The 2026 tax year is a pivotal one for Virginia taxpayers, driven by the Commonwealth’s significant shift in how it aligns with the federal tax code. This change, enacted through House Bill 29, moves Virginia from a system of “rolling conformity” to a “fixed-date conformity” with the Internal Revenue Code (IRC) as it existed on December 31, 2025 . This transition, while adopting many provisions of the federal One Big Beautiful Bill Act (OBBBA), deliberately decouples from several key tax benefits, creating new complexities for individuals and businesses . For the many professionals, entrepreneurs, and high-net-worth individuals in the DC metro and Northern Virginia area, understanding these differences is crucial for effective tax planning and avoiding unwelcome surprises . The Core Change: Fixed-Date Conformity Historically, Virginia automatically adopted most federal tax changes. Under the new fixed-date model, the state is now tied to the IRC as it stood on a specific date, meaning future federal changes will not automatically apply unless the General Assembly takes specific action . The Virginia Department of Taxation has made it clear that taxpayers benefiting from federal provisions from which Virginia has decoupled “must maintain separate Virginia records and calculate depreciation, amortization, carryforwards, and adjustments as if [OBBBA] changes had not been enacted” . This means that for the 2025 tax year (filed in 2026), many taxpayers will need to track and report their federal and state tax positions separately, potentially requiring amended returns . Key OBBBA Provisions Virginia Has Decoupled From Virginia has specifically decoupled from several major business-friendly provisions of the OBBBA. This means that while you may benefit from these provisions on your federal return, you likely cannot claim the same benefits on your Virginia return. The key decouplings include : Research and Experimental (R&E) Expenditures (IRC §174A): The OBBBA allowed for immediate expensing of domestic R&E costs. Virginia has rejected this, requiring that these costs continue to be amortized over five years for state purposes . This creates a significant, permanent timing difference for technology firms, government contractors, and other innovation-driven businesses that are prevalent in the region. Section 179 Expensing: While the federal government significantly increased expensing limits, Virginia has decoupled from the OBBBA’s increased dollar limitations for expensing certain depreciable business assets under IRC Section 179 . Virginia businesses must now calculate their state deduction using the prior, lower federal limits. Bonus Depreciation: The law also clarifies that Virginia will continue its long-standing policy of decoupling from the federal bonus depreciation provisions under IRC Section 168(k) . Business Interest Deduction (IRC §163(j)): A particularly impactful change is the reduction in Virginia’s deduction for disallowed business interest expenses. For tax years beginning on or after January 1, 2025, the state deduction decreases from 50% to just 20% of the interest disallowed on the federal return . This is a critical change for businesses with significant leverage, including many in the real estate and investment sectors. Virginia Has Adopted Other Federal Provisions It is important to note that Virginia has conformed to many other OBBBA provisions. The state has adopted the majority of the law, meaning that Virginia taxpayers will benefit from the increased standard deduction and the federal deductions for tips, overtime, car loan interest, and the enhanced senior deduction for the 2025 tax year . Additionally, the standard deduction for Virginia is currently set at $8,750 for single filers and $17,500 for joint filers . The PTET Is Now Permanent A significant win for pass-through entities (S-Corps, partnerships, and LLCs) is that HB 29 permanently extends Virginia’s elective Pass-Through Entity Tax (PTET) . This tax allows eligible business owners to avoid the federal $10,000 cap on state and local tax (SALT) deductions by paying state income tax at the entity level. The permanent extension provides long-term planning certainty. The law also makes permanent the provision that substantially similar out-of-state PTE taxes are deemed paid by the individual owners for purposes of Virginia’s PTET credit . Legislative Proposals to Watch The 2026 Virginia General Assembly session also saw several other proposals that would have significant impacts if passed, including: Sales Tax Expansion (HB 900 and HB 978): These bills aimed to broaden Virginia’s sales tax base by extending it to many currently exempt personal services and digital products. While professional services (including accounting) would remain exempt, the expansion would affect many service-based businesses and their compliance systems . High-Income Tax Proposals (HB 979, HB 1074): Several bills proposed additional taxes, such as a surtax on higher-income individuals (often targeting income above $1 million) or new taxes on investment income like capital gains and dividends . Market-Based Sourcing: A significant proposal in the budget includes a transition from Virginia’s outdated “Cost of Performance” method to a “Market-Based Sourcing” method for apportioning corporate income. This would bring Virginia in line with most other states and protect in-state businesses from double taxation . Conclusion Virginia’s shift to fixed-date conformity and its deliberate decoupling from key OBBBA provisions create a new, more complex tax environment. For businesses and high-net-worth individuals in the DMV area, this reinforces the need for sophisticated, year-round tax planning that carefully considers both federal and state implications. The permanent extension of the PTET offers some relief for pass-through entities, but the overall landscape requires close attention to legislative changes and proactive financial management.
The Importance of Proactive Tax Planning Tax planning is a year-round process of making strategic decisions to minimize future tax liability. At Nova Tax & Accounting Services , our expert tax solutions include comprehensive tax planning for individuals, businesses, and nonprofits serving Virginia and Washington DC. We help you understand your options, implement strategies, and adjust as circumstances change. Tax Preparation vs. Tax Planning: What’s the Difference? Many taxpayers confuse tax preparation with tax planning. They serve different purposes. Tax Preparation is the annual process of compiling income, deductions, and credits to file a return. It looks backward at the previous year. Tax Planning is a year-round process of making strategic decisions to minimize future tax liability. It looks forward. Key Tax Planning Strategies Income Shifting and Timing – Tax planning often involves accelerating deductions into the current year while deferring income to a future year. This strategy is most effective when you expect to be in a lower tax bracket in the future. Retirement Contributions – Maximizing contributions to tax-advantaged retirement accounts (401(k), IRA, SEP) reduces current taxable income while building long-term savings. Charitable Giving Strategies – For taxpayers who take the standard deduction, bunching multiple years of charitable donations into a single year can push you over the threshold to itemize. Under current law, taxpayers using the standard deduction can deduct up to $1,000 in cash donations ($2,000 for married couples), making charitable giving tax-efficient regardless of filing status. Business Structure Optimization – For business owners, the choice between operating as a sole proprietorship, partnership, S-corporation, or C-corporation has significant tax implications. Tax planning services include analyzing which structure minimizes your overall tax burden. Capital Gains and Losses – Tax-loss harvesting involves selling underperforming investments to offset capital gains. This strategy can reduce or eliminate taxes owed on profitable investment sales. Section 179 Expensing and Depreciation – Businesses can deduct the full cost of qualifying equipment purchases rather than depreciating them over time. Under Virginia law, taxpayers must be aware of state-specific depreciation rules, as Virginia has decoupled from certain federal Section 179 increases. Virginia’s 2026 Fixed-Date Conformity Virginia has shifted to a fixed-date conformity with federal tax law, effective December 31, 2025. This means federal tax changes enacted after that date do not automatically apply to Virginia returns. Key decouplings include: Section 179 Expensing – Virginia has decoupled from federal increases to Section 179 expensing limits. Bonus Depreciation – Virginia remains one of the few states that strictly deconforms from federal bonus depreciation provisions. Research & Experimental (R&E) Expenditures – Virginia requires these costs to be amortized over five years, rejecting federal moves toward immediate expensing. IRS Help and Representation If you receive an IRS notice, do not ignore it. Most notices are routine and can be resolved with a written response or a phone call. However, more complex issues—such as a full-scale audit or a dispute over worker classification—require a strategic approach. When to hire a professional: The notice is an audit notification The amount owed is significant You disagree with the IRS’s position Multiple tax years are involved A CPA authorized to practice before the IRS can act as your representative, communicate directly with the IRS, and protect your rights under the Taxpayer Bill of Rights. Why Choose Nova Tax & Accounting for Tax Planning and IRS Help? At Nova Tax & Accounting Services , our expert tax solutions include comprehensive tax planning, preparation, and IRS representation. We help you navigate Virginia’s complex tax landscape, including fixed-date conformity and local tax requirements. Schedule your free consultation today to discuss your tax planning needs.
Understanding Form 990 Form 990 preparation is an annual requirement for most tax-exempt organizations. Unlike a tax return that calculates taxes owed, Form 990 is an information return that provides the IRS, donors, and the public with detailed information about an organization’s finances, governance, and program activities. At Nova Tax & Accounting Services , our Form 990 service ensures accurate, timely filings that reflect your mission and maintain compliance. Which Form Does Your Organization File? Form 990-N (e-Postcard) – For organizations with gross receipts under $50,000. Filing is online through the IRS website; no paper return is required. Form 990-EZ – For organizations with gross receipts under $200,000 AND total assets under $500,000. Form 990 (long form) – For organizations with gross receipts over $200,000 OR total assets over $500,000. Form 990-PF – For private foundations. All private foundations file this form regardless of revenue level. Key Schedules to Form 990 Schedule A – Public Charity Status and Public Support. This schedule is required for all section 501(c)(3) organizations filing Form 990 or Form 990-EZ. It demonstrates that the organization meets the public support test or qualifies under another public charity category. Schedule B – Schedule of Contributors. Nonprofits must report donors who contributed over certain thresholds. The schedule is filed with the IRS but is not publicly available for most organizations. Schedule D – Supplemental Financial Statements. Required for organizations with endowments, escrow accounts, art collections, or other complex assets. Schedule G – Supplemental Information Regarding Fundraising or Gaming Activities. Required for organizations that conduct fundraising events, professional fundraising campaigns, or gaming activities. Schedule I – Grants and Other Assistance to Organizations, Governments, and Individuals in the United States. Required for organizations that make grants or provide other assistance. Schedule J – Compensation Information. Required for organizations that pay certain officers, directors, trustees, or key employees more than specified thresholds. Schedule L – Transactions with Interested Persons. Required for organizations that engage in transactions with interested persons (officers, directors, key employees, substantial contributors). Filing Deadlines Form 990 is due by the 15th day of the 5th month after the end of the organization’s tax year. For calendar-year organizations, the deadline is May 15. A six-month extension is available by filing Form 8868. Failure to file Form 990 for three consecutive years results in automatic revocation of tax-exempt status. Reinstatement is a lengthy and expensive process. Common Form 990 Preparation Errors Failing to provide complete and accurate information Not attaching required schedules Reporting incorrect compensation information Failing to disclose potential conflicts of interest Miscalculating the public support test on Schedule A Virginia State Filing Requirements In addition to federal Form 990 filing, Virginia nonprofits that solicit donations must register annually with the Virginia Department of Agriculture and Consumer Services (VDACS) . The registration is due by May 15 for calendar-year organizations. New Form 990 Transparency Requirements The IRS has announced plans to revise Form 990 to require clearer reporting on government contracts, grants, and fiscal sponsorship arrangements. Nonprofits should prepare for enhanced scrutiny of how public funds are managed and reported. Why Choose Nova Tax & Accounting for Form 990 Preparation? At Nova Tax & Accounting Services , we specialize in Form 990 preparation for tax-exempt organizations across Virginia and Washington DC. Our team ensures accurate, timely filings that reflect your mission and maintain compliance. We help you navigate complex schedules, document governance policies, and prepare for new transparency requirements. Schedule your free consultation today to discuss your nonprofit’s filing needs.