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.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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 $42,150 of taxable income for singles and up to $70,450 for joint filers)
High: 8.75% (on taxable income over for $213,150 for singles and up to $259,500 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 $1,730 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 (33¢ per gallon effective January 1, 2023).
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%.
-
-
Four Ways Women Can Take Control of Their Financial Health
Adjusting for life events, taking advantage of workplace benefits and preparing for caregiving can make a big difference in your financial future.
-
What is APY?
Savings Here's everything you need to know about APY, the important factor in how much your savings could earn in a year.
-
Etsy, eBay, PayPal Want IRS 1099-K Relief for Online Sellers
Companies like ebay, Etsy, and PayPal want Congress to raise the new $600 reporting threshold for IRS Form1099-K to give relief to millions of sellers who use their sites.
-
RMD Deadline Coming Soon for Some Seniors
The IRS is reminding some seniors and retirees of an important required minimum distribution (RMD) deadline that is just a couple of weeks away.
-
Pink Tax: What Does Price Discrimination Cost Women?
Women's History month is a good time to revisit the “pink tax”—a form of price discrimination that’s banned in many states but costs women millions of dollars each year.
-
Biden Wants a Wealth Tax: Should Billionaires Pay More?
Debate over how much tax billionaires and millionaires should pay is heating up given the wealth in the Biden budget.
-
Tax Day 2023: When Is the Last Day to File Your Taxes?
tax deadline Tax Day for most of us is April 18. This is when Federal income tax returns are due. But some people have some extra time to file. Are you one of them?
-
Income Tax Brackets for 2023 Are Set
Although the federal tax rates didn't change, the tax bracket income ranges for the 2023 tax year are adjusted to account for inflation.
-
Tax Withholding Adjustments Can Boost Your Paycheck Now and Avoid Penalties Later
W-4 form If you've had too much or too little tax withheld from your paychecks, there's still time to submit a new Form W-4 to change your tax withholding for the rest of the year.
-
2023 Standard Deduction Amounts Are Now Available
The IRS has released the 2023 standard deduction amounts. In addition to saving you money, the standard deduction can also tell you if you even have to file a return.
