Virginia’s 2026 Tax Law Changes – What Every Taxpayer Needs to Know
The 2026 session of the Virginia General Assembly brought significant changes to the Commonwealth’s tax landscape. From new local sales tax options to educator deductions and tobacco licensing shifts, these changes affect individuals, families, and businesses across Virginia. This comprehensive guide breaks down each new law, explains what it means for you, and provides practical guidance for navigating the updated tax environment.
Additional 1% Local Sales Tax Option: “1 for Schools”
One of the most significant changes enacted in 2026 is the expansion of the 1% local sales tax option to all Virginia localities . Previously, only nine cities and counties had the authority to place a local sales tax measure on the ballot. The new law allows any locality to increase its sales tax rate by 1% if approved by voters in a referendum .
What the Tax Funds
The additional revenue must be used exclusively for school construction or renovation projects . Some localities can also use the funds for public transportation purposes . The dedicated funding source cannot be applied to existing debt service for projects started before the tax takes effect . However, it can help pay down new debt quicker, strengthening local governments’ commitment to long-term financial stewardship.
Items Exempt from the Increase
The 1% local option increase does not apply to :
Food purchased for home consumption – groceries will continue to be taxed at the reduced rate of 1% statewide
Essential personal hygiene products – these products are also exempt from the additional local tax
This exemption structure means that approximately 20% of all retail spending remains at the lower rate . The structure is designed to shield essential household purchases from the additional tax burden.
Local Impact: Chesterfield County Example
Chesterfield County voters will decide on the “1 for Schools” tax on November 3, 2026 . If approved, the dedicated funding would support multiple school projects:
New elementary schools to reduce overcrowding and eliminate reliance on classroom trailers
Middle school replacements and completions
High school additions to consolidate campuses
Pre-K expansion to serve up to 150 additional students
Recurring funding for major building systems and infrastructure renewals
The Board of Supervisors has indicated that if voters approve, the county would consider reducing the real estate tax rate by 2 cents and the personal property tax rate by 10 cents, offsetting the impact of the new sales tax while reducing the overall tax burden .
Who Bears the Cost
An important aspect of the sales tax structure is that approximately 30% of the revenue generated would come from visitors and people traveling through participating localities . This means the tax burden is shared with non-residents who utilize local infrastructure and services.
Reinstatement of the Eligible Educator Expense Deduction
Starting with Tax Year 2026 returns, qualified taxpayers can deduct up to $500 in eligible educator expenses . This reinstatement provides meaningful tax relief for Virginia’s teachers, instructors, counselors, principals, and aides.
Who Qualifies
An eligible educator is an individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year . This mirrors the federal definition of an “eligible educator” for purposes of the educator expense deduction.
What Expenses Qualify
Qualified expenses include amounts paid or incurred for :
Books and supplies
Computer equipment, including related software and services
Other equipment
Supplementary materials used in the classroom
For courses in health and physical education, expenses for supplies are qualified only if related to athletics. The expenses must be unreimbursed—if the educator was reimbursed by their school or another source, those expenses are not eligible for the deduction.
Interaction with Federal Law
For federal income tax purposes, eligible educators may deduct up to $250 of unreimbursed qualified expenses ($500 for married couples filing jointly where both are educators) . The Virginia deduction allows up to $500 for each qualified educator, providing additional state-level relief beyond what is available at the federal level. The deduction is available to educators who claim the standard deduction or itemize their deductions—it is an “above-the-line” deduction.
Retail Tobacco Products Licensing
Beginning October 1, 2026, retail tobacco products licensing, including for liquid nicotine and nicotine vape products, will be administered by the Virginia Alcoholic Beverage Control Authority (Virginia ABC) . This represents a significant shift from the previous Department of Taxation oversight.
What This Means for Businesses
Retail tobacco permits will be required on October 1, 2026 . The sale of tobacco products after this date without a permit may result in misdemeanor criminal charges . This applies to all persons permitted to sell any retail tobacco product, including:
Persons holding a Retail Sales and Use Tax Exemption Certificate for Stamped Cigarettes Purchased for Resale
Retail dealers of liquid nicotine and nicotine vapor products
Persons holding any other similar permit issued by the Department of Taxation
Annual Renewal Fees
The annual renewal fee on retail tobacco permits will be in an amount set by the Virginia ABC Board . All retail tobacco permittees remain subject to state merchants’ license taxation, state restaurant license taxation, and other state or local taxation applicable to retail tobacco products .
Enforcement and Compliance
The legislation also requires that the Office of the Attorney General conduct underage buyer operations for licensed dealers at least once every 24 months . This enhances compliance enforcement and helps prevent illegal sales to minors.
Businesses should be aware that these provisions require reenactment by the 2027 Session of the General Assembly to remain effective , so continued attention to legislative developments is essential.
Innocent Spouse Relief
Effective July 1, 2026, Virginia taxpayers may apply for relief from tax liability arising from a joint return filed with a spouse or former spouse .
How the Relief Process Works
If you believe your spouse or former spouse should be held responsible for all or part of a tax due from a joint tax return you filed together, you may apply for relief from the tax liability using Virginia’s Offer in Compromise Doubtful Liability process . The Department of Taxation may grant relief for a spouse who meets the qualifications for relief under § 6015 of the Internal Revenue Code, regardless of whether a claim for federal relief was made .
Key Features
State-Level Relief: You do not need to first claim federal relief to seek Virginia relief . The Department may grant relief based on the federal qualifications standards, even if you have not pursued relief at the federal level.
Joint Return Liability: The relief addresses situations where one spouse believes they should not be held responsible for tax liabilities arising from a joint return .
Effective Date: July 1, 2026
This change provides Virginia taxpayers with a valuable option for addressing unfair tax liability arising from marital situations.
Standard Deduction Update
The standard deduction remains at $8,750 for single filers** and **$17,500 for married couples filing jointly for Tax Year 2026 . The Virginia General Assembly has removed the sunset from these standard deduction amounts, making them permanent .
Future Increases
Beginning with Tax Year 2027, the standard deduction increases . Current law provides for scheduled increases based on legislation enacted in prior sessions.
Historical Context
Under prior law, the standard deduction was scheduled to revert to $3,000 for single individuals and $6,000 for married individuals filing jointly after taxable year 2026 . The removal of this sunset and the permanent codification of the higher standard deduction amounts represents significant tax relief for Virginia taxpayers.
Practical Guidance for Virginia Taxpayers
For Individuals and Families
Educator Deduction: If you are a K-12 educator, keep track of unreimbursed expenses for supplies, materials, and equipment. You may be able to deduct up to $500 on your Virginia return starting with Tax Year 2026 .
Innocent Spouse Relief: If you are facing tax liability from a joint return filed with a spouse or former spouse, explore whether Virginia’s innocent spouse relief provisions can help .
Standard Deduction: For Tax Year 2026, the standard deduction is $8,750 for single filers and $17,500 for married couples filing jointly .
For Businesses
Sales Tax Compliance: The 1% local sales tax option will be determined by local referendums, with the first votes occurring on November 3, 2026 . Businesses should prepare for potential local rate changes and ensure their point-of-sale systems can handle rate adjustments.
Tobacco Licensing: If your business sells retail tobacco products, including liquid nicotine and vape products, you must obtain a permit from Virginia ABC by October 1, 2026 . Failure to do so may result in criminal charges .
For Local Governments
Referendum Planning: Localities considering the 1% sales tax option should prepare for voter education and ballot placement .
Revenue Projections: Local governments should plan for the potential revenue impact of new sales tax collections.
Additional Resources
For more information on these and other Virginia tax law changes, consult the following resources:
At Nova Tax & Accounting Services , we stay current with all Virginia tax law changes to help individuals, businesses, and nonprofit organizations navigate the evolving tax landscape. Our expert tax solutions team can help you understand how these changes affect your specific situation and ensure you take advantage of all available deductions and credits. Schedule your free consultation today to discuss your Virginia tax planning needs.