Tax in Vermont: a complete guide
This guide details what you need to know about your tax liability if you live in Vermont.
Vermont state income tax
Vermont has a graduated state income tax rate ranging from 3.35 percent to 8.75 percent.
These ranges are broken down as follows for single filers:
| Vermont taxable income | Tax rate |
|---|---|
| $3,500—$48,900 | 3.35 percent |
| $48,901—$113,550 | 6.6 percent |
| $113,551—$233,050 | 7.6 percent |
| $233,050 and over | 8.75 percent |
For those who are married and filing separately, the ranges are as follows:
| Vermont taxable income | Tax rate |
|---|---|
| $10,538—$86,388 | 3.35 percent |
| $86,389—$193,938 | 6.6 percent |
| $193,939—$289,988 | 7.6 percent |
| $289,989 and over | 8.75 percent |
Vermont also has a graduated corporate income tax, ranging from 6.00 percent to 8.5 percent.
Residents of Vermont also need to be aware of their federal tax obligations. In 2023, seven different federal income tax brackets dictate how much you’ll owe each tax year.
If you’re unsure about filing your taxes, a financial advisor can help. Here, they can review your income sources and develop a unique tax strategy just for you.
Vermont Sales Tax
Vermont has a statewide sales tax rate of 6 percent.
However, local counties and municipalities can also add their own rates on top of this of one percent. This brings the local sales tax to 7 percent. However, according to the Tax Foundation, the average combined tax rate is 6.36 percent.
Certain items are exempt from sales and use tax, including:
Groceries
Clothing
Prescription drugs
Menstrual products
Diapers
Unlike other states, Vermont does not hold an annual tax holiday.
Vermont Property Tax
According to data from the U.S. Census Bureau, the average American household spends $2,690 on real estate property taxes, with the national average around 1.07 percent.
Vermont’s average effective property tax rate is 1.78 percent, which is among the highest in the US. However, the amount of tax you pay will depend on where in the state you live. For example, in Windsor County, you will pay 1.92 percent. In Franklin County, it comes in at around 1.52 percent.
Like many other states, Vermont's property tax is collected locally, meaning any property tax you owe must be paid directly to the town where the property is located.
Vermont Motor Tax
When buying a vehicle in Vermont, you must be aware of the tax you must pay.
You must pay six percent state sales tax when purchasing any new or used vehicle.
Vermont Estate Tax
Vermont is one of the few states that does levy estate tax. However, you will only pay estate tax should your estate surpass $5 million upon death.
Vermont’s estate tax is applied at a flat rate of 16 percent. This is only applied to the amount surpassing $5 million. For example, if your estate is worth $6 million, you will only be taxed on $1 million.
It’s important to remember federal estate tax will also apply if your estate is above a certain threshold ($12.92 million in 2023); otherwise, there will be no fees on the estate or inheritance you leave behind.
Vermont Retirement Tax
Unlike some states, Vermont taxes retirement income from savings accounts such as 401(k) and IRA plans. This is calculated on the state income tax system. However, Vermont does offer a deduction of up to $10,000 for some retirement income.
Social Security benefits are tax-exempt for joint filers with an adjusted gross income (AGI) of $65,000 or less.
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.