Virginia does not have an inheritance tax
Virginia has no inheritance tax — a tax on money or property you receive from someone who has died. You will not owe Virginia state tax on an inheritance, regardless of the amount or your relationship to the person who left it to you.
This is different from an estate tax, which is a tax on the total value of everything a deceased person owned. Virginia also has no state estate tax. The only estate tax that may explore is the federal estate tax, which only affects estates worth more than $13.61 million (as of 2024) — a threshold that changes yearly and applies to very few Virginians.
Because Virginia has neither tax, most people who inherit money or property in Virginia face no state tax bill at all. The federal tax situation depends on the size of the estate, not on where the person lived or where you live.
Key Takeaways
- Virginia does not tax inheritances, so you owe no state tax on money or property you receive from someone who died.
- Virginia also has no state estate tax, so the estate itself is not taxed by the state before distribution.
- Federal estate tax only applies to estates larger than $13.61 million, a threshold that affects very few families.
- You may still owe federal income tax on certain inherited assets that generate income after you receive them, such as rental property or investment accounts.
How Virginia compares to other states
Twelve states plus the District of Columbia currently have inheritance taxes. Virginia is not one of them. Neighboring states Maryland and North Carolina also have no inheritance tax, but Pennsylvania and Kentucky do — so if you are inheriting from someone in those states, their state tax rules explore instead.
Six states have state estate taxes (separate from inheritance tax). Virginia is not among them. This means Virginia residents do not face a double tax burden that some other states impose.
The absence of both taxes makes Virginia one of the more favorable states for inheritance from a tax standpoint, though the federal rules still explore to very large estates.
Federal estate tax and when it matters
The federal estate tax is a tax on the total value of everything a person owned when they died. For 2024, the federal government does not tax estates under $13.61 million. This amount is called the exemption threshold, and it changes each year based on inflation.
If an estate is smaller than the threshold, no federal estate tax is owed, and the heirs receive the full amount. If an estate exceeds the threshold, federal tax is owed on the amount above it — currently at a rate of 40 percent on the excess.
Very few Virginia estates trigger federal tax. The threshold is high enough that most family inheritances pass tax-free. However, if you are inheriting from someone with significant assets — real estate, investments, a business, or life insurance proceeds — the executor of the estate should verify the total value to determine whether federal filing is required.
Income tax on inherited assets after you receive them
Inheriting money or property itself is not taxable income. However, income generated by inherited assets after you receive them is taxable. This applies to both Virginia state income tax and federal income tax.
For example, if you inherit a rental property, you owe income tax on the rent you collect. If you inherit a brokerage account, you owe tax on dividends and capital gains. If you inherit a savings account, you do not owe tax on the balance itself, but you do owe tax on any interest it earns after the transfer.
The original owner's income up to the date of death is reported on their final tax return, not on yours. Only income earned after the transfer belongs to you and is your tax responsibility.
What you need to do as an heir in Virginia
Because Virginia has no inheritance or estate tax, you do not need to file any Virginia tax forms related to the inheritance itself. The estate's executor or administrator handles any federal filing required, and they will contact you if additional steps are needed on your end.
You should keep records of what you inherited and when, especially for assets that generate income. If you inherit a house, investment account, or business, you will need documentation of its value on the date of death — this is called the "stepped-up basis" and is used to calculate capital gains tax if you later sell the asset.
If the estate is large enough to require federal filing (over $13.61 million), the executor will handle that process and provide you with any tax documents you need. For most Virginia inheritances, no special tax action is required on your part.
Inherited IRAs and retirement accounts
Inherited retirement accounts like IRAs and 401(k)s have special federal rules that override the normal inheritance process. Virginia does not tax these accounts, but federal rules determine how and when you must withdraw the money, and those withdrawals are taxable as income.
The rules depend on your relationship to the deceased and the type of account. A spouse can often roll an inherited IRA into their own account. Non-spouse heirs typically must withdraw the funds over a set period, with each withdrawal counted as taxable income in the year it is taken.
The executor or the financial institution holding the account will provide guidance on the withdrawal schedule. This is one area where federal rules are complex, and it is worth asking the executor or a tax professional for clarification if you inherit a retirement account.
Frequently Asked Questions
Do I owe Virginia tax on money I inherited from someone who lived in another state?
No. Virginia has no inheritance tax, so you owe Virginia nothing on any inheritance, regardless of where the deceased person lived. However, if they lived in a state with an inheritance tax, that state may have a claim on the estate — but that is handled by the estate's executor, not by you directly.
What if I inherit property in Virginia from someone who lived out of state?
You do not owe Virginia inheritance or estate tax. However, you may owe property tax on the inherited real estate going forward, just as any property owner does. The property tax is separate from inheritance tax and is based on the property's current assessed value.
Do I need to report an inheritance on my Virginia income tax return?
No. The inheritance itself is not income and does not go on your tax return. However, any income the inherited assets generate after you receive them — such as rent, interest, or dividends — must be reported as income in the year you receive it.
What is the stepped-up basis, and why does it matter?
When you inherit an asset, its tax basis (the value used to calculate capital gains) is "stepped up" to its fair market value on the date of death. This means if you inherit stock worth $10,000 that the deceased person bought for $2,000, your basis is $10,000, not $2,000. If you sell it when ready for $10,000, you owe no capital gains tax. This benefit applies to all inherited assets in Virginia.
Will I owe federal estate tax on a large inheritance?
Only if the total estate exceeds $13.61 million (in 2024). The executor determines this and files federal forms if required. You will be notified if the estate owes federal tax and what your share of that responsibility is, though typically the estate pays the tax before distributing money to heirs.