The state of Virginia does not have an estate tax – but you still may be subject to the federal estate tax, depending on the size of your estate.1 If you’re living in the Old Dominion and you’re thinking about estate planning, this guide has all the information you need to know. If you decide you need help with estate planning or any other type of financial planning, you may want to consider hiring a financial advisor. SmartAsset’s financial advisor matching service can help you find the right advisor for you.
Virginia Estate Tax
Virginia has no estate tax. It is one of 38 states not to levy a tax on an estate of any size.
What Is the Estate Tax?
The estate tax is a tax levied against the estate of a recently deceased person, before the money is passed on to their heirs. It is sometimes referred to in the media as the “death tax.”
The estate tax is different from the inheritance tax. The inheritance tax is taken from a person’s heirs after the money has already been transferred to them.
Virginia Inheritance and Gift Tax
Virginia does not have an inheritance tax. Another state’s inheritance tax may apply to you if the person leaving you money lived in a state that levies inheritance tax. Pennsylvania has a tax that applies to out-of-state inheritors, for example.2
There’s also no gift tax in Virginia. The federal gift tax exemption is $16,000 per recipient each year for 2022, going up to $17,000 in 2022. Any gift over that amount to one person in a year will count against your lifetime exemption of $12.92 million.
Federal Estate Tax
Though there isn’t an estate tax in Virginia, you might have to pay the federal estate tax. The federal estate tax exemption is $12.06 million in 2022 and goes up to $12.92 million in 2023. The exemption is portable for spouses, meaning that with the right legal steps a couple can protect $25.84 million after both spouses have died.3
The top tax rate for the federal estate tax is 40%, applying to taxable estates over $1 million. A full chart of federal estate tax rates is below.
Here’s an example of how it works: Let’s say your estate is worth $17.74 million and you aren’t married. Subtracting the exemption of $12.92 million, leaves you with a taxable estate of $4.82 million. Consulting the chart, you are in the highest bracket. Your base tax payment on the first $1 million is $345,800. You also pay 40% on the remaining $3.82 million, which comes to $1.528 million. That, plus the base of $345,800, means your total tax burden is $1,873,800.4
FEDERAL ESTATE TAX RATES
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $10,000||$0||18%||$1|
|$10,000 – $20,000||$1,800||20%||$10,000|
|$20,000 – $40,000||$3,800||22%||$20,000|
|$40,000 – $60,000||$8,200||24%||$40,000|
|$60,000 – $80,000||$13,000||26%||$60,000|
|$80,000 – $100,000||$18,200||28%||$80,000|
|$100,000 – $150,000||$23,800||30%||$100,000|
|$150,000 – $250,000||$38,800||32%||$150,000|
|$250,000 – $500,000||$70,800||34%||$250,000|
|$500,000 – $750,000||$155,800||37%||$500,000|
|$750,000 – $1 million||$248,300||39%||$750,000|
|Over $1 million||$345,800||40%||$1 million|
*The taxable estate is the total above the exemption of $12.92 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Virginia Tax Picture
Virginia is generally tax-friendly toward retirees. Social Security is not taxed and other sources of retirement income are partially taxed. The income tax rate in Virginia ranges from 2% to 5.75%. Our Virginia paycheck calculator can show you what your take home pay will be.
The sales tax in the state ranges from 4.3% to 7%. While Virginia property taxes are below the national average at 0.75%, the high home values in many parts of the state mean the actual payment can still be quite high. This is especially true in northern Virginia, particularly in Fairfax County.
Estate Planning Tips
- If you still have questions after reading this, you might want to think about enlisting professional help. Whether you’re dealing with a loved one’s estate or just need help with financial planning in general, a financial advisor can help you get on the right track. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Make sure you know what your retirement income will look like when planning your estate. SmartAsset’s retirement calculator can help you figure out what your savings will look like when you retire.
- It isn’t fun to think about, but make sure you name a guardian for your children when drawing up your will or estate plans. With any luck this particular provision will stop being relevant when they turn 18, but it is still good to plan for the worst.
- “Estate and Inheritance Taxes.” Virginia Tax. https://www.tax.virginia.gov/estate-and-inheritance-taxes.
- Pennsylvania Department of Revenue. “Inheritance Tax.” https://www.revenue.pa.gov:443/TaxTypes/InheritanceTax/Pages/default.aspx.
- “Frequently Asked Questions on Estate Taxes.” Internal Revenue Service, August 9, 2023. https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-estate-taxes.
- “Estate Tax.” Internal Revenue Service, October 26, 2022. https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax.
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