Virginia Probate Tax Deductions

Deductable Assets

Not all assets are subject to Virginia's probate tax. Some assets and property can be deducted. Any property in an estate that is transferred through the power of appointment is exempt from the Virginia probate tax. Any property that is jointly held and contains a right of survivorship (such as joint tenants of a property) does not go through probate because full ownership goes immediately to the co-tenant by law. Third, any insurance proceeds that are being paid to a named beneficiary (provided the beneficiary is not the deceased's estate itself) are exempt from the probate tax. Finally, any bonds payable on death are deductible.

There are slight differences in the process of probate in Virginia depending upon where the deceased's heirs reside. Any real, tangible property of the deceased will go through probate (and thus be taxed) regardless of the heir's state of residence. However, any intangible property, including bank accounts or investments, can be deducted from the probate tax if the person receiving the intangible property is not a resident of Virginia.

The Virginia probate tax rate is 0.1 percent, although it is not exactly assessed that way. The Virginia Department of Taxation says the tax is calculated at 10 cents for every $100 that the estate is worth. In addition, cities or towns are allowed to charge their own additional probate tax, but it cannot exceed one-third of that (so roughly 3.33 cents per $100 of estate value).

You must declare your Virginia probate tax deductions and file your probate tax return when the will is presented for probate. You must also include an estate inventory and any other documents pertinent to the estate, the probate process, and the probate tax. You must also pay the probate tax amount at that time. This entire process should take place at the local Virginia state circuit court where the deceased resided.