Work in Virginia, Live in Tennessee: How Your Pay Is Taxed

Reciprocity

Does Virginia exempt Tennessee residents from its income tax?

No. Virginia's wage exemptions for nonresidents cover daily commuters from Kentucky and the District of Columbia and residents of Maryland, Pennsylvania and West Virginia who meet set conditions. The Form 763 instructions add that residents of states other than those listed do not qualify for a filing exception, and Tennessee is not on the list.

A Tennessee resident paid for work done in Virginia is therefore a nonresident with Virginia-source income, which the instructions define as income received from labor performed, business done, or property located in Virginia. You must file once Virginia adjusted gross income (VAGI) reaches the filing threshold. For 2025 you do not have to file if you are single with VAGI under $11,950, or married filing jointly with combined VAGI under $23,900 when both spouses have Virginia-source income.

Falling below the threshold does not mean ignoring Virginia. If Virginia tax was withheld or you made estimated payments, you are entitled to a refund, and the instructions are plain that you must file a return to get it.

Tennessee side

Why is there no Tennessee return or credit to claim?

Tennessee does not tax wages, and its constitution is the reason. Article II, Section 28 says the Legislature shall not levy, authorize or otherwise permit any state or local tax upon payroll or earned personal income. The wording reaches local governments as well as the state, whether you live in Bristol, Kingsport or Johnson City.

Tennessee's only tax on individual income, the Hall income tax, applied to interest from bonds and notes and dividends from stock, never to pay. It was repealed for tax periods that begin on January 1, 2021, or later, and the Department of Revenue asks people not to file a return for those years. Some older forum answers still quote Hall filing thresholds, but that tax no longer exists.

The practical result is simple. Credits for taxes paid to another state exist to offset a second state's tax on the same wages. With no Tennessee tax on your pay, there is nothing to offset, and the Virginia figure on Form 763 is your entire state income tax on those wages. Virginia's Schedule OSC, which is required to claim credit for taxes paid to another state, has nothing to work with either.

One exception matters for some commuters: the professional privilege tax. Tennessee charges $400 a year, due June 1, to people licensed or registered to practice certain professions, including attorneys, securities agents, broker-dealers, investment advisers and lobbyists, and you pay it once even with several licenses. The constitutional bar on earned-income taxes does not affect it, because the same section keeps any tax in effect on January 1, 2011.

Form 763

How does Form 763 turn Virginia wages into a tax bill?

Form 763 figures the tax as if you were a resident, then keeps only the Virginia share:

• Start with VAGI: federal adjusted gross income plus Virginia additions minus Virginia subtractions. With only wages and bank interest, it is usually the same as federal AGI.
• Subtract the standard deduction on Line 11 ($8,750 single, $17,500 married filing jointly for tax years 2025 and 2026) and the exemption amount on Line 12, which is $930 for each exemption claimed. Line 15 is taxable income computed as a resident.
• Fill in the Nonresident Allocation Percentage Table: Virginia-source income divided by total income, to one decimal place. Enter 100% if all of your income is from Virginia sources.
• Line 17 multiplies Line 15 by that percentage. Line 18 is the tax from the Tax Table, or from the Tax Rate Schedule if Line 17 is above the table.

The 2025 Tax Rate Schedule charges 2% on the first $3,000, $60 plus 3% from $3,000 to $5,000, $120 plus 5% from $5,000 to $17,000, and $720 plus 5.75% above $17,000. The standard deduction stays at $8,750 single and $17,500 joint for tax year 2026. A 2026 law raises it to $9,200 and $18,400 for 2027 and $9,300 and $18,600 for 2028 and 2029; the higher amounts are now scheduled to sunset after 2029. The full Tax Table sits on the Virginia Tax website, and if your VAGI is under the filing threshold you skip both the table and the schedule.

Withholding

What should a Virginia employer withhold from a Tennessee resident?

Virginia tax, from the first paycheck. A ruling of the Tax Commissioner explains that an employee who earns wages while performing services in Virginia must have tax withheld regardless of whether the employee is a resident or a nonresident. The full exemption on Form VA-4 does not fit a Tennessee commuter: it covers employees expecting VAGI under $11,950 if single, daily commuters from Kentucky or the District of Columbia, and residents of Maryland, Pennsylvania or West Virginia whose Virginia income is only wages taxed at home.

Form VA-4b does not help either. It lets an employee estimate the credit for income taxes paid to another state and lower Virginia withholding to match, and a Tennessee resident pays no such tax on wages. The same ruling notes you may still adjust the amount withheld through the Personal Exemption Worksheet on Form VA-4.

When withholding runs short for any reason, Virginia expects estimated payments. The instructions say you are generally required to pay estimated tax if your Virginia liability exceeds your Virginia withholding and other credits by more than $150, using Form 760ES or online payment.

Remote days

Do days you work from home in Tennessee count as Virginia income?

Virginia sources wages by where the labor is performed. In the allocation table, Column B holds only the portion of each type of income that comes from Virginia sources, and pay for days you actually work at home in Tennessee is not labor performed in Virginia. A hybrid worker therefore files with an allocation below 100%.

Payroll will only reflect that if you tell them. The 14-26 ruling says employers can use several methods to find the wages subject to withholding for nonresident employees, and the one chosen should give the most accurate reflection of actual Virginia source income. Give payroll a work-location schedule so the Virginia wages on your W-2 track the days you were really in Virginia.

If the W-2 still shows too much Virginia pay, fix it on the return by reporting Virginia-source wages in Column B from your own records, and keep a dated log in case Virginia Tax asks. If you had no Virginia-source income at all and tax was withheld in error, the instructions point to Form 763-S to obtain a refund.

Example: Tennessee resident, $60,000 Virginia salary, single (2025 rules)

Tax year 2025 figures from the Form 763 instructions, one personal exemption, wages only. Tax computed with the Tax Rate Schedule; Form 763 uses the Tax Table below its maximum, so the filed amount can differ slightly through rounding.

Residency traps

Could keeping a Virginia apartment make you a Virginia resident?

Yes, if you stay long enough. Virginia has two kinds of residents. A domiciliary resident is someone whose permanent home is in Virginia. An actual resident is a person who, for an aggregate of more than 183 days of the taxable year, maintained a place of abode in Virginia. A resident is usually taxed on all wages, which would erase the benefit of living in Tennessee.

In Ruling 14-26, employees planned to commute to a Virginia office and rent an apartment nearby while keeping homes, families, licenses and bank accounts in their home states. The Tax Commissioner found they would not become domiciliary residents, and because they would spend no more than 183 days a year in Virginia, they would not be actual residents either. Domicile turns on intent and conduct: the ruling lists factors such as the residence of a spouse, where property sits, and motor vehicle registration and licensing, and says a simple declaration is not sufficient.

One detail matters for anyone with a Virginia bed: the ruling says physical presence in Virginia for any portion of a day generally counts that day for actual residency purposes. If you keep an apartment, count every commute day as a Virginia day.

Moves and couples

What if you moved to Tennessee, or only one spouse works in Virginia?

Moving out of Virginia to become a Tennessee domiciliary makes you a part-year resident, provided you do not move back to Virginia for at least 6 months. Part-year residents generally file Form 760PY for the resident months, which allows a subtraction for income attributable to residence outside Virginia. If you kept earning Virginia-source pay after the move, you file 2 returns: Form 760PY for the resident period and Form 763 for Virginia-source income received as a nonresident.

Couples follow a specific rule. When both spouses are nonresidents and both have income, but only one has income from Virginia sources, a separate return must be filed. Only the spouse with Virginia-source pay files Form 763. A spouse who works from home in Tennessee for a Virginia company has no Virginia-source wages, so the employer's address alone does not create a Virginia filing.

Returns for tax year 2025 must be postmarked by May 1, 2026. Virginia law provides an automatic 6-month filing extension, but at least 90% of the tax must be paid by that date. This is general information, not tax advice.