My total income is $15,473.40 and I am a state employee in Virginia. Can I claim the Federal/State employee subtraction and subtract out $15,000 of that income?

[IreneS · Accepted solution]

No.  You can't claim the Federal/State employee subtraction on your Virginia return and subtract out $15,000 of your income because your total income is more than $15,000.

The instructions for VA Form 760 (p. 18) state:

Federal and State Employees - Any individual who qualifies as a federal or state employee earning $15,000 or less in annual salary from all employment can subtract up to $15,000 of the salary from that state or federal job. If both spouses on a joint return qualify, each spouse may claim the subtraction. The subtraction cannot exceed the actual salary received. If you claim this subtraction, you cannot claim a Credit for Low-Income Individuals or Virginia Earned Income Credit.

[Edited | 4/15/2020 | 9:07am PDT]

[rendopc]

The answer from IreneS is correct but not for the reason that she stated. The subtraction would not be allowed because your total wages, NOT TOTAL INCOME exceed $15,000. Virginia has elaborated on this below:

​​​​​​​Federal and State Employees

Federal and state employees whose total salary from all employment during the taxable year is $15,000 or less may subtract up to $15,000 of the salary received from a federal or state government job. Virginia employees working in universities, colleges and community colleges who are eligible for the subtraction include, but are not limited to: Virginia employees of state-supported institutions of higher education in the Commonwealth, and employees of publicly supported comprehensive community colleges. Federal employees who are not eligible for the subtraction include but are not limited to the following: Members of the active or reserve components of Army, Navy, Air Force, or Marines, National Guard of Virginia, any other state, or District of Columbia. Additionally, local government employees and United States Postal Service employees are not eligible for the subtraction. If the total salaries reported exceed $15,000, you may not claim the subtraction. For example, an individual who earned $10,000 in a federal or state government job and $15,000 in a private sector job during the taxable year 2005 would not be eligible for the subtraction. Unearned income, such as pensions and annuities, is not considered in determining eligibility for the subtraction. For example, an individual who received federal or state government wages of $14,000 and pension income of $35,000 during the taxable year would be eligible to claim the subtraction.

Herbert A. Rendo CPA MSAF