General Assembly Raised Bill No. 1429 proposes a personal income tax deduction for military personnel who receive compensation for serving in funeral honor guard details. The bill modifies existing tax law by repealing subparagraph (B) of subdivision (20) of subsection (a) of section 12-701 and replacing it with new provisions that explicitly recognize military funeral honor guard detail compensation as a deductible income. This change aims to provide financial relief to military members by ensuring that their service-related compensation is not subject to state income tax. The bill is set to take effect on July 1, 2025, and will apply to taxable years beginning on or after January 1, 2025.

In addition to the military compensation deduction, the bill introduces various amendments to the tax code, including provisions for the treatment of income from the discharge of indebtedness, contributions to manufacturing reinvestment accounts, and a phased approach to the taxation of income from the state teachers' retirement system. It also outlines a detailed schedule for the taxation of pension and annuity income based on federal adjusted gross income, with exemptions for lower-income earners. Furthermore, the bill allows for a gradual increase in the subtraction of distributions from traditional IRAs and includes provisions for taxpayers licensed under marijuana-related chapters to claim certain expenses. Overall, the bill aims to provide tax relief to lower and middle-income taxpayers while addressing specific financial circumstances.

Statutes affected:
Raised Bill: 12-701
VA Joint Favorable Change of Reference: 12-701