Taxes in Vermont: Features and Advantages

Main Taxes in the State of Vermont

Income Tax:

Vermont applies a progressive personal income tax, with rates ranging from 3.35% to 8.75% depending on income level and filing status. Wages, business income, investments, and rental income are taxable. Capital gains are included in taxable income, though partial exclusions may apply for long-term holdings. The state offers standard and itemized deductions, tax credits, and support programs for low-income families.

Sales Tax:

The base Sales Tax rate in Vermont is 6%, with municipalities able to add up to 1%, bringing the total to 7%. The tax applies to most goods, as well as digital products, cloud services, and certain services. Groceries, prescription drugs, and some medical devices are exempt.

Determining the taxable base and applicable rate can be complex and requires professional expertise. Our company provides services for obtaining a Sales Tax Certificate, as well as preparing and filing Sales and Use Tax Returns. We advise business owners on registration, calculation, and reporting.

Property Tax:

Property tax is levied at the municipal and school district levels. The average effective rate is about 1.71% of market value, one of the highest in the country. Rates vary by region, property use, and local decisions. Homeowners may qualify for homestead exemptions, while renters may receive partial refunds through tax filings.

Business Taxes:

Vermont levies a Corporate Income Tax on C corporations with progressive rates:

• 6.0% — on the first $10,000 of profit,
• 7.0% — from $10,001 to $25,000,
• 8.5% — on profits above $25,000.

C corporations are also subject to a Minimum Annual Tax ranging from $100 to $100,000 depending on gross income. The minimum tax for S corporations, LLCs, and Partnerships is $250 per year. Annual Reports are required for all entities. Filing deadlines: within 3 months after fiscal year-end for LLCs, and 2.5 months for corporations.

Excise Taxes:

Vermont levies excise taxes on alcohol, tobacco, gasoline, medical equipment, and sugary beverages. Additional taxes apply to car rentals and hotel services.

Estate and Gift Tax:

Vermont does not levy a gift tax, but it does impose an estate tax. The exemption threshold in 2025 is $5 million. Rates start at 16% and can reach 20% depending on the amount exceeding the threshold. This tax applies independently of the federal estate tax.

Favorable Tax Conditions in Vermont:

The minimum tax on pass-through businesses is only $250 per year — lower than in New York ($25–$4,500) or California ($800/year). Vermont also does not levy tax on personal tangible property.

Taxes in Vermont Compared to Other States:

Property tax is high, comparable to New Jersey or Illinois. Income tax is above the U.S. average, especially for high earners. Vermont also levies an estate tax, unlike most states. Mandatory annual reporting and minimum business taxes add to the burden.