Virginia Payroll Tax Guide (2026)
Virginia withholding still runs on the same 2, 3, 5 and 5.75% brackets written into Code section 58.1-320, unemployment tax stays on an 8,000 dollar wage base with base rates from 0.10 to 6.20%, and the minimum wage stepped up to $12.77 an hour on 1 January 2026.[6]
Virginia payroll at a glance
Virginia runs two state payroll taxes: graduated income tax withholding taken from employee pay, and unemployment insurance contributions that employers fund entirely on the first $8,000 of each worker’s wages.[6]
What changed for Virginia payroll in 2026
Six items moved for Virginia employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.
2026 Virginia payroll tax calculator
Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.
Employer pays
Withheld from the employee
State income tax withholding is not included above: it depends on the employee’s Form VA-4, Employee’s Virginia Income Tax Withholding Exemption Certificate, with Form VA-4P for pension and annuity payees and filing status, so it cannot be estimated from gross pay alone.
Payroll tax rates & the nexus question
Virginia runs four state payroll taxes. The table below is the whole state layer for 2026.[6]
The state payroll taxes
| Tax | Paid by | 2026 rate | Wage base |
|---|---|---|---|
| UI | Employer | 0.10%–6.20%; 2.50% new | $8,000 |
| Pool cost charge | Employer | Varies | $8,000 |
| Fund building charge | Employer | 0.20% | $8,000 |
| Income tax withholding | Employee | 2.00%–5.75% | No limit |
Virginia does not use lettered schedules. The base tax rate comes from benefits charged against the account divided by taxable wages over the last four completed fiscal years, run through trust fund factors, and then add-ons are applied across the board: a pool cost charge that spreads benefits which cannot be recovered from an individual account, and a 0.2% fund building charge that applies to all employers when the trust fund balance is 50% or less.[6]
Supplemental wages have their own rate. Bonuses, commissions and other supplemental payments are withheld at 5.75% when paid separately from regular wages. That is a state rate only; federal supplemental withholding is a separate 22% layer.[2]
Who has to register
An employer becomes liable on a quarterly payroll of $1,500 or more, or on employing one worker for 20 weeks in a calendar year. Separate rules apply to agricultural, domestic and 501(c)(3) non-profit employers.[6] Income tax withholding is administered separately by Virginia Department of Taxation, so most employers end up with two state account numbers, not one.
Multistate and remote employees
When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.
- 1. Localisation of service→
- 2. Base of operations→
- 3. Place of direction & control→
- 4. Employee’s residence
One remote employee is usually enough. A single person working from home in Virginia generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.
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Ask a Payroll SpecialistRegistration & return filing
Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.[6]
How to register
- Cross the wage threshold→
- Employer Self Service, with eForms and Web Upload as alternatives; new businesses register through iReg→
- Receive account number→
- File & deposit online
An employer becomes liable on a quarterly payroll of $1,500 or more, or on employing one worker for 20 weeks in a calendar year. Separate rules apply to agricultural, domestic and 501(c)(3) non-profit employers.[6]
Deposit schedule
Frequency follows the withholding liability. Under $100 a month files quarterly, due the last day of the month after the quarter. From 100 to $999 a month files monthly, due the 25th of the following month. At $1,000 a month or more the employer becomes a semi-weekly filer and must pay within three banking days of the close of any federal semi-weekly period in which the liability passes $500.[2]
Returns, reports & due dates
| Form | What it is | Due |
|---|---|---|
| Form FC-20 quarterly tax report and Form FC-21 quarterly payroll report, both filed electronically | Quarterly unemployment return | April 30, July 31, October 31, January 31 |
| Form VA-5 for monthly and quarterly returns, Form VA-15 for semi-weekly payments, Form… | Income tax withholding returns | Frequency follows the withholding liability. Under $100 a month fi |
| Annual reconciliation | Year-end withholding reconciliation | January 31 |
| Form 941 | Federal quarterly return | Last day of the month after quarter end |
| Form 940 | Federal unemployment, annual | January 31 |
| New hire report | Report of newly hired employees | Within 20 days of start date |
Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.[6]
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Subject wages vs. exempt payments
Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.[6]
Subject wages
- Salaries, hourly pay, overtime and piece rates
- Commissions, bonuses and incentive pay
- Most cash tips reported by the employee
- Vacation, holiday and paid sick leave when taken as wages
- Severance and payments in lieu of notice
- The cash value of meals and lodging provided as compensation
- Employer contributions to a non-qualified deferred compensation plan
Not subject
- Reimbursements of genuine business expenses under an accountable plan
- Employer contributions to a qualified retirement plan
- Employer-paid premiums for accident and health insurance
- Most third-party sick pay after the sixth calendar month
- Payments to a genuine independent contractor
- Workers compensation benefits
The wage base is per employer, per year, not per job. If you hire someone in August who already earned $8,000 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.
Glossary of key terms
- Taxable wage base
- The slice of each employee’s annual pay that unemployment tax is calculated on. In Virginia that is $8,000 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
- Experience rating
- The method Virginia Employment Commission uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
- New employer rate
- The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
- Form VA-4, Employee’s Virginia Income Tax Withholding Exemption Certificate, with Form VA-4P for pension and annuity payees
- The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Virginia Department of Taxation.
- Reserve account
- The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
- Successor employer
- A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
- Localisation of service
- The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
- FUTA credit reduction
- A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
- Supplemental wages
- Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Virginia payroll tax, layer by layer
Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.
Layer 1: Federal
| Tax | Rate | 2026 base |
|---|---|---|
| Social Security | 6.2% each side | $184,500 |
| Medicare | 1.45% each side | No limit |
| Additional Medicare | 0.9% employee only | Over $200,000 |
| FUTA, standard | 0.6% net | $7,000 |
| Federal income tax | Per Form W-4 | No limit |
Virginia has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[13]
Layer 2: State
| Tax | Rate | 2026 base |
|---|---|---|
| UI, new employer | 2.50% | $8,000 |
| UI, experienced | 0.10%–6.20% | $8,000 |
| Pool cost charge | Varies | $8,000 |
| Fund building charge | 0.20% | $8,000 |
| Income tax, standard | 2.00%–5.75% | No limit |
| Income tax, supplemental | 5.75% | No limit |
Layer 3, county & city: no payroll tax, but a wage floor
No county or city in Virginia levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.[9]
The state minimum wage is $12.77 an hour, effective 2026-01-01. The tipped cash wage is $2.13. No local ordinance sets a higher floor. Virginia sets one statewide rate and neither the Department of Labor and Industry nor the U.S. Department of Labor lists any local Virginia minimum wage. A tipped employee may be paid a 2.13 dollar cash wage only if tips bring total hourly earnings to at least $12.77. Virginia adjusts the rate every January 1 by the increase in the U.S. Average Consumer Price Index. The Department of Labor and Industry had not published the January 1, 2027 rate as of 20 August 2026.[9]
Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.[14]
Virginia payroll FAQs
If you pay the bonus separately from regular wages and do not allow exemptions, Virginia lets you withhold at a flat 5.75%, which is the top marginal rate. If you pay it together with regular wages, add the two amounts and run the normal tables or formula on the total. Either method is acceptable, so pick one and apply it consistently.
Once your withholding liability reaches $1,000 or more a month. At that point you pay on Form VA-15 within three banking days after the close of any federal semi-weekly period in which your accumulated liability passes $500. You also file Form VA-16 each quarter to reconcile those payments, plus Form VA-6 by 31 January.
A new employer starts at a 2.50% base rate plus whatever add-ons are in force, applied to the first $8,000 of each employee’s wages. You keep that rate until you qualify for an experience rate, which requires wages reported for at least 12 months in the period ending 30 June of the prior year. Experience rated employers run from 0.10 to 6.20%.
You become liable once you have a quarterly payroll of $1,500 or more, or once you employ at least one worker for 20 weeks during a calendar year. Register through iReg to get a VEC account number, then file Form FC-20 and Form FC-21 every quarter by 30 April, 31 July, 31 October and 31 January. Late reports carry a 100 dollar penalty each plus interest.
No. Virginia has a single statewide withholding tax administered by Virginia Tax and no county or city levies a wage or payroll tax. Your state side deductions are Virginia income tax withholding only, on top of federal income tax, Social Security and Medicare.
You may pay a cash wage of $2.13 an hour to a tipped employee, but the combination of that cash wage and tips has to reach $12.77 an hour. If tips fall short in a pay period, you make up the difference. The maximum tip credit is therefore $10.64 an hour.
$8,000 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.
$12.77 an hour. No local ordinance sets a higher rate. The tipped cash wage is $2.13.
April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.
Sources & methodology
- Virginia Department of Taxation – Employer Withholding
- Virginia Department of Taxation – Employer Withholding Instructions
- Virginia Law, Legislative Information System – Code of Virginia 58.1-320, Income Taxes on Individuals
- Virginia Department of Taxation – New Virginia Tax Laws
- Virginia Employment Commission – Employers
- Virginia Employment Commission – Employer Frequently Asked Questions
- Virginia Employment Commission – Tax Filing and Registration
- U.S. Department of Labor, Employment and Training Administration – Significant Provisions of State Unemployment Insurance Laws, January 2026
- Virginia Department of Labor and Industry – Virginia Minimum Wage Rate Increasing Effective January 1, 2026
- Virginia Department of Labor and Industry – Employment Law Updates: New Legislation Protecting Virginia Workers Applies Beginning July 1, 2026
- U.S. Department of Labor, Wage and Hour Division – State Minimum Wage Laws
- U.S. Department of Labor, Wage and Hour Division – Minimum Wages for Tipped Employees
- U.S. Department of Labor, Employment and Training Administration – FUTA Credit Reductions
- U.S. Department of Labor, Wage and Hour Division – Salary Levels for the Executive, Administrative and Professional Exemptions
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