Legislation enacted by the 2006 General Assembly, House Bill 5018, repeals the Virginia estate tax for the estates of decedents whose date of death occurs on or after July 1, 2007. The estates of decedents whose date of death occurs before July 1, 2007 remain subject to the estate tax provisions. In addition, the repeal of the Virginia estate tax does not affect the filing requirements for fiduciary income tax, regardless of when the date of death occurs.
The Virginia estate tax is a transfer tax on the estates of resident decedents and the estates of nonresident decedents having real estate or tangible personal property located in Virginia. Estates of alien decedents having real estate or tangible personal property located in Virginia, as well as intangible personal property attributable to Virginia are also subject to the tax. Only those estates that are required to file a federal estate tax return will be subject to the Virginia estate tax requirements.
The personal representative/executor of an estate must file a Virginia Estate Tax return (Form EST-80) whenever required by federal law to file the federal estate tax return. Generally, the filing requirement is for an estate with a gross value exceeding the applicable federal exclusion for estates. The following table gives the federal filing requirements by year of death:
| Date of Death | Gross Value Exceeding |
|---|---|
| Through December 31, 1997 | $600,000 |
| January 1, 1998 - December 31, 1998 | $625,000 |
| January 1, 1999 - December 31, 1999 | $650,000 |
| January 1, 2000 - December 31, 2001 | $675,000 |
| January 1, 2002 - December 31, 2003 | $1,000,000 |
| January 1, 2004 - December 31, 2005 | $1,500,000 |
| January 1, 2006 - June 30, 2007 | $2,000,000 |
For Virginia estate tax returns due for decedents with a date of death beginning January 1, 2005 , the amount of estate tax paid to the state is no longer a credit against the federal estate tax on Form 706. The State Death Tax paid to any state has now become a deduction on both the state and federal returns (Form 706, Line 3b). The amount of the Federal Taxable Estate will appear after deductions allowed on the federal return, resulting in an inter-related computation for the Virginia estate tax and related deduction. The Tentative Taxable Estate (Line 3a) and Adjusted Taxable Gifts (Line 4) from the federal return (Form 706) will be needed to compute the State Death Tax Deduction.
Virginia law does not provide for a specific tax rate. The tax is based on the federal credit for state death taxes allowable by § 2011 of the Internal Revenue Code as it existed on January 1, 1978 (refer to the tax table below).
Under the Economic Growth and Tax Relief Act of 2001, the federal credit for state death taxes is reduced incrementally beginning in 2002, and fully repealed in 2005. Virginia law, however, does not allow for a credit reduction. Virginia's tax is the credit for state death tax before the federal reduction for a date of death prior to December 31, 2004. (Please refer to the section "Virginia Estate Tax Beginning January 1, 2005" to compute the Virginia Estate Tax for 2005.) In cases where the decedent's entire estate is located in Virginia, the total amount of state death tax credit is the Virginia tax. Otherwise, the credit is prorated.
| Adjusted Taxable Estate | ||||
|---|---|---|---|---|
| At Least | But Less Than | Credit | Percent | Of Excess Over |
| 0 | 40,000 | 0 | 0.0% | 0 |
| 40,000 | 90,000 | 0 | 0.8% | 40,000 |
| 90,000 | 140,000 | 400 | 1.6% | 90,000 |
| 140,000 | 240,000 | 1,200 | 2.4% | 140,000 |
| 240,000 | 440,000 | 3,600 | 3.2% | 240,000 |
| 440,000 | 640,000 | 10,000 | 4.0% | 440,000 |
| 640,000 | 840,000 | 18,000 | 4.8% | 640,000 |
| 840,000 | 1,040,000 | 27,600 | 5.6% | 840,000 |
| 1,040,000 | 1,540,000 | 38,800 | 6.4% | 1,040,000 |
| 1,540,000 | 2,040,000 | 70,800 | 7.2% | 1,540,000 |
| 2,040,000 | 2,540,000 | 106,800 | 8.0% | 2,040,000 |
| 2,540,000 | 3,040,000 | 146,800 | 8.8% | 2,540,000 |
| 3,040,000 | 3,540,000 | 190,800 | 9.6% | 3,040,000 |
| 3,540,000 | 4,040,000 | 238,800 | 10.4% | 3,540,000 |
| 4,040,000 | 5,040,000 | 290,800 | 11.2% | 4,040,000 |
| 5,040,000 | 6,040,000 | 402,800 | 12.0% | 5,040,000 |
| 6,040,000 | 7,040,000 | 522,800 | 12.8% | 6,040,000 |
| 7,040,000 | 8,040,000 | 650,800 | 13.6% | 7,040,000 |
| 8,040,000 | 9,040,000 | 786,800 | 14.4% | 8,040,000 |
| 9,040,000 | 10,040,000 | 930,800 | 15.2% | 9,040,000 |
| 10,040,000 | 99,999,999,999 | 1,082,800 | 16.0% | 10,040,000 |
The Virginia estate tax return, Form EST-80, is due nine months from the date of death (same as the federal due date). Any balance of tax due must be paid with the return. Virginia recognizes federal extensions granted both for filing and for payment.
A letter providing proof of payment is automatically generated to certify the amount of tax paid to Virginia after the department has processed the estate tax return.
The penalty for late payment is 5% of the tax due. There is no penalty for late filing. Interest accrues on the tax from the original due date through the date paid whether or not an extension is granted. In accordance with the Code of Virginia § 58.1-15, interest is assessed at 2% above the federal "underpayment rate".
Last Updated 9/17/2008 12:12
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