Capital Gains Tax

Capital Gains Tax in Virginia: Complete Guide 2026

Updated 2026-03-10

Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.

Capital Gains Tax in Virginia: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.

Virginia taxes capital gains as ordinary income, meaning your investment profits face the same graduated rates as wages and salaries. With a top marginal rate of ~5.75% that kicks in at a relatively low income threshold, most Virginia residents with capital gains will pay the maximum state rate. Understanding how Virginia treats capital gains, the interaction with federal taxes, and available strategies helps investors minimize their combined tax burden.


Virginia Capital Gains Tax Rates

Virginia does not distinguish between short-term and long-term capital gains at the state level. All capital gains are taxed as ordinary income:

Tax RateTaxable Income Range
~2%$0 - ~$3,000
~3%~$3,001 - ~$5,000
~5%~$5,001 - ~$17,000
~5.75%Over ~$17,000

Since the top rate applies to income over ~$17,000, most taxpayers with any meaningful capital gains will pay ~5.75% on those gains.

Combined Federal and Virginia Capital Gains Tax

Gain TypeFederal RateVirginia RateCombined Rate
Short-term (held under ~1 year)~10-37% (ordinary)~5.75%~15.75-42.75%
Long-term (held ~1+ year), low bracket~0%~5.75%~5.75%
Long-term, middle bracket~15%~5.75%~20.75%
Long-term, high bracket~20%~5.75%~25.75%
Long-term + NIIT (~3.8%)~23.8%~5.75%~29.55%

Virginia residents can face combined rates approaching ~30% on long-term capital gains when including the federal Net Investment Income Tax (NIIT).


How Virginia Taxes Capital Gains

Conformity with Federal Definitions

Virginia starts with federal adjusted gross income (AGI), which includes capital gains as reported on your federal return. The state then applies Virginia-specific adjustments. Since capital gains are already included in federal AGI, they flow directly into Virginia taxable income.

No Preferential State Rate

Unlike the federal system, which taxes long-term capital gains at preferential rates (~0%, ~15%, or ~20%), Virginia treats all capital gains as ordinary income. This means the ~5.75% rate applies regardless of holding period. This is a critical distinction that affects investment planning for Virginia residents.

Capital Loss Deduction

Virginia conforms to the federal capital loss deduction rules:

  • Capital losses offset capital gains dollar for dollar
  • Net capital losses can offset up to ~$3,000 of ordinary income per year
  • Excess losses carry forward to future years indefinitely

Virginia Capital Gains vs. Neighboring States

StateCapital Gains Tax RateTreatmentAdditional Surtax
Virginia~5.75%Ordinary incomeNone
Maryland~5.75%Ordinary incomeCounty income tax ~2.25-3.2%
North Carolina~4.5% (flat)Ordinary incomeNone
West Virginia~6.5%Ordinary incomeNone
D.C.~10.75%Ordinary incomeNone
Tennessee~0%No income taxNone
Pennsylvania~3.07% (flat)Flat rateLocal income taxes

Virginia’s ~5.75% rate is competitive with Maryland’s base rate but lower once Maryland’s county income taxes are added. North Carolina and Pennsylvania offer lower rates. D.C. has a much higher rate, and Tennessee taxes no income at all.

For the full comparison, visit our state income tax rates comparison.


Strategies for Reducing Virginia Capital Gains Tax

Tax-Loss Harvesting

Selling investments at a loss to offset gains is an effective strategy. Be mindful of the wash sale rule, which disallows the loss if you repurchase a substantially identical security within ~30 days. The loss offset reduces both your federal and Virginia tax liability.

Qualified Opportunity Zone Investments

Virginia has numerous designated Qualified Opportunity Zones. Investing capital gains in a Qualified Opportunity Fund can defer the gain and potentially reduce the tax on it if the investment is held for sufficient time.

Charitable Giving of Appreciated Assets

Donating appreciated securities to charity avoids capital gains tax entirely while providing an itemized deduction for the full fair market value. This works at both the federal and Virginia state level.


Tips for Managing Virginia Capital Gains Tax

  1. Hold investments for at least one year. While Virginia does not offer a preferential state rate for long-term gains, the federal preferential rate (~0%, ~15%, or ~20% instead of ordinary rates up to ~37%) makes holding assets at least ~1 year critical for reducing your combined tax. See our federal income tax guide.

  2. Harvest losses before year-end. Review your portfolio in November and December for loss-harvesting opportunities. Realized losses offset gains dollar for dollar, reducing both federal and Virginia tax. Be careful of the wash sale rule.

  3. Use tax-advantaged accounts. Gains within 401(k), IRA, and Roth IRA accounts are not subject to Virginia capital gains tax (or federal tax until withdrawal). Maximize contributions to these accounts to shelter investment growth.

  4. Consider installment sales. For large asset sales (real estate, business interests), an installment sale spreads the gain over multiple years, potentially keeping more income in lower federal brackets and reducing NIIT exposure.

  5. Donate appreciated securities. Instead of selling appreciated stock and donating cash, donate the stock directly to a qualified charity. You receive the full fair market value deduction while avoiding capital gains tax at both federal and state levels. Consult our self-employment tax guide if the gains relate to business assets.

  6. Plan around the ~$17,000 bracket threshold. Virginia’s top rate applies at a low income level. If your total income is near the bracket thresholds, timing gains and deductions can save a small amount, but for most taxpayers, the ~5.75% rate is effectively flat.

  7. Consider your Virginia estimated tax payments. Large capital gains can result in underpayment penalties if not covered by withholding or estimated payments. If you have a significant gain, make an estimated payment to Virginia by the quarterly due date.


Key Takeaways

  • Virginia taxes all capital gains as ordinary income at rates up to ~5.75%, with no preferential rate for long-term gains.
  • The top ~5.75% rate applies to income over ~$17,000, meaning most capital gains are taxed at the maximum rate.
  • Combined federal and Virginia capital gains tax can reach approximately ~29.55% for high-income taxpayers (including NIIT).
  • Virginia’s rate is competitive with neighboring Maryland (when county taxes are excluded) and lower than D.C.’s ~10.75%.
  • Tax-loss harvesting, charitable giving of appreciated assets, and use of tax-advantaged accounts are the primary strategies for reducing capital gains tax.
  • Capital losses offset gains dollar for dollar and can offset up to ~$3,000 of ordinary income per year.

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