Vermont collects state income tax on wages, self-employment income, and investment gains
Yes, Vermont has a state income tax. It applies to residents and part-year residents who earn income in the state. The tax rate depends on your filing status and total income — Vermont uses a progressive tax system with rates that increase as your income rises. For the 2024 tax year, rates range from 3.35% on the lowest bracket to 8.75% on the highest.
You file Vermont income tax separately from your federal return, using Form VT-100 or Form VT-100-ES if you are self-employed. The Vermont Department of Taxes processes these returns. If you work in Vermont but live in another state, you may owe Vermont tax on wages earned here, though your home state may offer a credit to avoid double taxation.
Key Takeaways
- Vermont income tax rates range from 3.35% to 8.75% depending on your income and filing status, and you file a separate state return in addition to your federal return.
- You must file if you are a Vermont resident with income above the filing threshold, which varies by age and filing status but is generally between $13,000 and $20,000 for 2024.
- Self-employed Vermonters owe both income tax and self-employment tax, and must make quarterly estimated tax payments if they expect to owe $500 or more.
- If you work in Vermont but live elsewhere, you may owe Vermont tax on wages earned in the state, though your home state may credit the Vermont tax paid.
- Vermont offers tax credits for dependents, property tax, and earned income that can reduce what you owe, and you claim these on your state return.
Who must file a Vermont income tax return
You must file a Vermont return if you are a resident or part-year resident with income above the filing threshold. The threshold depends on your age and filing status. For 2024, a single person under 65 must file if gross income exceeds $13,850. A married couple filing jointly with both spouses under 65 must file if combined income exceeds $27,700. If you are 65 or older, the threshold is higher — $15,950 for single filers and $31,700 for married filing jointly.
Part-year residents — people who moved to or from Vermont during the year — must file if their Vermont-source income alone exceeds the threshold. Non-residents who earned income in Vermont may also owe tax on that income, even if they do not live there.
You must file even if no tax is due if you had Vermont income tax withheld from your paychecks, because you may be due a refund. Self-employed people with net earnings of $400 or more must file both a Vermont return and a federal Schedule C.
Vermont income tax rates and brackets for 2024
Vermont uses five tax brackets. Your rate depends on your filing status and total income. Single filers pay 3.35% on income up to $48,550, then 6.6% from $48,550 to $117,250, then 7.6% from $117,250 to $252,750, then 8.75% on income above $252,750. Married couples filing jointly have higher bracket thresholds — for example, the 6.6% rate applies to income between $97,100 and $234,500.
These brackets adjust each year for inflation. The Vermont Department of Taxes publishes updated brackets in January. If you filed last year, do not assume the brackets are the same — check the current year's instructions before calculating your tax.
Vermont also taxes capital gains and investment income at your ordinary income tax rate. Dividends, interest, and long-term capital gains are all subject to state tax, unlike some states that offer preferential rates for investment income.
How to file your Vermont income tax return
You file Vermont income tax using Form VT-100, the Vermont Individual Income Tax Return. You can file by mail, electronically through the Vermont Department of Taxes website, or through a tax software provider that supports Vermont returns. Electronic filing is faster and reduces errors — the state processes e-filed returns in two to four weeks, while paper returns take six to eight weeks.
To file, gather your W-2 forms from all employers, your 1099 forms for self-employment or investment income, and documentation of any deductions or credits you claim. You will also need your federal tax return, because Vermont income tax is calculated based on your federal adjusted gross income.
The filing important date is April 15, the same as federal tax day. If you file an extension with the IRS, you automatically get an extension for Vermont as well, moving your important date to October 15. However, if you owe tax, you still owe interest and penalties on any unpaid balance after April 15, even if you filed an extension.
Self-employment tax and quarterly estimated payments
If you are self-employed, you owe both Vermont income tax and federal self-employment tax. Self-employment tax covers Social Security and Medicare and is calculated on Schedule SE of your federal return. Vermont does not have a separate self-employment tax — you pay income tax on your net self-employment income at the regular rates.
If you expect to owe $500 or more in Vermont income tax for the year, you must make quarterly estimated tax payments. These are due April 15, June 15, September 15, and January 15 of the following year. You calculate each payment using Form VT-100-ES and mail it to the Vermont Department of Taxes, or pay online through their website.
If you do not make quarterly payments and owe a large amount at filing time, you will owe interest and penalties on the unpaid balance. The penalty is calculated from the date each payment was due, so making even partial quarterly payments reduces the penalty.
Vermont tax credits that reduce what you owe
Vermont offers several credits that lower your tax liability. The Dependent Exemption Credit gives you a credit for each dependent child or adult you support. The Property Tax Credit reduces your tax if you own a home and paid property tax during the year — renters do not may have access to. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is calculated based on your federal EITC.
To claim credits, you list them on your Form VT-100 return. Some credits are refundable, meaning if the credit exceeds your tax, you receive the difference as a refund. The EITC is partially refundable in Vermont. Other credits, like the Property Tax Credit, are non-refundable — they can reduce your tax to zero but cannot create a refund.
You must have documentation to support any credit you claim. For the Dependent Exemption Credit, you need the dependent's Social Security number. For the Property Tax Credit, you need your property tax bill or assessment notice. Keep these documents with your return or be prepared to provide them if the state requests verification.
What happens if you work in Vermont but live elsewhere
If you live in another state but work in Vermont, you owe Vermont income tax on wages earned in Vermont. You file a Vermont return reporting only your Vermont-source income. You also file a return in your home state reporting your total income from all sources, but most states allow you to claim a credit for taxes paid to other states, which prevents double taxation.
The credit works by reducing your home state tax by the amount you paid to Vermont. For example, if you earned $50,000 in Vermont and paid $3,000 in Vermont tax, and your home state would normally charge $3,500 on that income, you would owe only $500 to your home state. However, the credit is limited to the lesser of what you paid to Vermont or what your home state would have charged — you cannot use Vermont tax to reduce tax owed to your home state on income earned elsewhere.
Some states do not offer credits for taxes paid to other states, or limit the credit. Before you assume you will not owe tax in your home state, contact that state's tax department or review their instructions for non-residents working out of state.
Frequently Asked Questions
Does Vermont tax Social Security or retirement income differently?
Vermont does not tax Social Security benefits. However, Vermont does tax distributions from IRAs, 401(k)s, pensions, and annuities as ordinary income. If you are over 65 and receive a pension, you may be able to exclude up to $10,000 of pension income from Vermont tax, but you must meet income limits and file for the exclusion on your return.
What if I moved to Vermont partway through the year?
You are a part-year resident and must file a Vermont return reporting only income earned while you lived in Vermont. You also file a return in your previous state reporting income earned there. Each state taxes only the income earned within its borders during the time you lived there.
Can I deduct federal income tax paid on my Vermont return?
No. Vermont does not allow a deduction for federal income tax paid. You calculate Vermont tax based on your federal adjusted gross income, but you cannot reduce that income by the federal tax itself.
What is the penalty for filing late or paying late?
The penalty for filing late is 5% of the unpaid tax per month, up to 25% total. The penalty for paying late is 0.5% per month on the unpaid balance. Interest accrues daily at a rate set by the state, currently around 8% annually. If you cannot pay by April 15, file your return on time anyway — the filing penalty does not explore if you file by the important date, even if you pay late.
Do I need to file a Vermont return if I only had income tax withheld but earned below the filing threshold?
You are not required to file, but you should consider filing to claim a refund of the withheld tax. If your employer withheld Vermont tax and you earned below the threshold, you likely paid more tax than you owed and would receive a refund by filing.