I don't know VA law. hopefully, someone else will respond. if not call the Virginia Department of Taxation. have them cite their code section
for federal
since the repayment was more than $3000 you have the following options for 2022
1) take as a deduction on Schedule A line 16 denote as IRC 1341 repayment OR
2) recompute your taxes for 2021, the year you received the payment, by excluding the payment.
the decrease in taxes is taken as a credit in 2022 on schedule 3 line 12d denote as IRC 1341
