When ownership of a business or real property moves due to succession—whether to heirs or among owners—you might expect hefty taxes. But in Virginia, the rules often shift responsibility away from the successor. Here’s what you need to know.
Transfer tax basics in Virginia
Virginia imposes a state transfer tax at $0.25 per $100 of property value, plus local transfer taxes that may add around $0.083 per $100. Normally, the buyer—or in a succession, the successor—covers those taxes. For example, if you’re receiving business real estate, you would typically pay the deed’s transfer taxes.
Grantor tax on the outgoing party
The seller—or in succession, the grantor—also owes grantor tax. This tax amounts to $0.50 per $500 of the transfer value, excluding liens. In Northern Virginia, an extra $0.10 per $100 applies. So if someone hands over property to you, they are generally responsible for the grantor tax.
Exemptions in entity transfers
Virginia doesn’t tax transfers of controlling interests in entities like corporations. If you’re succeeding in an LLC or partnership and a majority interest (50% or more) passes within the entity, both transfer and recordation taxes usually don’t apply. That means you can often take over the business without facing significant taxation.
No inheritance or estate tax
Virginia eliminated its estate and inheritance taxes in 2007. That means you won’t owe those taxes for a business succession in the state. Only federal and deferred capital gains taxes might apply, depending on the situation.
If you receive real property or a share of a business, you will likely pay transfer taxes unless the transfer qualifies for an entity exemption. The grantor typically pays the grantor tax, although you might agree to split or cover it. And with no state estate or inheritance tax, you face less burden when stepping into ownership.
