Inheriting a home can feel like both a blessing and a burden.
Maybe the property belonged to a parent or grandparent, and now you’re unsure what to do with it — keep it, rent it, or sell it.
Before you make a decision, it’s important to understand the tax implications that come with inheriting real estate in Virginia.
Let’s break it down simply.
1. Virginia Has No Inheritance or Estate Tax
Good news first:
If you inherit a house in Virginia, you won’t owe state inheritance or estate tax.
Virginia eliminated its estate tax in 2007, and there’s no separate inheritance tax here.
👉 So you don’t pay Virginia directly for inheriting a property.
However, that doesn’t mean there are no taxes at all. Federal tax rules still apply.
2. Understanding the “Step-Up in Basis” Rule
This is the most important concept for inherited property.
When someone passes away, the property’s cost basis (what they originally paid for it) “steps up” to its current fair market value (FMV) on the date of their death.
Example:
- Your parents bought the home in Lynchburg in 1995 for $80,000.
- At the time of their passing, it’s worth $240,000.
- Your new basis is $240,000.
If you later sell it for $250,000, you’d only owe taxes on the $10,000 gain, not on the $170,000 increase since 1995.
That step-up in basis drastically reduces (and sometimes eliminates) capital gains tax for inherited homes.
3. Capital Gains Tax When You Sell
If you sell the house, the difference between the sale price and your stepped-up basis is considered your capital gain (or loss).
Short vs. Long Term:
- Inherited property is always treated as long-term for tax purposes, even if you sell it right away.
This means it’s taxed at long-term capital gains rates (0%, 15%, or 20%, depending on income).
Deductible Costs:
When calculating gain, you can also deduct:
- Realtor commissions
- Closing costs
- Certain repair expenses tied to the sale
4. Renting the Inherited Property
If you decide to keep and rent the house, rental income becomes taxable.
However, you can offset some of that income through deductions like:
- Property taxes
- Mortgage interest (if any)
- Maintenance and repairs
- Depreciation
Be sure to track all income and expenses carefully — and consider speaking with a tax professional about how to maximize deductions.
5. What if There Are Multiple Heirs?
If you inherited the property jointly with siblings or relatives, you each share ownership — and each of your bases is stepped up proportionally.
If you sell, the proceeds (and potential tax) are split accordingly.
Sometimes it’s easier for one heir to buy out the others or for all to sell and divide the proceeds.
In either case, having a clear written agreement helps avoid family disputes.
6. What If the Property Is in an Estate or Trust?
If the property hasn’t officially been transferred to your name yet, the estate or trust may handle the sale.
The same step-up rules usually apply, but timing and tax reporting may differ slightly.
The estate’s executor or accountant can guide you — or you can sell once the property is in your name.
7. Selling the Inherited House “As-Is”
Sometimes keeping or fixing an inherited home just isn’t practical.
Repairs, taxes, and maintenance can pile up fast — especially if the property has been vacant or outdated for years.
That’s where Hill City Homebuyers can help.
We buy inherited homes in Lynchburg, Bedford, Campbell, and Amherst Counties for cash, in as-is condition.
You can avoid realtor fees, make a clean sale, and often close in as little as 7–10 days.
We handle everything — from title work to coordination with the estate.
You walk away with cash and peace of mind.
Key Takeaways
| Situation | Tax Impact |
|---|---|
| Inheriting the house | No Virginia inheritance tax |
| Selling the house | Capital gains on the difference between sale price and stepped-up basis |
| Keeping the house | Rental income taxable, but expenses deductible |
| Multiple heirs | Taxes and proceeds split proportionally |
| Selling to cash buyer | Usually quick, simple, and still benefits from step-up in basis |
📞 Ready to Sell or Learn More?
If you’ve recently inherited a house in Lynchburg or Central Virginia, don’t let the stress of maintenance, taxes, or probate weigh you down.
Reach out to Hill City Homebuyers — we’ll walk you through your options, explain the process, and if you’re ready, make you a fair, no-obligation cash offer.
Call or text: (434) 515-1478
Website: hillcityhomebuyer.com
Sell the house easily. Keep the memories, not the headaches.