Quick answer: Virginia has no separate capital gains tax and no inheritance tax. Capital gains are taxed as regular Virginia income at rates up to 5.75 percent, and Virginia repealed its estate tax for deaths after July 1, 2007. Most Virginia home sellers owe far less tax than they fear, and many owe nothing at all.
I am David Mount, a Northern Virginia listing agent and Certified Probate Real Estate Specialist. Sellers ask me about taxes on nearly every listing appointment, especially on inherited homes. Here are the real numbers for 2026. I am an agent, not a CPA, so treat this as orientation and confirm your specifics with a tax professional.
Does Virginia Have a Capital Gains Tax?
Not a separate one. Virginia taxes capital gains as ordinary income on your state return, at graduated rates topping out at 5.75 percent on income over 17,000 dollars. There is no special lower state rate for long term gains, but there is also no extra state surcharge. If you exclude a gain federally, it is generally excluded from Virginia income too, because Virginia starts from your federal adjusted gross income.
Does Virginia Have an Inheritance Tax or Estate Tax?
No. Virginia has no inheritance tax, and its estate tax was repealed for deaths on or after July 1, 2007. Heirs in Virginia do not pay state tax simply for inheriting a house. The federal estate tax exists but applies only to very large estates: the federal exemption is 15 million dollars per person for deaths in 2026. The overwhelming majority of Northern Virginia estates owe nothing.
What Federal Tax Do You Pay When You Sell Your Home?
If the home was your primary residence for at least two of the last five years, you can exclude up to 250,000 dollars of gain from federal tax, or 500,000 dollars for a married couple filing jointly, under Section 121. Long term gains above the exclusion are taxed at 0, 15, or 20 percent depending on income, plus a possible 3.8 percent net investment income tax at higher incomes.
Worked example: a Fairfax couple bought in 2005 for 450,000 dollars and sells in 2026 for 950,000. Their 500,000 dollar gain is fully covered by the joint exclusion. Federal tax owed: zero. Virginia tax owed: zero.
What About Taxes on an Inherited House?
Inherited homes get a stepped up basis: your cost basis becomes the market value on the date of death, not what the deceased paid. If your mother bought her Springfield home for 90,000 dollars in 1985 and it was worth 700,000 when she passed, your basis is 700,000. Sell it for 720,000 a few months later and your taxable gain is roughly 20,000 dollars minus selling costs, often close to nothing.
This is the single most misunderstood number in probate sales. Heirs regularly assume they owe tax on the full sale price and nearly accept a lowball cash offer to “avoid taxes” that were never owed. For the full picture, see my guide to capital gains on inherited property in Virginia.
When Do Virginia Home Sellers Actually Owe Tax?
The common cases: a primary residence gain above the 250,000 or 500,000 dollar exclusion, a rental or investment property (no exclusion, plus depreciation recapture at up to 25 percent federally), a second home, or an inherited home that appreciated significantly after the date of death. Even then, selling costs, capital improvements, and timing strategies can shrink the bill. A one hour conversation with a CPA before listing routinely saves sellers real money.
Virginia Home Sale Tax FAQ
Do I pay taxes when I sell my house in Virginia?
Often no. If the gain on your primary residence is under the federal exclusion, you owe neither federal nor Virginia income tax on the sale. You will pay the state grantor tax at closing, currently about 1 dollar per 1,000 of sale price plus regional congestion fees in Northern Virginia.
Does Virginia tax out of state heirs who sell an inherited Virginia house?
The gain on Virginia real estate is Virginia source income, so out of state heirs generally file a Virginia nonresident return for the year of sale. With stepped up basis the taxable amount is usually small. Your home state typically credits the Virginia tax paid.
How do I avoid capital gains tax on my Virginia home?
Live in it two of the last five years to claim the Section 121 exclusion, keep records of capital improvements to raise your basis, and for investment property consider a 1031 exchange. There is no legitimate way to avoid tax on a large gain above the exclusion without one of these tools.
Thinking about selling in Northern Virginia and want a net sheet that includes the real tax picture? Call or text me at 571-946-8418 or email david.mount@thereduxgroup.com.