Is Rental Income Taxable in Virginia? What Landlords Need to Know

Evan Willoughby

You might think that collecting rent from your Virginia property is just extra cash in your pocket. But the IRS and the state of Virginia definitely want their share. Rental income is taxable in Virginia, both at the federal and state level. A lot of new landlords are surprised by how closely these earnings are tracked.

Any rent you get—even if it’s a payment from your cousin who’s "helping out" while he gets back on his feet—is considered taxable income. And it doesn’t stop at just the monthly rent check. Things like non-refundable deposits, late fees, and some utility payments can count as income, too. Miss reporting it, and you could face penalties that eat up more than the profits from that rental.

This isn’t meant to scare you off from renting out your place. Once you know what counts as rental income and what you can deduct, you can make smarter choices come tax time. I’ve met people who end up in a mess just because they mixed personal and rental finances, or forgot to keep proper records. Don’t let that be you.

Let’s get real about what rental income looks like under Virginia law, break down exactly what gets taxed, and walk through some straightforward tips that’ll help you keep more of what you earn (and less stress when April rolls around).

• Understanding Rental Income Tax in Virginia
• What Counts as Rental Income?
• Reporting and Deductions for Landlords
• Tips to Keep You Out of Trouble

Understanding Rental Income Tax in Virginia

If you own a property in Virginia and rent it out, the money you make doesn’t just go into your bank account, no questions asked. The state of Virginia treats rental income as taxable, and you’re expected to report that money when you file your state and federal taxes—no way around it.

What does this actually mean on the ground? Plain and simple: If someone pays you rent for a house, apartment, basement suite, or even a spare room, Virginia wants you to count that as income for tax purposes. This counts whether you live in Roanoke or Richmond. Even if you’re just renting out your place on Airbnb a few weekends a year, that’s rental income, too.

You file this income on your federal tax return (usually using IRS Schedule E). On your Virginia state return, it’s reported as part of your total income, so there’s no separate form just for rent. The state income tax rates for 2025 range from 2% up to 5.75%, depending on your total income bracket.

If you’re thinking about skirting these rules, think again. Virginia is aggressive about tracking down unpaid taxes. Sometimes, big online platforms (like Airbnb or Vrbo) even send your earnings straight to the tax authorities. As a landlord, it’s your job to keep things straight, or you could get hit with fines or back taxes.

“Virginia law requires all income—regardless of source—that’s earned by residents to be reported. Rental income definitely counts.”
— Virginia Department of Taxation, 2024

Now, here’s a tip a lot of folks miss: If you share ownership of a rental property (say, with your siblings or spouse), each owner needs to report their share of the income and any deductible expenses. Don’t let this slide or you’ll end up arguing at tax time.

The bottom line? Treat every penny of rental cash as taxable income, set aside some of that money for taxes, and keep your paperwork organized from day one. It’s way better than scrambling in April when you realize you owe a chunk you weren’t ready for.

What Counts as Rental Income?

This isn’t just about that monthly rent check. Rental income in Virginia covers a bunch of different payments connected to your property. If you’re earning it from tenants, there’s a pretty good chance the IRS and the Virginia Department of Taxation expect you to report it.

Here’s exactly what usually counts as rental income:

• Monthly rent: The regular payment you get from tenants. This one’s simple—every rent payment must be reported as income, no matter how it’s paid.
• Advance rent: If a tenant pays first and last month’s rent when they move in, the whole thing counts as income the year you receive it. Even if some of it covers a future year, you still report it now.
• Security deposits kept: If you keep all or part of a deposit because a renter broke the lease or left damage, that money becomes taxable income. But if you return it to the tenant, it’s not income.
• Non-refundable fees: Any charges the tenant pays that they won’t get back—like a cleaning fee or pet fee—are rental income.
• Payment for services: If your renter does work for you (like landscaping) instead of paying rent, you have to include the fair value of that work as income.
• Tenant-paid owner expenses: If your tenant covers an expense that you usually would—let’s say property taxes, utilities, or repair bills—that’s also rental income, even if you never see the cash directly.
• Late fees and penalties: Every extra dollar a renter pays for being late is also taxable.

If you’re getting creative with arrangements—like trading free rent for a service—don’t forget that the IRS wants you to estimate and report that value. And if utilities are included in rent, count the whole payment as income, then claim the utility bill as a possible deduction.

Keeping track of every payment or fee can make your life so much easier. I’ve seen landlords scramble at tax time because they forgot about that "extra" income. Use a simple spreadsheet or rental app, and you’ll be way ahead of the game.

Reporting and Deductions for Landlords

Filing taxes as a landlord in Virginia isn’t just about handing over a number to the government. Where you report your rental income depends on how you own your property. Most folks use the IRS Schedule E (Form 1040) for federal taxes. Virginia follows suit—you’ll add it to your Virginia individual tax return, usually on Schedule ADJ. It’s not optional, even if you only rent one room.

Every dollar you collect—rent, pet fees, late charges, cleaning fees—needs to be tracked and reported. Got a lease where the tenant pays you for the water bill? That counts as rental income too. Keep a log or use a spreadsheet. Audits happen more often than you’d think, and you want your numbers to match your bank statements.

Here’s where you catch a break: a ton of expenses are deductible. These lower your taxable rental income and can really take the sting out of tax season. The trick is knowing exactly what counts, and keeping every receipt.

• Mortgage interest can be deducted, which is a big help if you have a loan.
• Property taxes: what you pay the county or city. Don’t forget them.
• Repairs and maintenance: Fixing the faucet, repainting, or replacing a broken window? Deduct it. But upgrades (like adding a deck) are improvements, not repairs—they get depreciated over years.
• Depreciation: This one trips up a lot of new landlords. You can’t write off the whole cost of the house in one year, but you can claim part of it every year for up to 27.5 years. The land doesn’t count, just the building.
• Insurance: If you pay landlord or hazard insurance, that’s a write-off.
• Utilities: If you pay for your tenant’s heat, water, or trash, write it down.
• Professional fees: Lawyers, accountants, and property managers come with costs—deduct them.

Here’s a quick look at typical deductions I see yearly for Virginia landlords:

*Data from real landlords in Fairfax County, 2024 tax year.

Just keep everything organized from day one. Holly, my spouse, helps me file everything by month, not by type, but both ways are fine so long as you’re consistent. If you ever get that audit letter, you’ll save yourself a headache by having your paperwork ready to go. And yes, if you file online, there are programs made just for landlords with rentals in Virginia, so you don’t have to wing it with general tax software.

Tips to Keep You Out of Trouble

If you want to breeze through tax season, you’ve got to play it smart with your rental income. There are some classic mistakes that trip up landlords in Virginia—mostly because folks don’t realize how closely Virginia and the IRS watch this stuff. Here’s how to stay on top of things and avoid costly headaches.

• Keep every receipt and document everything. Save rent checks, deposit slips, repair bills, and communication with tenants. If you’re audited, you’ll need proof for every income and expense you report.
• Separate business and personal finances. Set up a dedicated bank account just for your house rent agreement earnings and pay expenses for your rental straight from there. This makes tax prep a breeze and keeps your records squeaky clean.
• Track your deductions. You can write off things like mortgage interest, property taxes, repairs (but not upgrades), insurance, and even travel for property management. Just don’t try to fudge it—if it’s personal, it’s not deductible.
• Know the deadlines. Virginia’s income tax returns are due by May 1—earlier than the federal due date. Miss the state deadline, and you’ll rack up late fees and possible penalties.
• File your rental income on the right forms. For individuals, you’ll almost always report it on IRS Schedule E and the Virginia state equivalent. If you own through a business, different paperwork could be required.

Here’s a quick breakdown of common deductible expenses for Virginia landlords, to give you a better idea of what the tax guys are looking for:

One more bit of wisdom: If you have any doubts, talk to a pro. Tax laws, especially for rental income, change fast. My friend got tangled up over an Airbnb rental last year just because he didn’t realize short-term rentals follow the same basic rules as traditional rents.

Sticking to these habits means fewer surprises, less anxiety, and more money in your pocket. Staying organized will serve you well whether you’re renting out the family home or juggling a handful of properties around Virginia.