Vermont Income Tax Calculator - SmartAsset (2024)

Taxes in Vermont

Vermont State Tax Quick Facts

• Income tax: 3.35% - 8.75%
• Sales tax: 6% - 7%
• Property tax: 1.90% average effective rate
• Gas tax: 32.61 cents per gallon of regular gasoline, 34.10 cents per gallon of diesel

Vermont’s tax system consists of a state personal income tax, estate tax, state sales tax, local property tax, local sales taxes and a number of additional excise taxes on products like gasoline and cigarettes. For the 2023 tax year, the income tax in Vermont has a top rate of 8.75%, which places it as one of the highest rates in the U.S. Meanwhile, total state and local sales taxes range from 6% to 7%.

A financial advisor can help you understand how taxes fit into your overall financial goals. Finding a financial advisor doesn't have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Vermont Income Taxes

Vermont has four tax brackets for the 2023 tax year, which is a change from previous years when there were five brackets. Rates range from 3.35% to 8.75%. The table below shows rates and brackets for the four main filing statuses in Vermont.

The rates above do not apply to your total income, but rather to taxable income. Taxable income incorporates adjustments, deductions and exemptions so it is almost always lower than your total income.

To calculate taxable income in Vermont, begin with federal taxable income, which can be located on your Federal Form 1040. From there, you should add any income from interest on non-Vermont state and local debt obligations (e.g. New York City municipal bonds) and add back state and local income taxes (which can be deducted federally). Then, you can subtract any income from United States debt obligations (e.g. U.S. savings notes) and subtract the capital gains exclusion (see more in the capital gains section below).

Vermont Tax Credits

After calculating your income tax liability, you may be able to claim some credits to reduce your tax bill or increase your refund. Credits available to individuals in Vermont include the Credit for Child & Dependent Care Expenses, the Elderly or Permanently Totally Disabled Tax Credit and the Earned Income Tax Credit (EITC). These are all based on federal credits. The first two are equal to 24% of the federal credit and the EITC is equal to 36% of the federal credit.

Vermont Capital Gains Tax

Most capital gains in Vermont are subject to the personal income tax rates of 3.35% - 8.75%. This includes all short-term gains, but long term-gains may be eligible for an exclusion. Since 2014, taxpayers have been able to claim an exclusion of up to $5,000 on their federal net adjusted capital gains.

Certain types of long-term gains may be eligible for an alternate exclusion equal to 40% of the net adjusted capital gain on assets held at least three years. This exclusion cannot be claimed on residential real estate used as a taxpayer’s primary or non-primary home, depreciable personal property (except farm property or standing timber) or any publicly traded financial instruments (including stocks and bonds). Income from capital gains on other types of property (like commercial real estate) is eligible for this 40% exclusion after three years.

Vermont Sales Tax

The base sales tax in Vermont is 6%. This applies to goods and some services in Vermont. Certain types of items are specifically exempted. In addition to that 6% state rate, a number of cities in Vermont collect their own 1% local option sales tax.

The table below shows the state, local option and total sales tax rates for the Vermont cities that collect the extra tax. Any cities not shown do not collect the additional 1% tax, which means that taxable goods bought there will only be subject to the 6% state rate.

The most important exemptions to these rates are for food (as long as it is intended for off-site consumption), prescription and some over-the-counter drugs, medical equipment (such as wheelchairs or oxygen equipment) and newspapers. Purchases of clothing are also untaxed, as Vermont is one of a handful of states to exempt clothing items from sales tax. Motor vehicles are subject to a 6% tax levied by the Vermont Department of Motor Vehicles and are therefore exempt from the local option rates above.

Some products are subject to rates higher than those listed above. The state tax on hotels, motels and restaurant meals (the “Meals and Rooms Tax”) is 9%, plus an additional 1% local option meals and rooms tax collected by some cities. Alcohol is also subject to a higher sales tax.

Vermont Property Tax

Vermont’s property tax rates rank among the highest in the U.S. On average, Vermont homeowners pay more than $4,570 per year in property taxes, which leads to a 1.90% average effective rate. That is the fifth-highest average effective property tax rate in the country. Note that property is assessed and tax rates are set at the municipal level in Vermont, so rates can vary from one city or town to the next.

Considering buying a house in the Green Mountain state, or looking to refinance a property you already own? Take a look at our Vermont mortgage guide for details on rates and information about getting a mortgage in the state.

Vermont Gas Tax

While gasoline purchases in Vermont are not subject to sales tax, there is an excise tax on fuel in Vermont. The state tax on regular gasoline totals 32.61 cents per gallon, and the state tax on diesel fuel is 34.10 cents per gallon.

Vermont Alcohol Tax

Taxes on alcoholic beverages in Vermont vary depending on the type of beverage. Vermont is a control state, which means that it controls the wholesale of liquor, which is sold through agency stores. The state therefore captures revenue by selling liquor, which functions as a de facto tax. It also taxes the agency stores based on their total revenue, with rates ranging from 5% to 25%. The Tax Foundation has estimated that these taxes, along with the revenue earned through the state liquor control system, are equivalent to an excise tax of $7.68 per gallon of liquor, which is the 19th-highest rate in the nation.

Beer and wine (which are not part of the control system) face two types of taxes in Vermont. The first is an alcohol sales tax of 10% (plus a 1% local option tax in some cities). The second is an excise tax, which us 27 cents per gallon of beer and 55 cents per gallon of wine.

Vermont Estate Tax

The Vermont estate tax applies to gross estates with a value of $5 million or more. If the total value of the decedent’s in-state and out-of-state assets exceeds that amount, a state estate tax return is required. Taxes may not be required if the property is being left to a surviving spouse. Any estates worth more than the $5 million cut-off are taxed at a rate of 16%.

• Multiple polls by Gallup, Inc. have rated Vermont as the least religious state in the U.S.
• The capital of Vermont is Montpelier, while the largest city is Burlington, with a population of about 44,700.
• Vermont’s state animal is the Morgan horse.