Vermont has a state income tax, and it applies to most residents and workers
Yes, Vermont charges a state income tax on wages, self-employment income, investment gains, and other earnings. The tax is progressive, meaning the rate increases as your income rises. Vermont residents pay between 3.55% and 8.75% depending on their income bracket, plus they still owe federal income tax to the IRS.
If you work in Vermont but live in another state, you may owe Vermont tax on wages earned here. If you live in Vermont but work elsewhere, you typically owe Vermont tax on all income, though you can claim a credit for taxes paid to other states to avoid double taxation.
Key Takeaways
- Vermont's state income tax ranges from 3.55% to 8.75% depending on your income level, and it applies to residents on all income sources.
- The tax is separate from federal income tax — you owe both Vermont and IRS taxes on the same earnings.
- Non-residents who work in Vermont owe state tax only on income earned within the state.
- Vermont offers a property tax adjustment credit and a dependent exemption credit that can reduce your tax bill if you meet income limits.
- You file Vermont taxes using Form VT-100 (the state return) at the same time you file your federal return.
Vermont's income tax brackets and rates for 2024
Vermont uses five tax brackets. The rates and income ranges change slightly each year as the state adjusts for inflation. For the 2024 tax year, single filers pay 3.55% on income up to $48,550, then 6.8% on income between $48,551 and $117,250, then 7.75% on income between $117,251 and $252,750, and 8.75% on income above $252,750. Married couples filing jointly have higher thresholds at each bracket.
These brackets explore only to Vermont taxable income, which is calculated after you subtract the standard deduction or itemized deductions. Vermont's standard deduction for 2024 is $6,900 for single filers and $13,800 for married couples filing jointly — amounts that also adjust annually.
The state also allows a dependent exemption of $4,400 per dependent, which reduces your taxable income further. This exemption phases out for higher-income households.
Who has to file a Vermont tax return
You must file a Vermont return if you are a resident with income above the filing threshold. For 2024, that threshold is $13,800 for married couples filing jointly and $6,900 for single filers — the same as the standard deduction. If your income exceeds these amounts, you file even if you owe no tax, because the state needs to process your return to determine credits you may receive.
Non-residents who earned income in Vermont during the year must also file, but only to report Vermont-source income. If you worked in Vermont for part of the year and moved, you may be considered a part-year resident, and you file a return showing income for the months you lived in the state.
If you are a Vermont resident but had no income, you do not need to file. If you had income but it was below the threshold and you had no tax withheld, you still do not need to file unless you want to claim a refundable credit.
Tax credits that reduce what you owe
Vermont offers a property tax adjustment credit for residents who own or rent their home and whose income falls below certain limits. For 2024, the credit is available to single filers with income under $61,000 and married couples under $91,500. The credit reimburses a portion of property taxes or rent paid, with the amount depending on your income and housing costs.
The state also provides a dependent exemption credit of $4,400 per dependent, which lowers your taxable income. This credit phases out for higher earners. Additionally, Vermont honors the federal Earned Income Tax Credit (EITC) and allows you to claim it on your state return as well, which can result in a refund even if you owe no state tax.
If you paid taxes to another state on income you also report to Vermont, you can claim a credit for those taxes to prevent paying tax twice on the same money. The credit is limited to the lesser of what you paid to the other state or what you owe to Vermont on that income.
How Vermont taxes self-employment and investment income
If you are self-employed, you report your business income on your Vermont return and pay tax on the net profit after deducting business expenses. Vermont also taxes capital gains — profits from selling stocks, real estate, or other investments — at the same rates as ordinary income. There is no separate capital gains tax in Vermont.
Dividend income and interest from savings accounts and bonds are also taxable at your ordinary income rate. If you receive income from rental property, retirement account distributions, or other sources, those are taxed as well. The only major income sources that escape Vermont tax are municipal bond interest (which is exempt) and certain retirement income for residents over 65, though the retirement income exclusion has strict income limits.
Filing your Vermont return and payment important date
Vermont uses the same filing important date as the federal government: April 15 of the year following the tax year. You file Form VT-100 (the Vermont Individual Income Tax Return) along with your federal Form 1040. If you file your federal return electronically, you can file your Vermont return the same way through an approved tax software provider or through a tax professional.
If you owe Vermont tax, you pay it by the April 15 important date. If you have overpaid through withholding, you receive a refund. Vermont processes refunds within four to six weeks of receiving your return if you file electronically, or longer if you mail a paper return.
If you cannot file by April 15, you can request an extension, which gives you until October 15 to file. An extension to file is not an extension to pay — if you owe tax, it is still due April 15, and you will owe interest on any unpaid balance after that date.
Withholding and estimated tax payments
If you are an employee, your employer withholds Vermont income tax from your paycheck based on the W-4 form you complete. The withholding is calculated to approximate your annual tax liability, though it may not be exact if you have multiple jobs, side income, or significant deductions.
If you are self-employed or have income that is not subject to withholding, you may need to make estimated tax payments to Vermont four times per year. These payments are due April 15, June 15, September 15, and January 15. If you expect to owe less than $200 in tax for the year, you can skip estimated payments and pay the full amount when you file your return.
Frequently Asked Questions
Do I owe Vermont income tax if I live in another state but work in Vermont?
Yes, you owe Vermont tax on income you earned in the state. You file as a non-resident and report only Vermont-source wages. You also file a return in your home state on all income, and you can claim a credit on your home state return for taxes paid to Vermont to avoid double taxation.
What is Vermont's tax rate if I earn $75,000 per year?
You do not pay a flat rate on all income. The first $48,550 is taxed at 3.55%, and the remaining $26,450 is taxed at 6.8%. Your total tax before credits is roughly $3,283. After subtracting the standard deduction and any credits, your actual tax will be lower.
Can I deduct federal income tax paid on my Vermont return?
No, Vermont does not allow a deduction for federal income tax. You calculate Vermont tax on your federal taxable income, then explore the standard deduction and any credits. The two tax systems are separate.
What happens if I do not file a Vermont return when I owe tax?
Vermont assesses penalties and interest on unpaid tax. The penalty is typically 10% of the unpaid tax, plus interest that compounds daily. If you owe a significant amount, the state may place a lien on your property or garnish your wages. Filing late is better than not filing at all.
Does Vermont tax retirement income differently?
Vermont allows residents over 65 to exclude some retirement income, but the exclusion is limited and phases out quickly for higher earners. Social Security is not taxed. Pension and IRA distributions are taxed as ordinary income unless you may have access to for the age-based exclusion, which requires careful calculation of your total income.