Virginia does not have an inheritance tax, and it does not have a state estate tax either. If you inherit money or property from someone who lived in Virginia, you owe the Commonwealth nothing on the transfer itself, no matter how large your share. That said, a few other taxes can still reach an inheritance: a small probate tax paid by the estate, federal estate tax on very large estates, income tax on inherited retirement accounts, and inheritance taxes charged by other states where the deceased owned property.
Why Virginia Collects No Death Tax
Virginia has never imposed an inheritance tax, the kind of levy some states charge each beneficiary based on what they personally receive. It once collected an estate tax, but that tax was tied to a federal credit that Congress eliminated. For deaths occurring on or after July 1, 2007, the Virginia Department of Taxation confirms no state estate tax is owed.1Virginia Tax. Estate and Inheritance Taxes The statute remains on the books, but because it calculates the tax as a match to a federal credit that no longer exists, the result is always zero.2Virginia Code Commission. Virginia Code 58.1-902 – Tax on Transfer of Taxable Estate of Resident
So within Virginia, heirs pay nothing to the state based on the value of what they inherit. The taxes described below are either paid by the estate, triggered by federal law, triggered by how you handle a specific type of asset, or imposed by another state.
The Probate Tax the Estate Pays
Virginia charges a probate tax when a will is admitted or an administrator is appointed. The rate is 10 cents for every $100 of estate value, and estates valued at $15,000 or less are exempt entirely.3Virginia Department of Taxation. Probate Tax On a $500,000 estate, the state probate tax works out to $500.
Localities may add their own probate tax of up to one-third of the state amount.3Virginia Department of Taxation. Probate Tax With the full local surcharge, that same $500,000 estate would owe roughly $667 combined. The estate pays this out of its assets before distributions, not the beneficiaries individually. The clerk of the circuit court handling probate can confirm the local rate.
Federal Estate Tax on Large Estates
The federal estate tax still applies, but only to estates above a very high threshold. For deaths in 2026, the basic exclusion amount is $15,000,000 per person, reflecting changes made by the One, Big, Beautiful Bill Act signed in July 2025.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 An estate with a gross value below that figure, after accounting for lifetime taxable gifts, owes no federal estate tax and generally does not need to file Form 706.5Internal Revenue Service. Instructions for Form 706
Gross estate counts everything the deceased owned or held an interest in: real estate, bank accounts, investments, business interests, and life insurance proceeds. Rates on the amount above the exclusion start at 18 percent and reach 40 percent on amounts more than $1,000,000 above the exemption.6Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax
Portability for Surviving Spouses
A surviving spouse can claim the deceased spouse’s unused exclusion, a feature the IRS calls portability. If one spouse dies in 2026 with a $5,000,000 estate, the $10,000,000 of unused exclusion can carry over, giving the survivor up to $25,000,000 in combined exclusion against their own future estate.5Internal Revenue Service. Instructions for Form 706 Portability is not automatic. The executor has to file Form 706 and make the election, even when the estate is far too small to owe any tax. Skip that filing and the unused exclusion is lost for good.
Income Tax on Inherited Retirement Accounts
This is the tax that most often catches heirs off guard. Traditional IRAs and 401(k) plans were funded with pre-tax dollars, so the IRS gets its cut when the money comes out. Every withdrawal from an inherited traditional account counts as ordinary income to you at your current tax rate.7Internal Revenue Service. Retirement Topics – Beneficiary Inherited Roth accounts are generally tax-free when withdrawn, since the original owner already paid tax on the contributions.
How quickly you have to drain the account depends on your relationship to the deceased. A surviving spouse has the most options, including rolling the inherited account into their own IRA. Most other beneficiaries, including adult children, must empty the account by the end of the tenth year after the year of the owner’s death.7Internal Revenue Service. Retirement Topics – Beneficiary If the original owner had already begun required minimum distributions before dying, the beneficiary generally must keep taking annual withdrawals during that ten-year window rather than waiting until the end.8Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions
The tax hit can be real. A $500,000 inherited IRA pulled out evenly over ten years adds $50,000 to your taxable income each year, which can push you into a higher bracket depending on your other earnings. Spacing withdrawals across the full ten years usually produces less total tax than taking a lump sum.
Capital Gains and the Step-Up in Basis
When you inherit property other than a tax-deferred retirement account, you get a valuable benefit called a step-up in basis. Your tax basis in the inherited asset, the starting value for calculating gains when you eventually sell, becomes the fair market value on the date of death rather than what the original owner paid.9Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent If a parent bought a house for $150,000 and it was worth $450,000 when they died, your basis is $450,000. Selling shortly afterward at that price produces little or no taxable gain.
Hold the asset longer and you owe capital gains tax only on appreciation above the stepped-up value. For 2026, long-term capital gains rates (on assets held more than a year) are 0 percent, 15 percent, or 20 percent depending on your total taxable income. Single filers with taxable income up to $49,450 pay 0 percent; the 20 percent rate kicks in above $545,500. Married couples filing jointly reach 20 percent above $613,700.10Internal Revenue Service. Rev. Proc. 2025-32
The step-up covers most inherited assets: stocks, bonds, real estate. It does not cover traditional IRAs and 401(k)s. The executor can also elect an alternate valuation date six months after death if the estate’s total value has dropped, which can further lower gains for heirs who sell.11Internal Revenue Service. Gifts and Inheritances
Income Earned While the Estate Is Being Settled
Between the date of death and the final distribution, estate assets often keep generating money. Interest on bank accounts, dividends from stocks, and rent from real property all count as taxable income. If the estate distributes that income to you during the year, the executor sends you a Schedule K-1 showing your share, and you report it on your personal return. The underlying inheritance is not taxable to you, but the income it threw off during administration is.
Inheritance Taxes in Other States
Virginia’s silence on inheritance tax does not shield you from another state’s tax. If you inherit real estate or tangible personal property located in a state that imposes an inheritance tax, that state can tax the transfer based on where the property sits. About six states currently charge inheritance taxes, with rates and exemptions that vary.
Two of Virginia’s neighbors illustrate the point:
- Pennsylvania charges 0 percent on transfers to a surviving spouse, 4.5 percent to direct descendants, 12 percent to siblings, and 15 percent to other heirs.12Department of Revenue, Commonwealth of Pennsylvania. Inheritance Tax
- Maryland imposes a 10 percent inheritance tax on transfers to beneficiaries who are not close family members. Spouses, children, grandchildren, parents, grandparents, and siblings are exempt.
The tax follows the property, not the beneficiary. A Virginia resident who inherits a cabin in Pennsylvania from an uncle would owe Pennsylvania’s 15 percent inheritance tax on that cabin’s value. Intangible assets like bank accounts and investment portfolios are generally taxed based on where the deceased lived, so if the deceased was a Virginia resident, those assets usually escape another state’s inheritance tax regardless of where you live.
You may need to file an inheritance tax return in the other state before title to real property can be transferred into your name. Checking the inheritance tax rules in any state where the deceased owned real estate is worth doing early, before probate paperwork starts moving.