Updated October 7, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. The 2025 Form 760 instructions say “Enter the federal adjusted gross income from your federal return”, and a gain excluded under section 121 is not in it. Gain above the exclusion is taxed at graduated rates, up to “and 5.75% for income over $17,000”. Nonresident sellers register with Virginia Tax at closing.
Virginia tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Starts from federal adjusted gross income, which excludes a gain excluded under section 121 (the instructions do not separately mention it) |
| Rate on gain above the exclusion | Graduated: 2% up to $3,000, 3%, 5%, then 5.75% over $17,000 |
| Collected at the sale | Nonresident sellers register with Virginia Tax at closing (Form R-5, through the settlement agent); no rate or amount is printed in the documents read. The deed carries a grantor’s tax of 50 cents for each $500 and a state recordation tax of 25 cents for each $100 |
| Source | Virginia Department of Taxation; Virginia General Assembly (LIS) |
What the Virginia documents say
The 2025 Form 760 instructions begin the computation with “Enter the federal adjusted gross income from your federal return”. Under the federal statute, “Gross income shall not include gain from the sale or exchange” of a principal residence that meets the ownership and use tests. The instructions do not separately mention section 121. That is reasoning from two documents.
The instructions print the rate schedule: 2% up to $3,000, 3% from $3,001 to $5,000, 5% from $5,001 to $17,000, and “and 5.75% for income over $17,000”. They also say Virginia uses “a fixed conformity date of December 31, 2025” for the Internal Revenue Code.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Virginia sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by Virginia. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000 in income, taxed at the graduated rates up to 5.75%; this page computes no tax because the bracket depends on the rest of the return.
What is collected at the sale
Virginia Tax’s page for nonresident property owners says sales “not subject to the Virginia income tax are exempt from registration”, and the statute covers “every nonresident payee receiving payments from the transfer of fee simple title”. The documents read print no withholding rate or amount for the sale.
Virginia also taxes the deed. Va. Code 58.1-802 sets a grantor’s tax of 50 cents “for each $500 or fraction thereof” and says the tax “shall be paid by the grantor”, though the grantor and grantee may arrange for the grantee to pay. Va. Code 58.1-801 levies a state recordation tax of “25 cents on every $100 or fraction thereof” of the consideration or actual value. Local recordation taxes were not read.
What changes in 2026
Virginia: the instructions say the 2026 General Assembly set a fixed Internal Revenue Code conformity date of December 31, 2025, replacing rolling conformity.
What the documents do not say
- The instructions do not mention section 121, so conformity is reasoned from the federal starting point. The documents read print no withholding rate or amount for nonresident sellers. The instructions are for tax year 2025.
Common mistakes
- Reading the nonresident registration as a rule for a resident’s main home; the page read is about nonresident property owners.
- Assuming the fixed conformity date changes the federal exclusion; the instructions only fix the date to which Virginia follows the Code.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Virginia taxes capital gains, Virginia retirement taxes, and home sale exclusion calculator.
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Answer againSources
- 2025 Form 760 Resident Individual Income Tax Instructions: https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2025-760-instructions.pdf
- Registration of Nonresident Property Owners: https://tax.virginia.gov/registration-nonresident-property-owners
- Va. Code 58.1-317 Filing of estimated tax by nonresidents upon the sale of real property: https://law.lis.virginia.gov/vacode/58.1-317/
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
- Va. Code 58.1-802, Additional tax paid by grantor (Virginia General Assembly; read October 8, 2026): https://law.lis.virginia.gov/vacode/58.1-802/
- Va. Code 58.1-801, Deeds generally (Virginia General Assembly; read October 8, 2026): https://law.lis.virginia.gov/vacode/58.1-801/
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.