Bottom Line
Middle-Class Families: Not Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Least Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
Just across the Connecticut River from no-tax New Hampshire, Vermont is a different place altogether. You'll need plenty of firewood to make it through Vermont winters, and plenty of money for the tax bill, too. The Green Mountain State has a steep top income tax rate – 8.75% (although most taxpayers don't pay that much). Plus, Vermont's statewide median property tax rate is the fifth-highest in the U.S.
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But at least the state's sales tax is on the low end. The average combined state and local tax rate is only 6.24%, and food for home consumption and clothing are exempt, limiting the impact of this tax (remember, no-sales-tax New Hampshire is next door).
Vermont Income Taxes
Vermont Income Tax Range
Low: 3.35% (on up to $40,950 of taxable income for singles and up to $68,400 for joint filers)
High: 8.75% (on taxable income over for $206,950 for singles and up to $251,950 for joint filers)
Vermont Taxation of Social Security Benefits
Social Security benefits are not taxed for joint filers with a federal adjusted gross income of $65,000 or less and other taxpayers with a federal AGI of $50,000 or less. Taxpayers who exceed those income limits may qualify for a partial exemption on their benefits. The exclusion for Social Security benefits cannot be taken if an exclusion for government (including military) pension income is claimed.
Vermont Tax Breaks for Other Retirement Income
The first $10,000 of income from the federal Civil Service Retirement System or a military pension is not taxed for joint filers with a federal adjusted gross income of $65,000 or less and other taxpayers with a federal AGI of $50,000 or less. The exemption also applies to income from a federal, state, or local government contributory annuity, pension, endowment, or retirement system based on earnings that were not covered by the federal Social Security Act. Taxpayers who exceed the income limits may qualify for a reduced exemption. The exclusion for government (including military) pension income cannot be taken if an exclusion for Social Security benefits is claimed.
Railroad Retirement benefits are fully exempt.
Vermont Sales Tax
6% state levy. Municipalities can add 1% to that, but the average combined state and local rate is 6.24%, according to the Tax Foundation.
- Groceries: Exempt
- Clothing: Exempt
- Motor Vehicles: Exempt from ordinary sales tax, but taxable under special 6% purchase and use tax
- Prescription Drugs: Exempt
Vermont Real Property Taxes
In Vermont, the median property tax rate is $1,902 per $100,000 of assessed home value.
Vermont Property Tax Breaks for Retirees
For 2022, senior homeowners with 2021 household income of $136,900 or less may qualify for a property tax credit of up to $8,000. To satisfy the household income requirement, homeowners age 65 and older don't have to include interest and dividend income greater than $10,000. In addition, a spouse's income is not included if he or she is at least 62 years old and permanently living in a nursing home or other care facility with no reasonable prospect of returning home. If you're at least 62 years old, a person who lives with you to provide attendant care, homemaker, or companionship services so that you can remain in your home is not considered a member of your household.
Vermont Motor Fuel Taxes
Gasoline: 36.36¢ per gallon.
Diesel: 32¢ per gallon.
Vermont Sin Taxes
Cigarettes: $3.08 per pack
Snuff & other smokeless tobacco: $2.57 per ounce
Cigars: Variable by price; as high as $4 per cigar
Other tobacco products: 92% of wholesale price
Vapor products: 92% of wholesale price
Beer: $0.27 per gallon
Wine: $0.55 per gallon
Liquor: $7.68 per gallon (the liquor tax is an estimate by the Distilled Spirits Council of the United States and published by the Tax Foundation)
Marijuana: 14% excise tax, plus general sales tax
Vermont Estate and Inheritance Taxes
Vermont has an estate tax with an exemption of $5 million. The tax rate is a flat 16%.
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