VERMONT
Return to Retiree Tax Map
NICKNAME
The Green Mountain State
BOTTOM LINE: NOT TAX-FRIENDLY
Vermont doesn't coddle retirees. Not only does it tax most retirement income, including Social Security, it has a steep top income tax rate. Vermont's state sales-tax rate is 6%, and local jurisdictions may add 1%. Vermont’s property taxes are among the ten highest in the U.S., according to the Tax Foundation.
STATE SALES TAX
6%. Medical items, food, equipment and fuel, residential fuel and electricity, clothing and shoes with a purchase price of $110 or less, and prescription and nonprescription drugs are exempt. Local jurisdictions may add 1%. Tax is 9% on prepared foods, restaurant meals and lodging, and 10% on alcoholic beverages served in restaurants.
INCOME-TAX RANGE
Low: 3.55% (on up to $35,350 of taxable income for singles, up to $59,050 for married couples)
High: 8.95% (on taxable income over $388,350 for singles and joint filers)
SOCIAL SECURITY
Social Security benefits are taxed.
EXEMPTIONS FOR OTHER RETIREMENT INCOME
Railroad Retirement benefits are exempt, but all other retirement income is taxed. Out-of-state government pensions are fully taxed.
PROPERTY TAXES
Real estate taxes have two components: school property tax and municipal property tax. Both taxes are billed and collected by the town or city where the real estate is located. A statewide education tax is imposed on all nonresidential and homestead property. For 2012, the base tax rate for nonresidential property is $1.38 per $100, and the base rate for homestead property is 89 cents multiplied by the district spending adjustment for the municipality per $100 of equalized education property value.
Eligible Vermont residents can make a claim for a rebate of their school and municipal property taxes if household income does not exceed a certain level. Generally, household incomes of $97,000 or more do not receive an adjustment. The maximum property tax adjustment for 2012 is $8,000. The rebate refunds the difference between a percentage of the claimant's household income and the eligible taxes. Eligible taxes are combined school and municipal property taxes minus the education property tax payment.
Vermont levies a property transfer tax of 0.005 on the first $100,000 of the home’s value and 0.0125 on the balance. The first $110,000 is exempt if the mortgage was obtained through the Vermont Housing Finance Agency.
Tax breaks for seniors: There is a property-tax exemption for veterans. The first $10,000 (may be increased up to $40,000 by a vote of the town) of appraisal value of the residence of a qualifying veteran, his or her surviving spouse or child may be exempt.
INHERITANCE AND ESTATE TAXES
Vermont has no inheritance tax, but it does have an estate tax if property exceeds $2.75 million. A bill is pending to increase the threshold for Vermont’s estate tax to the amount of the federal exemption, which for 2012 is $5.12 million. The maximum estate-tax rate is 16%.
Visit RetirementLiving.com for a complete rundown of taxes in Vermont.
Printer-friendly version
