Virginia Inheritance Tax: What Heirs Need to Know

Virginia's Stance on Inheritance Tax

Virginia does not levy an inheritance tax. Heirs, beneficiaries, and successors in the Commonwealth are not required to pay state tax on assets inherited from a Virginia resident or from someone who owned property in Virginia. This places Virginia among the majority of U.S. states that have repealed or never had an inheritance tax. The absence of a state inheritance tax is a notable feature of Virginia's estate planning landscape, though it does not eliminate all tax obligations at death.

Federal Estate Tax and Virginia Estates

While Virginia does not tax inheritances, the federal estate tax may apply to large estates. The federal estate tax exemption is substantial and adjusted periodically for inflation. For deaths in 2025, the exemption is roughly $13.61 million per individual, though this figure can change with legislative action or inflation adjustments. Estates exceeding that threshold may face a federal tax rate of up to 40% on the amount above the exemption.

Virginia residents should understand that the federal estate tax applies to worldwide assets for U.S. citizens and residents, not just Virginia-situated property. Non-citizen spouses and non-residents with U.S.-situs assets are subject to different rules, and the exemption may be smaller for non-citizens.

Who Pays Inheritance Tax in Virginia?

No one pays a Virginia inheritance tax because the state does not impose one. The question of who bears the tax burden in Virginia therefore shifts to the federal level and to other potential taxes:

• Federal estate tax: Paid by the estate before distribution, not by individual heirs, though the estate's executor is responsible for filing.
• Income tax on inherited assets: Heirs generally do not owe income tax on inherited property, but distributions from inherited retirement accounts may be taxable as ordinary income.
• Capital gains tax: Heirs receive a stepped-up cost basis on inherited assets, which can reduce or eliminate capital gains tax when the asset is later sold.

Exemptions and Special Considerations

Several federal exemptions and planning tools can reduce or eliminate estate tax exposure for large Virginia estates. Marital deductions allow an unlimited transfer of assets to a surviving U.S. citizen spouse without immediate estate tax. Charitable deductions reduce the taxable estate for bequests to qualified organizations. Trusts, including bypass trusts and qualified personal residence trusts, can shelter assets from the taxable estate over time.

Virginia also has no state-level estate tax tied to the federal estate tax, meaning Virginia estates are not subject to a separate state estate tax even if they exceed the federal threshold. This dual exemption — no state inheritance tax and no state estate tax — makes Virginia particularly favorable for estate planning purposes compared to states that impose one or both.

Practical Steps for Virginia Heirs

Heirs in Virginia should focus on practical steps regardless of the state's lack of inheritance tax. Obtaining a certified copy of the death certificate, identifying and valuing all assets, and working with the estate's executor or personal representative are essential. Heirs should also review inherited retirement accounts carefully, as required minimum distributions and income tax implications may apply depending on the heir's relationship to the deceased and the type of account.

For estates that may approach or exceed the federal exemption, early engagement with an estate planning attorney or tax professional is advisable. The interaction of federal exemptions, portability between spouses, and state-specific nuances can materially affect the after-tax value passed to beneficiaries, even in a state like Virginia with no inheritance tax.