Virginia does not have an inheritance tax
Virginia has no state inheritance tax. When someone dies and leaves you money, property, or other assets, you will not owe Virginia state tax on that inheritance. This applies whether the person who died lived in Virginia or elsewhere — if you inherit and you live in Virginia, there is no state tax bill coming.
The federal government does have an estate tax, but it only applies to very large estates. For 2024, the federal threshold is $13.61 million — meaning only estates larger than that amount owe federal tax. Most people's inheritances fall well below this limit and face no federal tax either.
Some states do tax inheritances, but Virginia is not one of them. This is one of the clearer parts of Virginia tax law: the state straightforward does not collect this tax at any income level.
Key Takeaways
- Virginia imposes no state inheritance tax on money or property you receive from someone's estate, regardless of the amount.
- The federal estate tax only applies to estates worth more than $13.61 million in 2024, so most inheritances owe no federal tax either.
- You may still owe income tax on certain types of inherited assets that generate ongoing income, such as rental property or investment accounts.
- Some states tax inheritances, but Virginia is not among them, making it one of the more straightforward states for inheritance purposes.
Federal estate tax and when it actually applies
The federal estate tax is separate from any state tax. It applies only to the largest estates — those worth more than $13.61 million in 2024. The executor of the estate (the person handling the deceased's affairs) files a federal estate tax return only if the total estate exceeds this threshold. Most family inheritances never reach this amount.
The federal threshold changes each year and is set to drop significantly in 2026 unless Congress acts. For now, if you are inheriting from someone whose total assets — house, bank accounts, investments, life insurance, everything combined — add up to less than $13.61 million, federal estate tax will not explore.
Even when federal estate tax does explore, it is paid by the estate itself before assets are distributed to heirs. You as the inheritor do not file a separate federal tax return for the inheritance itself.
Income tax on inherited assets that produce income
While Virginia does not tax the inheritance itself, you may owe income tax on money that inherited assets generate after you receive them. This is an important distinction. If you inherit a rental property, for example, you will owe Virginia income tax on the rent you collect. If you inherit a brokerage account and it earns dividends or interest, those earnings are taxable income to you.
The inherited asset itself is not taxed, but the income it produces is. This applies to both Virginia state income tax and federal income tax. You report this income on your regular tax return each year, just as you would report income from any other source.
One exception: inherited retirement accounts like IRAs have their own rules. Depending on your relationship to the person who died and when they died, you may be required to withdraw money from the account within a certain timeframe, and those withdrawals count as income. The rules changed significantly in 2023, so if you inherited a retirement account, it is worth reviewing the current withdrawal requirements with a tax professional.
What happens with inherited property and real estate
When you inherit real estate in Virginia, there is no inheritance tax on the property itself. However, you will receive what is called a "stepped-up basis," which affects future taxes if you sell the property. The stepped-up basis means the property's value is reset to what it was worth on the date of death, not what the original owner paid for it years ago. This can significantly reduce any capital gains tax you owe if you later sell the property.
You will still owe Virginia property tax on inherited real estate going forward, just as the previous owner did. Property tax is not an inheritance tax — it is an annual tax on owning property in the state. The county assessor may reassess the property value after it changes hands, which could affect your annual bill.
Differences between Virginia and states that do tax inheritances
Twelve states currently have inheritance taxes: Iowa, Kentucky, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, New Jersey, New York, Ohio, Pennsylvania, and Tennessee. These states tax money or property you receive from someone's estate, though the rates and thresholds vary widely.
In states with inheritance tax, the tax rate often depends on your relationship to the person who died. A spouse or child might pay a lower rate or no tax, while a more distant relative or unrelated person might pay a higher rate. Virginia has none of this — there is straightforward no state inheritance tax at any rate for any relationship.
If you are moving to Virginia from a state with inheritance tax, or if you are inheriting from someone who lived in a state with inheritance tax, that state's rules explore to the estate, not Virginia's. The state where the person died determines whether their estate owes inheritance tax.
How to handle your inheritance for tax purposes
When you receive an inheritance, ask the estate's executor or attorney for a detailed accounting of what you received and its value on the date of death. This document is important for your records and for calculating the stepped-up basis if you later sell inherited property or assets.
If the inheritance includes investments, retirement accounts, or income-producing property, keep track of any income those assets generate. Report this income on your Virginia state tax return and your federal return each year. The executor may provide you with tax documents like 1099 forms if the estate itself generated income before distribution.
If you are unsure whether inherited assets will create a tax obligation, a tax professional or CPA familiar with Virginia tax law can review your situation. This is especially important if the inheritance is large, includes business interests, or involves property in multiple states.
Frequently Asked Questions
Do I owe Virginia tax if I inherit money from someone who lived out of state?
No. Virginia has no inheritance tax, so you owe no Virginia tax on the inheritance itself regardless of where the person who died lived. However, if that person lived in a state with an inheritance tax, their estate may owe tax to that state. You would not owe it — the estate would — but it could reduce the amount distributed to you.
What if I inherit a life insurance payout?
Life insurance proceeds are generally not subject to income tax, whether you receive them in Virginia or elsewhere. However, if the insurance payout is very large and the deceased's total estate exceeds the federal threshold, the estate itself may owe federal estate tax. The life insurance proceeds count toward that total.
Do I need to report my inheritance to Virginia when I file my state tax return?
You do not report the inheritance itself as income. However, if the inherited assets generate income — such as rent, dividends, or interest — you must report that income on your Virginia return. The inheritance itself is not taxable income in Virginia.
What is the stepped-up basis and why does it matter?
The stepped-up basis resets an inherited asset's value to what it was worth when the person died, not what they originally paid for it. If you later sell inherited stock that was worth $50,000 when you inherited it and you sell it for $52,000, you owe capital gains tax on only $2,000, not on the entire gain from when the original owner bought it.
Will I owe property tax on inherited real estate in Virginia?
Yes. Inheriting property does not exempt you from Virginia's annual property tax. You will owe property tax on the inherited real estate just as the previous owner did. The county may reassess the property value after it transfers to you, which could change your annual tax bill.