Effective January 1, 2005, the withholding formula used to determine employee state income tax is changing to account for increases in the personal exemption and the standard deduction amounts. The personal exemption amount of $800 increases to $900, except for the additional personal exemptions allowed for taxpayers age 65 and over and for the blind, which remain at $800. The standard deduction amount of $2,500 previously used to compute withholding increases to to$3,000. These changes will result in an increase in employee take-home pay.

In addition, the filing thresholds will increase for the 2005 taxable year. These increases will affect whether an employee may elect not to have Virginia income tax withheld from his or her wages. The filing threshold increases are as follows:

• the filing threshold for single taxpayers increases from $5,000 to $7,000
  
  
• the filing threshold for married taxpayers filing jointly increases from $8,000 to $14,000
  
  
• the filing threshold for married taxpayers filing separately increases from $4,000 to $7,000.

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...back to 27 January 2005

Further information:
www.tax.virginia.gov/site.cfm?alias=ImportantNewsUpdates#employer