Taxes on Selling a House in Virginia

Capital gains tax

You’ve likely heard the term “capital gains tax,” but what is it? 

When you sell your home for more than its adjusted cost basis, the profit is known as a capital gain. To calculate it, combine your original purchase price with the cost of eligible capital improvements, then subtract that total and any qualifying selling expenses from the sale price. The amount left over is your capital gain, but whether you owe taxes on it depends on your individual circumstances.

For example, say you bought a Virginia home for $295,000 a few years back, spent $20,000 on qualifying capital improvements over the years, and paid $15,000 in eligible selling expenses when you sold it for $425,000. 

Adding the $20,000 in qualifying improvements to your original purchase price of $295,000 gives you an adjusted cost basis of $315,000. Subtracting that amount and the $15,000 in eligible selling expenses from the $425,000 sale price leaves you with a capital gain of $95,000 before any applicable exclusions or other adjustments. This gain may be subject to capital gains tax, depending on your circumstances and eligibility for tax breaks.

State capital gains tax

Capital gains tax rates differ by state. Some states, like Florida, don’t even have a capital gains tax. In Virginia, the tax rate varies based on your income bracket, ranging between 2% and 5.75%:

Note that Virginia doesn’t have a special tax just for money you make from selling a home. Instead, any taxable profit from the sale is generally added to your other taxable income, and Virginia taxes the total based on its regular income tax rates, which range from 2% to 5.75%. 

Federal capital gains tax

Meanwhile, at the federal level, capital gains are classified as either “short-term” or “long-term”:

Short-term gains are generally taxed at ordinary income tax rates, while qualifying long-term gains may be taxed at lower rates of 0%, 15%, or 20%. 

These brackets apply to your taxable income, not just the profit from selling your home. Remember that if your sale qualifies for the primary residence exclusion, some or all of your gain may be excluded from federal taxation.

2026 short-term capital gains tax brackets

2026 long-term capital gains tax brackets

The maximum amount of capital gain that can be excluded is $250,000 for single filers, and $500,000 for a married couple that is filing jointly. To qualify for the exclusion, you must meet these criteria:

If you don’t meet all the requirements for the full home-sale exclusion, you may still qualify for a partial exclusion if you need to sell because of certain qualifying circumstances, such as a job relocation, a health issue, or an unforeseen event. For more, refer to IRS Publication 523.

How to report your Virginia capital gains taxes

• For your federal return, report your capital gains and losses by using the U.S. Individual Income Tax Return (IRS Form 1040) and Capital Gains and Losses, Schedule D (Form 1040).
• If you qualify to exclude your entire gain, you generally don’t need to report the sale unless you receive Form 1099-S or another reporting requirement applies.
• Virginia doesn’t have a separate “capital gains tax” form, and capital gains are included in your state income tax.

Transfer tax

When selling your Virginia home, capital gains tax isn’t the only cost to think about. You may also have to pay taxes and fees for transferring ownership of your home to the buyer. How much you pay depends on your home’s sale price, where it’s located, and which charges apply to your sale.

Virginia has two main state taxes related to property transfers: the recordation tax and the grantor’s tax. The state recordation tax is generally $0.25 for every $100, or fraction thereof, of the home’s sale price or actual value, whichever is higher. The grantor’s tax is generally $0.50 for every $500, or fraction thereof, of the applicable value after certain liens and debts are excluded. Some local governments also charge extra recording taxes. 

The seller typically pays the grantor’s tax, while the buyer generally pays the state recordation tax and deed recording fees. The exact costs can vary depending on the property’s location and the agreement between the buyer and seller. 

If you’re selling a home in Northern Virginia, you may have another fee to consider: the regional WMATA capital fee, also known as an extra transfer fee. This fee helps fund the region’s public transportation system and applies to property transfers in certain Northern Virginia localities. It’s generally $0.10 for every $100, or fraction thereof, of the applicable sale price or value after certain liens and debts are excluded. The seller typically pays this fee, but the buyer and seller can agree to handle it differently. 

For example, if you sell your home for $425,000, the state recordation tax would generally be $1,062.50, assuming the sale price is the taxable value. The grantor’s tax and any applicable local taxes can add to your total, and if your home is in an area where the regional WMATA capital fee applies, that could mean another $425 before any adjustments for qualifying liens or debts.

Property tax

Property tax is a yearly tax homeowners pay based on the value of their property. The amount you owe depends on where your home is located and how much your local government says it’s worth.

Virginia’s effective property tax rate on owner-occupied homes is estimated at 0.78%. This is a statewide estimate, not a rate everyone pays. Your actual property tax bill may be higher or lower depending on your city or county.

When you sell your home, property taxes are typically split between you and the buyer based on how long each of you owns the property. This is called prorating your taxes, and it’s usually handled at closing. However, how the costs are divided can depend on your closing agreement and local practices.

For details about property taxes in your area, check with your local city or county tax office or visit the Virginia Department of Taxation.

Inheritance tax

In some states, if you inherit a home, you may owe taxes. Virginia, however, is not one of these states. However, you will be responsible for any property taxes owed on the home. It’s also possible that a lien might exist on the property if the previous owner was not up to date on their taxes, which you would be responsible for.

If you decide to sell the inherited home, the concept of a “stepped-up basis” comes into play. The stepped-up basis means the home’s cost basis for tax purposes is set at its fair market value on the previous owner’s date of death, not what the original owner paid. This can significantly reduce capital gains tax if you sell your Virginia property soon after inheriting it. Capital gains tax is only applied to the portion of the profit above that stepped-up value.

»Learn more: Want to know exactly how much you’ll walk away with from your home sale? Use our Virginia closing cost calculator to get a personalized estimate of your selling expenses and see your potential proceeds after closing.

Other selling expenses you might encounter in Virginia

• Title fees: Title fees typically include a title search and title insurance. Title insurance helps protect the buyer and lender from certain problems with a home’s ownership history, such as forged documents, a previously unknown will, or deed restrictions that weren’t caught during the title search. Who pays for title insurance varies by location and the terms of the sale. In Virginia, title-related costs are split between buyers and sellers, so it’s important to check the closing agreement to know what you’re responsible for.
• Settlement fees: Also called escrow fees, settlement fees are usually 1% of the home sale value. This lump sum is charged by the title company, escrow company, or attorney handling the closing process. These fees typically cover the costs of preparing final documents, completing the transaction, and distributing payments to the appropriate parties. The exact amount and who pays these fees can vary depending on the agreement between the buyer and seller.
• Agent commissions: Real estate agent commissions in Virginia have traditionally ranged from around 5% to 6% of a home’s sale price, often split between the buyer’s and seller’s agents. But after the National Association of Realtors (NAR) settlement, new rules changed how agent compensation is discussed and agreed upon. Buyers working with agents generally need to sign a written agreement outlining their agent’s compensation before touring a home. With this, Virginia sellers may choose to pay only their listing agent’s commission, often around 2% to 3% of the sale price, depending on the agreement. However, some may also offer to cover part or all of the buyer’s agent’s fees to make their property more attractive to potential buyers.

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How to prepare for Virginia real estate taxes

Real estate taxes don’t need to be intimidating, and they don’t need to catch you off guard. There are several ways you can get an idea of what you’ll owe before the time comes to sell your home, and HomeLight is here to help. Here are some final steps to consider:

• Know your home’s value: Use an online automated valuation model (AVM) tool like HomeLight’s free Home Value Estimator. Having a ballpark idea of what your home might be worth can help you calculate the potential capital gains from the home sale.
• Save the right documents: Know what tax documents you will need to sell before doing so. Talk with a tax professional about the federal and state forms you may need in Virginia, as well as any tax breaks or exemptions you might qualify for.
• Find a top agent: An experienced real estate agent can guide you through the home sale process. They can help you figure out what you may owe in taxes and keep more money in your pocket. Our data shows that the top 5% of real estate agents across the U.S. sell homes for 10% more than the average real estate agent.

HomeLight makes it easy to find top real estate agents in your market. From our Agent Match tool to innovative programs like Simple Sale and Buy Before You Sell, we have you covered when it comes to selling your home, ensuring every transaction is simple, certain, and satisfying.

Editor’s note: This post is for educational purposes only, not financial, tax, or legal advice. HomeLight recommends consulting an advisor for guidance tailored to your situation.

Writer Joseph Gordon contributed to the original version of this post.

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