State Tax Guide
Progressive Income TaxVermont State Taxes: A Simple Guide
Vermont has a state income tax, state and local sales taxes, and local property taxes. This guide breaks down how the system works in clear, simple language for individuals.
📌 Important
This is a general overview. Tax rules change, and Vermont's credit programs can vary by year. Always check official Vermont guidance or consult a tax professional for updated information and your specific situation.
💰Vermont state income tax
Vermont taxes personal income using its own brackets and definitions, separate from federal rules. The state has a progressive income tax with rates that increase as income rises.
Key points:
- Residents above certain thresholds must file a Vermont state income tax return.
- Nonresidents may need to file if they earn Vermont-source income (such as wages from a VT employer or rental income from VT property).
- Vermont offers credits and adjustments that differ from federal tax rules—including credits for low-income households, child care, and other programs.
- Vermont's taxable income calculations start with federal adjusted gross income but include state-specific modifications.
- Part-year residents must allocate income between Vermont and other states.
Most residents file a federal Form 1040 alongside a Vermont state return (Form IN-111) if they meet filing requirements.
🛍️Sales and use tax
Vermont imposes a statewide sales and use tax, and some localities add additional taxes on items like meals, rooms, and alcoholic beverages. The state sales tax applies to most retail goods.
How it works:
- Many goods are subject to Vermont sales tax when purchased in the state.
- Groceries (unprepared food) are generally exempt from sales tax.
- Use tax applies when you buy taxable items from out-of-state sellers (including online) without paying sales tax and bring them into Vermont for use.
- Meals and rooms: Lodging, prepared meals, and alcoholic beverages may have extra local taxes on top of the state sales tax.
💡 For businesses:
Vermont businesses must collect and remit state and applicable local taxes on taxable transactions to the Vermont Department of Taxes.
🏡Property taxes
Property taxes in Vermont are imposed by towns, school districts, and municipalities based on assessed real property values. Vermont is known for linking property taxes closely to education funding, with a unique system that includes income-based adjustments.
How it works:
- Homeowners receive annual property tax bills from their town or municipality.
- Property taxes are based on the assessed value of your property as determined by local assessors.
- Rates vary significantly between towns, as each municipality sets its own rates based on local budgets and education funding needs.
- Property taxes fund schools, infrastructure, and municipal services—education is a major portion of property tax bills.
💡 Income-based adjustments:
Vermont offers income-based property tax adjustments for qualifying households through the "Property Tax Credit" program. This helps make property taxes more affordable based on household income. Check with the Vermont Department of Taxes for eligibility and application procedures.
Putting Vermont taxes together
A typical Vermont resident deals with:
- ✓Federal income tax (Form 1040)
- ✓Vermont state income tax (Form IN-111)
- ✓State and local sales and use taxes on purchases
- ✓Local property taxes if they own a home or property
Understanding how filing works makes it easier to layer Vermont's tax system on top. You can also explore what Form 1040 is to understand the federal side.