Virginia does not have an inheritance tax
Virginia has no state inheritance tax. You will not owe Virginia state tax on money or property you inherit from anyone, regardless of the amount or your relationship to the person who died. This applies whether you inherit a house, bank accounts, investments, or personal items.
The federal government does have an estate tax, but it only affects estates worth more than a certain threshold — $13.61 million for deaths in 2024, though this amount changes yearly. Most Virginia residents will never deal with federal estate tax because their estates fall below that limit. Virginia itself does not add a separate state-level tax on top of federal rules.
Key Takeaways
- Virginia has no state inheritance tax on any amount you inherit, from any source.
- The federal estate tax only applies to estates larger than $13.61 million (as of 2024), and most Virginia residents will not owe it.
- You may still owe income tax on inherited assets that generate income after you receive them, such as rental property or dividend-paying stocks.
- Some inherited retirement accounts have required withdrawal rules that can create a tax bill, even though the inheritance itself is not taxed.
What you inherit is not taxable income in Virginia
When you inherit money or property, Virginia does not treat it as income you earned. You do not report it on a Virginia tax return, and you do not owe state tax on the value of what you received. This is true whether the inheritance is large or small, and whether it comes from a will, a trust, or by the state's intestacy laws.
The person who died may have owed taxes on their own income or property before death, but those are separate from what you inherit. Once the inheritance passes to you, the inheritance itself is not a taxable event in Virginia.
Income generated by inherited assets is taxable
While the inheritance itself is not taxed, any income the inherited assets produce after you receive them is taxable. If you inherit a rental house and collect rent, that rent is income you must report. If you inherit stocks that pay dividends, those dividends are income. If you inherit a savings account and it earns interest, that interest is income.
You will report this income on your federal tax return and on your Virginia state return if you are a Virginia resident. The tax rate depends on the type of income and your overall income for the year. The inherited asset itself is not taxed, but what it earns is.
Inherited retirement accounts have special withdrawal rules
If you inherit a retirement account such as an IRA or 401(k), the account itself is not taxed when you receive it. However, the rules for withdrawing money from inherited retirement accounts can create a tax bill. The rules changed in 2023 under the find 2.0 Act, and they vary depending on whether you inherited from a spouse, a family member, or someone else.
In most cases, you must withdraw the inherited retirement account within a set timeframe — often 10 years. The withdrawals are taxed as income in the year you take them. If you withdraw a large amount in one year, it could push you into a higher tax bracket. You should speak with a tax professional or the retirement account custodian about the withdrawal rules that explore to your specific situation.
Federal estate tax only affects large estates
The federal government taxes estates, not inheritances. An estate is the total value of everything a person owned when they died. The federal estate tax applies only to estates worth more than $13.61 million in 2024. Virginia adds no additional state estate tax on top of this.
The federal threshold is high enough that most Virginia residents will never owe federal estate tax. If you inherit from someone whose total estate was below the threshold, there is no federal estate tax to pay. The threshold changes each year, so if you are dealing with a very large estate, check the current year's limit with a tax professional.
Property tax and other taxes on inherited real estate
When you inherit real estate in Virginia, you do not owe tax on the inheritance itself. However, you will owe property tax on the real estate going forward, just as the previous owner did. Property tax is assessed annually based on the value of the property, and it is not related to the fact that you inherited it.
If you sell inherited real estate, you may owe capital gains tax on the profit. However, inherited property receives a "step-up in basis," which means the property's value is reset to its fair market value on the date of death. If you sell it shortly after inheriting it at roughly the same price, you will owe little or no capital gains tax. If you hold it for years and the value increases, you will owe capital gains tax on the increase that happened after you inherited it.
What to do if you inherit property or money
If you inherit money or property, you do not need to file anything with Virginia or the IRS just because you inherited it. The executor or trustee of the estate handles the legal transfer. You only file a tax return if the inherited assets generate income that you must report.
If you inherit a retirement account, the custodian will send you paperwork explaining the withdrawal rules. If you inherit real estate, you will receive a deed or other legal document. If you inherit money, it will be transferred to your bank account or mailed to you. Keep records of what you inherited and when, in case you need them later for tax purposes.
Frequently Asked Questions
Do I have to pay Virginia tax on money I inherit?
No. Virginia has no inheritance tax, so you will not owe Virginia state tax on any amount you inherit. The federal government does have an estate tax, but it only applies to estates worth more than $13.61 million as of 2024, which affects very few people.
What if I inherit a house in Virginia?
You do not owe tax on inheriting the house itself. You will owe property tax on it going forward, just like the previous owner did. If you sell it later and make a profit, you may owe capital gains tax on the profit, but inherited property gets a step-up in basis that usually reduces or eliminates this tax if you sell soon after inheriting.
Do I owe tax on money I inherit from a retirement account?
The inheritance itself is not taxed, but you must withdraw the money according to federal rules, and those withdrawals are taxed as income. The rules changed in 2023 and vary by your relationship to the person who died. Contact the account custodian or a tax professional to understand your specific withdrawal timeline and tax obligations.
Is there a Virginia inheritance tax if I inherit from a parent or spouse?
No. Virginia has no inheritance tax for any relationship — not for spouses, children, parents, or anyone else. The amount you inherit does not matter either. Some states tax distant relatives differently, but Virginia taxes none of them.
What happens if the person who died owed taxes?
The person's estate pays any taxes they owed before the remaining assets are distributed to heirs. You do not inherit the tax debt itself. The executor uses estate funds to pay the deceased person's final income tax return, property taxes, and any other debts before you receive your inheritance.