Virginia Assembly OKs $188B Budget with Tax Cuts, School Boost

RICHMOND — The Virginia General Assembly passed a $188 billion biennial budget for fiscal years 2026-2028 on Friday, incorporating targeted tax cuts for middle-income families and increased funding for K-12 schools after weeks of negotiations. The compromise amendments to Senate Bill 30 extend the higher standard deduction — from $8,750 to $9,200 for single filers and $17,500 to $18,400 for joint filers — through January 1, 2030, costing the state $51 million in FY 2027 and $108.4 million in FY 2028. It also makes permanent the expanded earned income tax credit, benefiting lower-income workers whose refunds would otherwise sunset in 2027.

Gov. Glenn Youngkin, who proposed the framework on Dec. 17, 2025, hailed the plan for retaining Virginia's economic momentum without new taxes. New deductions align state policy with federal changes from last summer's tax bill, allowing 25% relief on tips, overtime pay and car loan interest in 2026, rising to 50% thereafter. A $100 rebate for single filers and $200 for joint filers heads out this year, returning nearly $500 million, while Senate moves end the data center sales tax exemption Jan. 1, 2027, generating $317.1 million in FY 2027 and $778.2 million in FY 2028 for transportation and schools — including $161.4 million to ease local K-12 costs.

Education sees direct wins: $17.6 million boosts school breakfast reimbursements by $0.22 per meal, and overall K-12 funding rises with sales tax revenue shifts. State employees and teachers get a 2% bonus via $124.7 million in general funds for FY 2026, plus $231.1 million total for bonuses amid Medicaid pressures. The structurally balanced budget, per the National Association of State Budget Officers, prioritizes job growth, capital projects and a prudent revenue forecast.