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Vermont Personal Income Tax Laws

There are considerable variations in state personal income taxes depending on where you live. Most states tax income at different rates depending on a person’s taxable income (a progressive income tax). Some states have one rate for all taxable income (a flat tax). Then there are nine states without a broad income tax – Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Here’s a quick summary of Vermont’s personal income tax laws.

Vermont’s Income Tax

Vermont has a progressive state income tax. Five tax rates tax income earned in different amounts, or “bands,” at higher levels. The lowest rate starts at 3.55%, then progressively bumps up to 7%, 8.25%, 8.9%, and tops out at 9.4%. Higher rates kick in when a taxpayer's income reaches a set amount. For example, a married joint filer is taxed at 3.55% on income up to $56,700, then at 7% for income up to $137,050, and so on. The income threshold for higher rates are annually adjusted for inflation by the state Department of Taxes.

There are also different tax levels depending on a taxpayer's filing status. Married joint filers generally pay the lowest personal income tax, following by heads of household, then unmarried individuals, married individuals filing separately, and finally estates and trusts. All are taxed at the same rates but the higher rates kick in at lower income bands. This means they pay more tax overall.

Vermont residents and non-residents are taxed at different levels as well. State residents pay income tax based on their adjusted gross income; non-residents pay tax on income earned in Vermont, such as from rents, property sales, and wages and salaries. A series of credits, incentives, and deductions also exist. Most of these lower the tax burden for low income taxpayers, taxpayers with children, and businesses investing in Vermont.

Code Sections Tit. 32, §§ 5821, et seq.
Who is Required to File? Residents, nonresidents, estates, and trusts.

For married individuals filing jointly, Vermont has progressive tax rates based on taxable income. The statute sets these rates and income threshold as follows:

$0-$56,700.00 is taxed at 3.55%;

$56,700.01-$137,050.00 is taxed at 7%;

$137,050.01-$208,850.00 is taxed at 8.25%;

$208,850.01-$372,950.00 is taxed at 8.9%;

$372,950.01 and over is taxed at 9.4%.

These rates are adjusted for inflation each year. The same rates apply to all personal income tax filers but at different levels depending on a taxpayer's status.

Federal Income Tax Deductible No
Federal Income Used as Basis Yes

Related Resources for Personal Income Tax Laws

State personal income tax laws are often complicated and difficult to understand. For more information or help with your state taxes, we recommend speaking with a local tax lawyer.

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