StructuredSales.org
StructuredSales.org
West Virginia's 2026 income-tax cut arrived the way several others did this year: a bill signed in the spring, rates rewritten back to January 1. Senate Bill 392 was signed March 31, 2026. The Tax Division describes it as a 5% across-the-board cut, retroactive to the start of the year, now codified at W. Va. Code § 11-21-4j. Capital gain is not pulled out of that table. It is West Virginia taxable income, and the top rate on it is 4.58% once taxable income clears $60,000.
The sales that hit the top bracket are concentrated. Northern panhandle and north-central counties are full of people who leased Marcellus acreage and are now being offered a check for the minerals themselves. The Monongahela woods still change hands as timber and as surface. The eastern panhandle, closer to the Washington commute than to Charleston, sells farmland, orchards, and houses that outgrew the federal home-sale exclusion. Chemical and manufacturing families along the Kanawha are a smaller, older group selling companies rather than acreage. Ohio's guide covers the same Utica geology from the other side of the river, with a different rate and a business-income question West Virginia does not ask. The eastern panhandle borders Maryland, which adds a county income tax and a 2% capital-gain surtax West Virginia does not have.
For single filers, joint filers, heads of household, and estates and trusts, § 11-21-4j reads:
Married filing separately uses half the dollar thresholds and half the base tax at each step, and it reaches 4.58% above $30,000. Joint filers do not get a wider top bracket. A couple and a single person both pay 4.58% on taxable income above $60,000. That is the fact that decides whether an installment sale changes the West Virginia total.
Top rate for 2026: 4.58% above $60,000 of West Virginia taxable income, retroactive to January 1. The tax on the first $60,000 is $1,950.50, not $2,748. The $797.50 gap is the only bracket benefit an installment can reuse.
There is no West Virginia deduction that excludes a percentage of long-term gain, and no retired-farmer exclusion. If other taxable income is already above $60,000, every additional dollar of gain costs 4.58 cents this year, lump sum or installment. West Virginia has cut rates more than once in recent years, including through a revenue trigger adopted in 2023 and through this year's separate bill. A payment recognized in a later year uses that year's table. This article does not assume a further cut. Anyone who builds a model on one should label it as a guess about future legislation or a future trigger finding.
A lessor who is paid every month is earning ordinary income. Selling the mineral interest can convert the remaining value into long-term capital gain, which is why mineral buyers mail so many offers. The federal character rules, depletion, and § 1254 recapture are covered in selling mineral rights. The West Virginia piece is simpler and harsher than the brochure: ordinary recapture is taxed in the year of sale, at ordinary rates up to 4.58%, and it cannot ride IRC § 453. The capital-gain remainder can. Each year's recognized gain goes into that year's West Virginia taxable income.
Residents are taxed on West Virginia taxable income from the state's starting point, which follows the federal return and then modifies it. Nonresidents are taxed on West Virginia-source income. A mineral interest and a timber tract located in the state do not stop being West Virginia property because the seller bought a house in Florida. Installment principal collected after the move is still source income in the year it is recognized, at the rates then in effect. Section 11-21-4j also resets several nonresident withholding references that still said 6.5% in older sections; for tax years beginning on or after January 1, 2026, those references operate at 4.58% for individuals. Withholding is not the final tax. The return is.
Timber and surface acreage follow the same source logic. Equipment and roads that were depreciated throw § 1245 recapture at closing. The land is the installment asset. Families comparing a sale during life with a hold for stepped-up basis should read sell or hold for a step-up with the federal basis rule in one hand and this bracket table in the other. West Virginia does not levy a state estate tax. That is a different statement from "holding is free," because federal estate tax and the income tax given up by selling are separate computations.
The illustration is a married couple whose only taxable income in the years shown is the gain. That is a ceiling case, useful because it shows the most the West Virginia brackets can do. A pension that already produces $60,000 of West Virginia taxable income erases the state difference described below. Price of the mineral interest is $1,000,000. Basis is $160,000. Long-term capital gain is $840,000, and the estimate assumes § 1254 recapture is zero. If depletion reduced basis, part of the closing is ordinary and this table overstates the gain that can be spread. Seven level years recognize $120,000 of gain each year. Interest on the unpaid balance is omitted; it would be ordinary income on top of these figures. The price is under $5 million, so the federal § 453A interest charge is not included.
Federal assumptions are the 2026 figures in Rev. Proc. 2025-32. With no other taxable income, the 0% long-term band covers the first $98,900 of gain. The standard deduction of $32,200 is what makes "no taxable income before the gain" consistent with about $32,200 of other adjusted gross income. Modified adjusted gross income for the net investment income tax is that $32,200 plus the year's gain. The lump-sum year puts $98,900 at 0%, $514,800 at 15% ($77,220), and $226,300 at 20% ($45,260), then 3.8% on $622,200 of the gain ($23,644). Each installment year puts $98,900 at 0% and $21,100 at 15% ($3,165) and stays under the $250,000 net-investment-income-tax threshold.
West Virginia tax on $840,000 is $1,950.50 plus 4.58% of $780,000, which is $37,674.50. Tax on $120,000 is $1,950.50 plus 4.58% of $60,000, which is $4,698.50. Seven of those years cost $32,889.50. The state difference is $4,785.00, which is the lower-bracket gap of $797.50, reused across the extra years, with rounding to the statutory half dollar. If other West Virginia taxable income is already over $60,000, both paths owe 4.58% of $840,000, or $38,472, and that $4,785 disappears.
| Tax on the $840,000 gain | Lump sum in 2026 | Seven-year total |
|---|---|---|
| Federal long-term capital gain tax | $122,480 | $22,155 |
| Federal 3.8% net investment income tax | $23,644 | $0 |
| West Virginia income tax | $37,674.50 | $32,889.50 |
| Combined | $183,798.50 | $55,044.50 |
The combined difference is $128,754. About $123,969 of it is federal, mostly from keeping each year out of the 20% bracket and out of the 3.8% tax. About $4,785 is West Virginia, and only in the no-other-income case. A seller who already lives above $60,000 of West Virginia taxable income should treat the state column as a wash and decide the installment on the federal numbers, on cash flow, and on whether a rated payment stream is preferable to a buyer's note. Installment structure versus seller financing is that last comparison. Related-party resales can accelerate the federal and West Virginia gain under § 453(e) even when the brackets were modeled cleanly.
4.58% of West Virginia taxable income over $60,000 for single filers, joint filers, and heads of household. Married filing separately reaches 4.58% over $30,000. Senate Bill 392, signed March 31, 2026, set those rates for taxable years beginning on or after January 1, 2026. There is no separate long-term capital-gains rate.
For joint filers, single filers, and heads of household: 2.11% on the first $10,000, 2.81% on the amount over $10,000 through $25,000, 3.16% over $25,000 through $40,000, 4.22% over $40,000 through $60,000, and 4.58% above $60,000. The tax on exactly $60,000 is $1,950.50. Married filing separately uses half those dollar thresholds.
Only the slice that would otherwise sit in the lower brackets. Once West Virginia taxable income is already above $60,000 before the gain, additional gain is taxed at 4.58% whether it arrives in one year or several, and the state total does not change if the rate stays put. A seller with little other taxable income restarts the lower brackets each year. On an $840,000 gain split over seven years with no other taxable income, that bracket restart is about $4,785. The larger difference is federal.
West Virginia taxes residents on West Virginia taxable income broadly and taxes nonresidents on West Virginia-source income. Gain from real property in West Virginia, which is how a mineral interest is usually classified, stays sourced to the state. Installment principal recognized in a later year is income of that year, taxed at that year's rates. A move to a state with no income tax does not repeal the West Virginia return on that source income.
Monthly royalty is ordinary income taxed as it is received. Selling the mineral interest can produce long-term capital gain if the federal holding-period and character rules are met. Depletion that reduced basis can be recaptured as ordinary income under section 1254 in the year of sale, and that ordinary piece cannot be spread on the installment method. The capital-gain remainder can.
Last reviewed: October 22, 2026.
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