Virginia taxes capital gains as ordinary income — up to 5.75% — stacked on top of federal tax, so selling appreciated real estate can cost roughly ~29.6% of the gain. A 1031 exchange into a Delaware Statutory Trust lets Virginia investors defer that combined bill and trade active landlording for passive institutional real estate.
The Virginia tax math
Here's the tax stack on a long-held rental sold for a $1.5M gain (excludes depreciation recapture, taxed separately at up to 25%):
| On a $1.5M gain | Tax |
|---|---|
| Federal long-term capital gains (20%) | $300,000 |
| Net investment income tax (3.8%) | $57,000 |
| Virginia income tax (5.75%) | $86,250 |
| Total if you simply sell | $443,250 |
| Tax if you 1031 into a DST | $0 deferred |
In Virginia's top bracket, roughly the combined rate above goes to tax if you sell outright — versus $0 now with a qualifying 1031 exchange. Run your Virginia numbers →
Virginia 1031 rules
Rules summarized as of 2026 — verify with your tax advisor.
Conforms to federal §1031
Virginia conforms to IRC §1031, so a qualifying exchange defers Virginia tax as well as federal tax.
Withholding at sale
Virginia may require nonresident withholding at closing; a qualifying 1031 exchange generally defers it. Confirm specifics with your closing agent.
How gains are taxed
Taxed as ordinary income — up to 5.75%.
Virginia market snapshot
Illustrative — wire to a market-data feed; refreshed quarterly.
Baker 1031 in Virginia
Realized (acquired, held, sold) programs on Virginia assets. Joined from full-cycle-deals.csv; sponsor-reported, net-to-investor, not independently verified; past performance ≠ future results.
| Program | Sponsor | Avg annual | Equity × | Hold |
|---|---|---|---|---|
| Applebee's — Virginia Beach | AEI | 11.22% | 1.19x | 2.55 yr |
| Aaron's Inc. – Newport News, VA — Newport News | Four Springs | 7.20% | 1.22x | 3.01 yr |
| Viscoe Road TIC — Radford | Time Equities | — | 0.00x | 9.02 yr |
| Springhouse — Newport News | Bluerock | 13.60% | 2.40x | 6.67 yr |
| Marriott Residence Inn — Alexandria | Syndicated Equities | -1.37% | 0.87x | 10.08 yr |
| Embassy Suites – Williamsburg, VA — Williamsburg | Peachtree Group | 8.70% | 1.41x | 4.29 yr |
| Tractor Supply — Bristol | AEI | 9.46% | 3.49x | 22.94 yr |
| CSRA Perry Place Apartments, DST — Richmond | Capital Square | 8.70% | 1.44x | 4.8 yr |
See every Virginia deal in the Data Center →
Current offerings for Virginia investors
| Offering | Sponsor | Type | Status |
|---|---|---|---|
| BR Diversified Industrial Portfolio 7, DST | Bluerock | Industrial | Available |
| CS1031 Richmond Active Living Apartments, DST | Capital Square | Senior Living | Closed |
| ExchangeRight Essential Income 9 DST | ExchangeRight | Net Lease | Closed |
DST sponsors based in Virginia
Learn more
Virginia FAQ
What is the capital gains tax rate in Virginia?
Virginia taxes capital gains as ordinary income, up to 5.75%, with no separate long-term rate. Combined with the federal 20% rate and the 3.8% net investment income tax, a high-bracket Virginia seller can face roughly ~29.6% on a real estate gain.
Does Virginia recognize 1031 exchanges?
Yes. Virginia conforms to IRC §1031, so a properly structured exchange defers Virginia tax as well as federal tax.
Why use a 1031 exchange in Virginia?
To defer the tax on a large gain (up to about ~29.6% combined) and move from active landlording into passive, professionally managed real estate while keeping your full equity invested. These are Regulation D offerings for accredited investors.
Disclosures
This page is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. State tax and 1031 rules summarized here are general, current as of 2026, and not tax advice — verify with your CPA and attorney. For accredited investors only. Representatives may transact business only in states where registered or exempt. Securities offered through Aurora Securities, Inc., member FINRA/SIPC; Baker 1031 Investments, LLC is independent of Aurora. Performance shown is sponsor-reported, realized programs only, net of fees, not independently verified, and not indicative of future results.