No. Virginia does not conform to federal §168(k) bonus depreciation. STR investors take the full federal Year-1 deduction but must add back the entire amount on the state return, recovering the state depreciation over the property's normal life (5, 15, or 27.5 years).
Statute citation and primary source
Governing statute: Va. Code §58.1-301 (fixed-date IRC conformity with §168(k) explicit exclusion); §58.1-322.03 (individual addition)
Primary source (Virginia DOR): https://www.tax.virginia.gov/laws-rules-decisions/tax-bulletins/16-1
Add-back mechanics for STR investors
Virginia uses fixed-date IRC conformity but has explicitly disallowed §168(k) since 2003 (and separately §168(l), §168(m), §1400L, §1400N). Depreciation is recomputed for VA purposes and the difference reported as addition/subtraction. On a $150,000 federal bonus deduction, a Virginia STR investor at the 5.75% top rate loses ~$8,625 in Year-1 state savings. Note: Virginia DOES allow §168(n) for qualified disaster property.
Worked example: $750K short-term rental
Assume a $750,000 STR with a 22% bonus-eligible % — a typical median for the DepreciMax 50-market Study — producing a $165,000 federal §168(k) Year-1 deduction.
- Federal tax savings at 37% bracket: $165,000 × 37% = $61,050
- Virginia Year-1 state savings: $0 (100% add-back required)
- Deferred state benefit: The $165,000 is recovered on the Virginia return over the property's normal life (5, 15, or 27.5 years depending on the classification), not in Year 1
- Year-1 timing "cost" vs. full conformity: ~$9,488 in state tax savings deferred (5.75% × $165,000)
The federal benefit is intact — but Virginia's decoupling means the state timing benefit is spread over decades instead of concentrated in Year 1. Whether that changes the deal economics depends on the investor's cost of capital and hold period.
What this means for your STR purchase decision
If you're comparing candidate short-term rentals in Virginia or considering an out-of-state purchase, the state's conformity status materially affects your Year-1 economics. Virginia's decoupling means the state timing benefit is deferred over decades — factor this into your cost-of-capital analysis, especially for shorter hold periods.
DepreciMax's state conformity tool lets you plug in a federal §168(k) deduction and see the full state impact for any of the 50 states plus DC — and our property search ranks active STR listings by their estimated Year-1 bonus depreciation potential.
Screen your Virginia STR candidates before you make an offer
DepreciMax analyzes any listing address and returns a first-year bonus depreciation estimate — factoring in Virginia's conformity status and top marginal rate.
Search a Market — Free →How this page is maintained
Every field on this page — conformity status, add-back percentage, top marginal rate, statute citation, primary-source URL — is pulled from the DepreciMax state conformity dataset (CC BY 4.0 licensed), which is verified against Virginia's Department of Revenue on a quarterly cadence. The verified-as-of date above reflects the last time this specific state was cross-checked against a primary source. If you spot an inaccuracy, email [email protected] and we'll re-verify within 48 hours.
Not tax advice. This page is educational research. Consult a qualified CPA before making tax-driven purchase decisions. Rates and rules change; verify against the primary source linked above before filing.