Virginia ~ Personal Income Tax: Request for Refund Based on Age Deduction Denied

The Virginia Department of Taxation has determined that the age deduction, which allows taxpayers born after January 1, 1939, who have attained the age of 65 to subtract up to $12,000 from their federal adjusted gross income, does not impose a tax on tax-exempt income derived from obligations of the United States. Under the facts presented, the taxpayer, a married citizen of Virginia, cashed United States savings bonds that had reached maturity. After noticing that the income resulting from his savings bonds had not been subtracted from his adjusted federal adjusted gross income (AFAGI) in computing the age deduction, the taxpayer felt that he was entitled to refunds for the tax years during which he had cashed in his savings bonds. Rejecting the taxpayer’s argument that Virginia was taxing tax-exempt income derived from obligations of the United States by failing to remove such income from the calculation of the age deduction, the department noted that a taxpayer does not have a right to any tax deduction. Additionally, according to the department, the Virginia General Assembly clearly excluded Social Security benefits and other benefits subject to taxation under IRC §86 from AFAGI. The department deferred to the statutory computation created by the Legislature and held that the taxpayer was not entitled to his requested refunds.

Ruling of Commissioner, P.D. 5-13, Virginia Department of Taxation, January 10, 2013 , ¶205-760



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