Virginia
Reviewed October 2026Federal §453 conformity
Yes — Virginia starts from the federal return and taxes installment gain as payments arrive at a 5.75% top rate reached quickly, with no capital gains preference (narrow subtractions for certain qualified technology-business investments aside). The gain component and the note's interest are both ordinary Virginia income in the year received.
Nonresident sourcing
Gain from Virginia real estate or a business operating in Virginia is Virginia income for sellers anywhere, and the payments keep that character; intangible gain generally follows the seller home.
Withholding
Virginia imposes no closing-table withholding on nonresident real estate sellers. Pass-throughs withhold on nonresident owners' Virginia income each recognition year unless the PTE election or an exemption covers it.
Selling, then moving (residency change)
Virginia-source gain stays taxable here after a move; other gain travels with the seller, and no rule accelerates deferred gain at the border.
Pass-through entity (PTE) tax election
Virginia's own PTE election was made permanent by 2026 legislation (HB 29, signed February 20, 2026), and the same bill removed the sunset that would have ended Virginia residents' credit for pass-through entity taxes paid to other states after 2025. As the law now stands, a Virginia resident whose multistate entity pays another state's substantially similar PTE tax is treated as having paid that tax personally for the Virginia credit, with no end date. The election is annual with owner credits, so the usual keep-the-entity-alive calendar applies for every payment year.
Estate and IRD
Virginia has no estate or inheritance tax. At death the federal rules apply — heirs pay income tax as payments arrive — with no state layer.
Planning notes
Virginia's list: check each federal item on the return against the state's fixed conformity date (December 31, 2025) and its OBBBA decoupling list before importing the federal numbers; calendar the Virginia PTET election for every payment year, knowing other states' PTE taxes stay creditable; and coordinate the entity's nonresident withholding. Everything else here is standard conforming-state work.
Virginia's PTET and the rule treating other states' substantially similar PTE taxes as paid by their individual owners (Va. Code §58.1-332(C)(2)) were both due to sunset after 2025. HB 29, signed February 20, 2026, removed those sunsets, so Virginia residents continue to credit other-state PTE-level taxes with no end date. The same bill fixed Virginia's conformity date at December 31, 2025 and decoupled from several OBBBA provisions — check the conformity list, not the credit, for the 2026 surprise.
Educational information, current as of the October 2026 review. State law changes; confirm treatment with a qualified advisor before structuring a transaction.
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