Short-Term Rental Taxes in Virginia: What Investors Need to Know in 2025
2–5.75% graduated income tax (top rate reached at just $17K of income) | Partial bonus dep: 20% year 1, then 20%/year for years 2–5 | No statewide lodging tax — locality TOT rates 2–8% | Markets: Virginia Beach, Shenandoah Valley, Charlottesville, Chincoteague
Virginia is a diverse STR state with coastal markets on the Atlantic (Virginia Beach, Chincoteague), mountain and wine country retreats (Shenandoah Valley, Charlottesville), and popular historic and college town markets. The state has a graduated income tax and a partial bonus depreciation conformity rule that requires careful planning for STR investors deploying cost segregation.
Virginia State Income Tax on Rental Income
Virginia's graduated income tax tops out at 5.75% — and it reaches that top rate at just $17,000 of taxable income. This means virtually every STR investor with meaningful net rental income in Virginia pays at the 5.75% rate on nearly all of it. Virginia starts with federal AGI and makes Virginia-specific additions and subtractions.
Virginia's Partial Bonus Depreciation Conformity
Virginia's approach to bonus depreciation is a middle-ground between full decoupling (as Georgia does) and full conformity (as Tennessee and Texas do). Virginia allows 20% of the federal bonus depreciation deduction in the year it is taken, then deducts the remaining 80% ratably over the following 5 tax years — 20% per year for years 2 through 5.
In practice, for a $100,000 federal bonus depreciation deduction: Virginia allows $20,000 in year one, then $20,000 in each of years 2 through 5. Unlike Georgia, Virginia investors recover the full deduction — just on a spread schedule. The economic cost is the time value of money on the deferred state deductions.
Federal: $150,000 bonus dep in year 1. Virginia: $30,000 in year 1, then $30,000/year for years 2–5. Total over 5 years = $150,000 (same total, different timing). Additional Virginia tax in year 1 vs. full deduction: ~$6,900 at 5.75% on the $120,000 Virginia addback.
Transient Occupancy Taxes by Virginia Market
| Locality / Market | Transient Occupancy Tax Rate | Notes |
|---|---|---|
| Virginia Beach (City) | 8% | Highest rate in VA; plus state sales tax |
| Charlottesville / Albemarle County | 5–7% | City and county rates differ |
| Loudoun County (wine country / NoVA) | 7% | Growing STR market near DC |
| Fairfax County | 2% | Northern VA suburbs; lower rate |
| Page County (Luray / Shenandoah) | 4–5% | Shenandoah Valley access point |
| Shenandoah County | 4% | Mountain / valley market |
| Accomack County (Chincoteague Island) | 5.5% | Beach / wildlife refuge market |
| Northampton County (Eastern Shore) | 5% | Cape Charles and coastal towns |
Top Virginia STR Markets
Virginia Beach: The largest coastal city in the country by land area. Virginia Beach's STR market is concentrated around the oceanfront resort area and the Sandbridge neighborhood. Average stays of 3–7 nights during peak season support the STR loophole. The 8% transient occupancy tax is Virginia's highest but in line with national coastal market averages.
Shenandoah Valley: Virginia's wine and mountain country, stretching along the Appalachian range. Markets in Luray (home to Luray Caverns, one of the East Coast's top tourist attractions), Harrisonburg, Front Royal, and the vineyard towns attract heavy weekend traffic from the DC metro area. Properties tend to be farmhouses, cabins, and rural retreats with high amenity ratios for cost segregation.
Charlottesville: Home to the University of Virginia and surrounded by Piedmont wine country. Strong STR demand from graduation weekends, football season, wine tourism, and the appeal of the Blue Ridge foothills. A college town with consistent year-round demand and strong average nightly rates.
Chincoteague Island: Virginia's premier beach island market on the Eastern Shore, adjacent to the Assateague National Seashore and famous for the wild Chincoteague ponies. A seasonal market with very strong summer occupancy and shoulder season wildlife tourism.
Cost Segregation in Virginia: Federal Benefits Still Strong
Virginia's partial conformity rule creates a timing difference, not a permanent loss of deductions. The full 100% federal bonus depreciation benefit applies on your federal return unchanged. For a $500,000 Virginia Beach property with $150,000 in cost seg deductions, federal first-year savings of $55,500 (at 37%) are fully available. The Virginia timing cost is approximately $6,900 in additional year-one state taxes — recovered over the following 4 years.
Estimate Your Virginia STR Tax Savings
Virginia's partial bonus dep conformity creates a timing difference, not a permanent loss. See your full federal and state net benefit with a free estimate.
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