tax guide
401(k) Rollover in Virginia
Virginia taxes 401(k) distributions as ordinary income at up to 5.75%. A correctly executed direct rollover avoids all state tax. A failed rollover adds Virginia income tax on top of the federal bill.
What Virginia residents need to know
- Virginia taxes income at graduated rates topping out at 5.75% on income over $17,000 (rates unchanged for 2026 — several 2026 bills to add higher brackets did not pass).
- Virginia taxes 401(k) and IRA distributions as ordinary income, with no general exclusion — but offers an Age Deduction of up to $12,000 for taxpayers 65 and older.
- For those born after January 1, 1939, the $12,000 age deduction phases out $1 for every $1 of income over $50,000 (single) / $75,000 (married, combined) — so it disappears entirely by $62,000 / $87,000 of adjusted income. Those born on or before January 1, 1939 keep the full $12,000 with no income test.
- A failed 60-day rollover adds the distribution to Virginia taxable income; a successful direct rollover has no Virginia tax consequence.
- Social Security and Tier 1 Railroad Retirement are fully subtracted in Virginia.
Watch out for
- A Roth conversion or large distribution raises the income used to phase out the age deduction — for a born-after-1939 taxpayer, conversion income can erode or eliminate the $12,000 deduction dollar-for-dollar above $50,000/$75,000.
- You cannot claim the age deduction and the disability income subtraction on the same return — choose the one that helps more.
The right move for Virginia residents
The most important step is the same in every state: do a direct rollover — custodian-to-custodian, no check issued to you. This eliminates the 20% mandatory federal withholding, the 60-day deadline risk, and all state tax exposure in one step.
The nesthelm plan generates custodian-specific transfer instructions for your exact situation — your custodian, your balance, your destination, and your state. Free preview, $49 full plan.
Free tools for Virginia residents
Custodian guides
State rules are half the picture — the transfer itself runs through your custodian's process.
This guide provides educational information about Virginia state tax rules as applied to 401(k) rollovers. State tax law changes frequently. Verify with a Virginia-licensed CPA before acting on this information.