My husband inherited agricultural land in Virginia in 2006. He is selling it this year (2017) we currently live in Texas. How do we if any pay taxes?

[Opus 17 · Accepted solution]

The hard way, like anyone else.

You will owe federal capital gains tax on the gain, which is the difference between the value when he inherited the land and the selling price. You may need to contact an appraiser to document the value in 2006 if you did not do so at the time (this can be done from historical records).  The net selling price can be reduced by legal expenses associated with the sale (transfer taxes, mortgage recording fee, your legal fees, inspections if the seller pays in that area).  He can increase the cost basis by the value of any permanent improvements that were made between 2006 and now.

Then since this is VA income you will owe VA state income tax on the income (amount of gain, not amount of cash received).  Since you are not VA residents, you will prepare a VA non-resident return which will only apply VA income tax to your VA-source income and not income from any other state.

Texas does not have a personal income and does not have a separate capital gains tax, so you will owe no tax in Texas.

[Hal_Al]

If you lived in a state with an income tax, your home state would give you a credit for the tax you pay VA. But since TX does not have  a state tax, you still have to pay tax to VA