Gifting Your Home to Children in Virginia: What Parents Should Know About Taxes

The 2026 Gift Tax Numbers

For 2026, the federal annual gift tax exclusion is $19,000 per recipient. That means you can give any one person up to $19,000 in a single year without using any of your lifetime exemption or filing a gift tax return. The lifetime gift and estate tax exemption is $15,000,000 per individual, or $30,000,000 for a married couple using portability, a level made permanent by the 2025 federal tax law. Gifts above the annual exclusion count against that lifetime exemption and require filing IRS Form 709.

For most families, a house is worth far more than $19,000, so a home gift is a large gift. The good news is that few Virginia families approach the $15 million exemption. The trade-off you need to weigh is not gift tax, which most people never pay, but the capital gains tax your child may face when they eventually sell the home.

The Big Catch: Carryover Basis

This is the detail that surprises most people. When you gift a home, the child does not receive the home's current value as their tax basis. Instead, under federal tax law, a gift carries over your original basis, the amount you originally paid for the home plus certain improvements, not its market value today.

If you bought the home for $120,000 decades ago and it is worth $500,000 today, your basis is still around $120,000. If your child later sells for $500,000, they may owe capital gains tax on roughly $380,000 of gain. That built-up appreciation, which spans your years of ownership, becomes the child's tax bill instead.

When the Child Sells: Capital Gains Rules

Long-term capital gains are generally taxed at 0%, 15%, or 20%, depending on income, with an additional 3.8% Net Investment Income Tax for higher earners. There is an important exception, though. If the child uses the home as their principal residence for at least two of the five years before the sale, they may exclude up to $250,000 of gain, or $500,000 if married and filing jointly. A child who moves in and stays for two-plus years can therefore wipe out a large share of the tax. A child who sells quickly after a gift has no such protection.

This is why a lifetime gift can be a good plan if the child genuinely intends to live in the home. It is often a poor plan if they plan to sell it soon.

The Alternative That Often Wins: Passing the Home at Death

When a home is inherited, the child receives a step-up in basis to the home's fair market value on the date of death. In the example above, the child's basis would become the full $500,000, so a later sale at that price would produce little or no capital gains tax. For many Virginia families, this makes keeping the home out of a lifetime transfer, through a will, trust, or transfer-on-death deed, the tax-wise choice. A Virginia transfer-on-death deed, sometimes called a beneficiary deed, can pass the home directly to a named beneficiary without probate while preserving the step-up.

Other Reasons to Think Twice

Beyond taxes, gifting your home can affect your own plans. Once the deed is signed over, you may lose control of the property and the equity that could otherwise fund your own care. A gift can also have implications for Medicaid eligibility, because programs that pay for long-term care look back at asset transfers made within the five years before an application. Finally, understand that Virginia does not impose its own gift tax, and Virginia has no estate tax, so the decisions here are driven almost entirely by federal rules rather than state ones.

Talk to a Professional Before You Transfer

The right structure depends on your goals, your home's value, your child's plans, and your own financial security. An elder law attorney and a CPA who works with Virginia homeowners can model the capital gains, document the basis, and set up the deed so the home passes the way you intend. This is one area where a few hundred dollars of professional advice can save tens of thousands in taxes.