Beneficiaries of an estate must sometimes pay an inheritance tax. The federal government imposes such a tax on estates with values above a certain limit. Some states also impose an inheritance tax. At the time of publication, Virginia doesn't impose an inheritance tax on estates of any size.
Virginia Inheritance Tax
At the time of publication, the only states that impose an inheritance tax are Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania and Tennessee. Virginia doesn't impose an inheritance tax on any estate regardless of its size or complexity. Because the federal government also imposes no inheritance tax, residents of Virginia typically won't pay any taxes when they inherit from an estate unless they receive property from a different state.
Virginia Estate Tax
In 2006 Virginia repealed its estate tax law. Estates passing from deceased individuals who died on or after July 1, 2007, won't owe any state estate tax. However, some estates may still be subject to federal estate taxes. For 2011 and 2012, only estates exceeding $5 million will owe federal estate taxes. The tax rate for such estates is 35 percent.
The current federal estate tax reduction is only valid until 2013. Unless the federal government passes a new law or extends the current reduction, estates of individuals who die on or after January 1, 2013, may owe estate taxes if their value exceeds $1 million. Because Virginia's estate tax repeal relates to the federal estate tax reduction, the tax may return in 2013.
If you live in Virginia and own property in a different state, that property may be subject to inheritance or estate tax. At the federal level, estate taxes don't apply to the entire gross value of the estate. Charitable contributions and property left to a surviving spouse can reduce the value of the taxable estate. There are also deductions available for mortgages and other debt.
- Commonwealth of Virginia: Estate
- Maps of World Finance: Virginia Inheritance Tax
- Hughes and Bentzen, PLLC; Introduction to Estate and Gift Taxes -- Circa 2011-2012; Stuart H. Sorkin, et al.; February 2011
- Retirement Living Information Center; Taxes by State; January 2011
- IRS: Frequently Asked Questions on Estate Taxes
- Stockbyte/Stockbyte/Getty Images