Taxation of Individuals, Trusts, and Estates

V.S.A. tit. 32, ch. 151, subch. 2

in effect

32 V.S.A. § 5821 Name of tax

5821. Name of tax The tax imposed by this subchapter shall be known as the Vermont personal income tax. Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966.

32 V.S.A. § 5822 Tax on income of individuals, trusts, and estates

5822. Tax on income of individuals, trusts, and estates (a) A tax is imposed for each taxable year upon the taxable income earned or received in that year by every individual, estate, and trust, subject to income taxation under the laws of the United States, in an amount determined by the following tables, and adjusted as required under this section: (1) Married individuals filing joint returns and surviving spouses: If taxable income is: | The tax is: Not over $64,600.00 | 3.35% of taxable income Over $64,600.00 but | $2,164.00 plus 6.6% of not over $156,150.00 | the amount of taxable income over $64,600.00 Over $156,150.00 but | $8,206.00 plus 7.6% not over $237,950.00 | of the amount of taxable income over $156,150.00 Over $237,950.00 | $14,423.00 plus 8.75% of the amount of taxable income over $237,950.00 (2) Heads of households: If taxable income is: | The tax is: Not over $51,850.00 | 3.35% of taxable income Over $51,850.00 but | $1,737.00 plus 6.6% not over $133,850.00 | of the amount of taxable income over $51,850.00 Over $133,850.00 but | $7,149.00 plus 7.60% not over $216,700.00 | of the amount of taxable income over $133,850.00 Over $216,700.00 | $13,446.00 plus 8.75% of the amount of taxable income over $216,700.00 (3) Unmarried individuals (other than surviving spouse or head of household): If taxable income is: | The tax is: Not over $38,700.00 | 3.35% of taxable income Over $38,700.00 but | $1,296.00 plus 6.6% of not over $93,700.00 | the amount of taxable income over $38,700.00 Over $93,700.00 but | $4,926.00 plus 7.6% not over $195,450.00 | of the amount of taxable income over $93,700.00 Over $195,450.00 | $12,659.00 plus 8.75% of the amount of taxable income over $195,450.00 (4) Married individuals filing separate returns: If taxable income is: | The tax is: Not over $32,300.00 | 3.35% of taxable income Over $32,300.00 but | $1,082.00 plus 6.6% of not over $78,075.00 | the amount of taxable income over $32,300.00 Over $78,075.00 but | $4,103.00 plus 7.6% not over $118,975.00 | of the amount of taxable income over $78,075.00 Over $118,975.00 | $7,212.00 plus 8.75% of the amount of taxable income over $118,975.00 (5) Estates and trusts: If taxable income is: | The tax is: $2,600.00 or less | 3.35% of taxable income Over $2,600.00 but | $87.00 plus 6.6% of not over $6,100.00 | the amount of taxable income over $2,600.00 Over $6,100.00 but | $318.00 plus 7.6% not over $9,350.00 | of the amount of taxable income over $6,100.00 Over $9,350.00 | $565.00 plus 8.75% of the amount of taxable income over $9,350.00 (6) If the federal adjusted gross income of the taxpayer exceeds $150,000.00, then the tax calculated under this subsection shall be the greater of the tax calculated under subdivisions (1)-(5) of this subsection or three percent of the taxpayer’s federal adjusted gross income. (b) As used in this section: (1) “Married individuals,” “surviving spouse,” “head of household,” “unmarried individual,” “estate,” and “trust” have the same meaning as under the Internal Revenue Code. (2) The amounts of taxable income shown in the tables in this section shall be adjusted annually for inflation by the Commissioner of Taxes using the Consumer Price Index adjustment percentage, in the manner prescribed for inflation adjustment of federal income tax tables for the taxable year by the Commissioner of Internal Revenue, beginning with taxable year 2003; provided, however, notwithstanding 26 U.S.C. § 1(f)(3), that as used in this subdivision, “consumer price index” means the last Consumer Price Index for All Urban Consumers published by the U.S. Department of Labor. (c) The amount of tax determined under subsection (a) of this section shall be: (1) increased by 24 percent of the taxpayer’s federal tax liability for the taxable year for the following: (A) additional taxes on qualified retirement plans, including individual retirement accounts and medical savings accounts and other tax-favored accounts; (B) recapture of the federal investment tax credit attributable to the Vermont portion of the investment; and (C) tax on qualified lump-sum distributions of pension income not included in federal taxable income; and (2) decreased by 24 percent of the reduction in the taxpayer’s federal tax liability due to farm income averaging. (d)(1) A taxpayer shall be entitled to a credit against the tax imposed under this section of 24 percent of each of the credits allowed against the taxpayer’s federal income tax for the taxable year as follows: the credit for people who are elderly or permanently totally disabled and the investment tax credit attributable to the Vermont-property portion of the investment. (2) Any unused solar energy investment tax credit under this section may be carried forward for not more than five years following the first year in which the credit is claimed. (3) Individuals shall receive a nonrefundable charitable contribution credit against the tax imposed under this section for the taxable year. The credit shall be five percent of the first $20,000.00 in charitable contributions made during the taxable year that are allowable under 26 U.S.C. § 170. This credit shall be available irrespective of a taxpayer’s election not to itemize at the federal level. (e) The tax determined under subsections (a) through (d) of this section shall be reduced by a percentage equal to the portion of adjusted gross income that is not Vermont income; provided, however, that if a taxpayer’s Vermont income exceeds the taxpayer’s adjusted gross income, no reduction shall be made and provided, further, that if a taxpayer has zero or negative Vermont income and the taxpayer’s Vermont income computed without regard to the reductions in subsection 5823(a) of this chapter does not equal or exceed the taxpayer’s adjusted gross income, no tax shall be due under this section. For the purposes of this subsection, adjusted gross income means federal adjusted gross income modified by the additions and subtractions provided for in subdivisions 5811(21)(A) and (B) of this chapter for an individual, and federal adjusted gross income modified by the additions and subtractions provided for in subdivisions 5811(28)(A) and (B) of this chapter for an estate or a trust. Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 4, eff. Jan. 1, 1968; 1979, No. 70, § 1, eff. Jan. 1, 1968, affecting taxable years beginning on or after Jan. 1, 1968; 1979, No. 84 (Adj. Sess.), § 1, eff. Jan. 29, 1980 for taxable years beginning on and after Jan. 1, 1980; 1981, No. 170 (Adj. Sess.) § 15, eff. April 19, 1982, affecting taxable years beginning on and after January 1, 1982; 1983, No. 144 (Adj. Sess.), § 4, eff. Jan. 1, 1985; 1985, No. 213 (Adj. Sess.), § 2, eff. June 2, 1986 for taxable years beginning on and after January 1, 1987; 1987, No. 82, § 2, eff. June 9, 1987, affecting taxable years beginning on and after Jan. 1, 1987 (except for change in tax rate); 1987, No. 259 (Adj. Sess.), § 1, eff. June 16 1988, affecting taxable years beginning on and after Jan. 1, 1988, § 2, eff. Jan. 1, 1989, affecting taxable years beginning on and after Jan. 1, 1989; 1989, No. 119, § 26, eff. June 22, 1989, applying to taxes payable for taxable years beginning on and after January 1, 1989; 1991, No. 32, § 2, eff. May 18, 1991, affecting taxes payable for taxable years beginning January 1, 1991, through December 31, 1993; 1993, No. 14, § 1, eff. April 27, 1993, applicable to income taxes payable for taxable years beginning on and after January 1, 1993; 1999, No. 49, § 35, eff. June 2, 1999; 2001, No. 67, § 4, eff. June 16, 2001; 2001, No. 140 (Adj. Sess.), § 5, eff. June 21, 2002; 2003, No. 66, § 305; 2005, No. 75, § 15; 2007, No. 92 (Adj. Sess.), § 27; 2009, No. 45, §§ 9, 9b, eff. May 27, 2009; 2009, No. 54, §§ 97, 99, eff. June 1, 2009; 2009, No. 1 (Sp. Sess.), § H.48a, eff. June 2, 2009; 2009, No. 159 (Adj. Sess.), §§ 9, 10, eff. June 4, 2010; 2013, No. 96 (Adj. Sess.), § 196; 2015, No. 57, § 65, eff. Jan. 1, 2015; 2018, No. 11 (Sp. Sess.), § H.2, eff. Jan. 1, 2018; 2018, No. 11 (Sp. Sess.), § H.3, eff. Jan. 1, 2018; 2019, No. 51, § 4, eff. Jan. 1, 2019; 2021, No. 138 (Adj. Sess.), § 2, eff. Jan. 1, 2022; 2023, No. 85 (Adj. Sess.), § 469, eff. July 1, 2024; 2025, No. 164 (Adj. Sess.), § 56, eff. January 1, 2026.

32 V.S.A. § 5823 Vermont income of individuals, estates, and trusts

5823. Vermont income of individuals, estates, and trusts (a) For any taxable year, the Vermont income of a resident individual is the adjusted gross income of the individual for that taxable year, and the Vermont income of a resident estate or trust is its gross income for the taxable year, less: (1) income exempted from State taxation under the laws of the United States and not subtracted under subdivision 5811(21)(B)(i) of this chapter; (2) military pay for full-time active duty with the U.S. Armed Services earned outside the State; and the first $2,000.00 of military pay for unit training in the State to National Guard and U.S. Reserve personnel for whom the Adjutant General or Reserve Component Commander certifies that the taxpayer completed all unit training of his or her unit during the calendar year, and who has a federal adjusted gross income of less than $50,000.00; (3) funds received through the federal Armed Forces Educational Loan Repayment Program under 10 U.S.C. chapters 109 and 1609, to the extent the funds are included in adjusted gross income of the taxpayer for the taxable year; and (4)-(7) [Repealed.] (8) the amount paid by the State of Vermont pursuant to 20 V.S.A. chapter 181 to the extent that such amount is included in the federal adjusted gross income of the taxpayer for the taxable year. (b) For any taxable year, the Vermont income of a nonresident individual, estate, or trust is the sum of the following items of income to the extent they are required to be included in the federal adjusted gross income of the individual after the value of those items are modified by the additions and subtractions provided for in subdivisions 5811(21)(A) and (B) of this chapter or the federal adjusted gross income of an estate or trust after the value of those items are modified by the additions and subtractions provided for in subdivisions (28)(A) and (B) of this chapter for that taxable year: (1) rents and royalties derived from the ownership of property located within this State; (2) gains from the sale or exchange of property located within this State; (3) wages, salaries, commissions, or other income (excluding military pay for full-time active duty with the U.S. Armed Services and also excluding funds received through the federal Armed Forces Educational Loan Repayment Program under 10 U.S.C. chapters 109 and 1609; and also excluding the first $2,000.00 of military pay for unit training in the State to National Guard and U.S. Reserve personnel for whom the Adjutant Inspector General or Reserve Component Commander certifies that the taxpayer completed all unit training of his or her unit during the calendar year, and who has a federal adjusted gross income of less than $50,000.00) received with respect to services performed within this State; (4) income (other than income exempted from State taxation under the laws of the United States) derived from every business, trade, occupation, or profession to the extent that the business, trade, occupation, or profession is carried on within this State, including any compensation received: (A) under an agreement not to compete with a business operating in Vermont; (B) for goodwill associated with the sale of a Vermont business; or (C) for services to be performed under a contract associated with the sale of a Vermont business, unless it is shown that the compensation for services does not constitute income from the sale of the business; (5) income that was previously deferred under a nonqualified deferred compensation plan and that would have previously been included in the taxpayer’s Vermont income if it had not been deferred, and income derived from such previously deferred income; and (6) proceeds from wagering transactions made within the State; or any Vermont State Lottery, tri-state lottery, or multijurisdictional lottery ticket paid to a person who purchased the ticket in Vermont, including payments received from a third party for the transfer of the rights to future proceeds related to the ticket; and the Commissioner may require withholding of any taxes due to the State under this subdivision from payments of wagering or lottery proceeds. (c) For any taxable year, the Vermont income of a part-year resident individual or trust is the sum of: (1) all items of income constituting Vermont income for the purpose of subsection (a) of this section that are earned or received during the period of the taxpayer’s residency in this State in the taxable year; and (2) all items of income constituting Vermont income for the purposes of subsection (b) of this section that are earned or received during the period of the taxpayer’s nonresidency in this State in the taxable year. (d) Vermont income shall not include any income of a nonresident from the activities listed in this subsection; and shall not include income of a nonresident through an entity such as a partnership, limited liability company, or trust, if that entity’s activities in this State are limited to activities that, without more, would not constitute nexus, plus any or all of the following activities necessary to create or maintain a World Wide Web page or internet site for the nonresident or entity: (1) ownership of data or programming code in this State, or use of that data or programming code by a person other than the nonresident or entity or by a person not in this State; (2) ownership of, or receipt of services from, computer servers in this State; and (3) receipt of computer processing or web hosting services from a computer service provider or web hosting service in this State. Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1967, No. 121, § 5, eff. Jan. 1, 1968; 1969, No. 263 (Adj. Sess.), § 3, eff. April 6, 1970; 1979, No. 105 (Adj. Sess.), § 44, eff. date, see note set out below; 1989, No. 119, §§ 22, 23(a), eff. June 22, 1989; 1989, No. 210 (Adj. Sess.), § 297, eff. May 31, 1990; 1991, No. 32, § 6, eff. May 18, 1991; 1993, No. 49, § 8, eff. May 28, 1993; 1995, No. 29, § 28, eff. April 14, 1995; 1995, No. 71 (Adj. Sess.), § 1, eff. Feb. 14, 1996; 1995, No. 169 (Adj. Sess.), § 23, eff. May 15, 1996; 1995, No. 174 (Adj. Sess.), § 6; 1997, No. 50, §§ 13, 14, eff. June 26, 1997; 1997, No. 79 (Adj. Sess.), § 2, eff. Jan. 1, 1999; 1997, No. 156 (Adj. Sess.), §§ 4, 52, eff. April 29, 1998; 2001, No. 140 (Adj. Sess.), § 6; 2001, No. 144 (Adj. Sess.), §§ 1, 2, 29, eff. June 21, 2002; 2003, No. 70 (Adj. Sess.), § 40, eff. March 1, 2004; 2003, No. 152 (Adj. Sess.), § 14; 2005, No. 14, § 2, eff. May 3, 2005; 2007, No. 33, § 1, eff. May 18, 2007; 2009, No. 160 (Adj. Sess.), §§ 51, 53, eff. June 4, 2010; 2011, No. 45, § 3a, eff. May 24, 2011; 2011, No. 45, § 36l, eff. July 1, 2013; 2023, No. 63, § 4, eff. June 14, 2023; 2025, No. 164 (Adj. Sess.), § 57, eff. January 1, 2026.

32 V.S.A. § 5824 Adoption of federal income tax laws

5824. Adoption of federal income tax laws The statutes of the United States relating to the federal income tax, as in effect on December 31, 2025, but without regard to federal income tax rates under 26 U.S.C. § 1, are hereby adopted for the purpose of computing the tax liability under this chapter and shall continue in effect as adopted until amended, repealed, or replaced by act of the General Assembly. Added 2001, No. 140 (Adj. Sess.), § 7, eff. June 21, 2002; 2001, No. 144 (Adj. Sess.), § 23, eff. June 21, 2002; amended 2003, No. 66, § 313; 2003, No. 152 (Adj. Sess.), § 24, eff. June 7, 2004; 2005, No. 14, § 13; 2005, No. 94 (Adj. Sess.), § 2, eff. March 8, 2006; 2007, No. 33, § 6, eff. May 18, 2007; 2007, No. 190 (Adj. Sess.), § 26; 2009, No. 1 (Sp. Sess.), § H.26, eff. June 2, 2009; 2009, No. 160 (Adj. Sess.), § 29, eff. June 4, 2010; 2011, No. 45, § 2, eff. May 24, 2011; 2011, No. 143 (Adj. Sess.), § 9, eff. May 15, 2012; 2013, No. 73, § 20; 2013, No. 174 (Adj. Sess.), § 5, eff. Jan. 1, 2014; 2015, No. 57, § 66, eff. Jan. 1, 2015; 2015, No. 134 (Adj. Sess.), § 11, eff. Jan. 1, 2015; 2017, No. 73, § 7, eff. Jan. 1, 2016; 2018, No. 11 (Sp. Sess.), § H.7, eff. Jan. 1, 2018; 2019, No. 51, § 5, eff. Jan. 1, 2019; 2019, No. 175 (Adj. Sess.), § 13, eff. Jan. 1, 2020; 2021, No. 9, § 23, eff. Jan. 1, 2021; 2021, No. 73, § 23, eff. March 31, 2021; 2021, No. 148 (Adj. Sess.), § 7, eff. Jan. 1, 2022; 2023, No. 72, § 1, eff. Jan. 1, 2023; 2023, No. 144 (Adj. Sess.), § 3, eff. Jan. 1, 2024; 2025, No. 27, § E.111, eff. Jan. 1, 2025; 2019, No. 51, § 5, eff. Jan. 1, 2019; 2025, No. 164 (Adj. Sess.), § 60, eff. January 1, 2026.

32 V.S.A. § 5825 Credit for taxes paid to other states and provinces

5825. Credit for taxes paid to other states and provinces (a) A taxpayer of this State who was a resident individual, estate, or trust during any portion of a taxable year shall receive credit against the tax imposed, for that taxable year, by section 5822 of this title for income taxes imposed by, and paid to, another state or territory of the United States, the District of Columbia, or a province of Canada, upon the taxpayer’s income earned or received from sources within that state, territory, district, or province during that portion of that taxable year. In no case shall the credit allowed by this section exceed the portion of Vermont income tax, otherwise imposed by this chapter, attributable to the adjusted gross income earned or received from sources within such other state, territory, district, or province. (b) For purposes of this section, when a taxpayer domiciled in another jurisdiction is deemed to be a resident of Vermont as provided by subdivision 5811(11)(A)(ii) of this title, income from intangibles not employed in a business, trade, or profession shall be deemed to be derived from sources within the jurisdiction of domicile. However, notwithstanding the provisions of this subsection, no credit will be allowed against the tax imposed unless the jurisdiction of domicile provides for a similar credit. Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1981, No. 134 (Adj. Sess.), § 1, eff. April 2, 1982; 1991, No. 67, § 26, eff. June 19, 1991; 1991, No. 186 (Adj. Sess.), § 12; 1997, No. 50, § 16, eff. June 26, 1997; 2001, No. 140 (Adj. Sess.), § 8, eff. June 21, 2002.

32 V.S.A. § 5825a Credit for Vermont Higher Education Investment Plan contributions

5825a. Credit for Vermont Higher Education Investment Plan contributions (a) A taxpayer of this State, including each spouse filing a joint return, shall be eligible for a nonrefundable credit against the tax imposed under section 5822 of this title of 10 percent of the first $2,500.00 per beneficiary, contributed by the taxpayer during the taxable year to a Vermont Higher Education Investment Plan account under 16 V.S.A. chapter 87, subchapter 7, provided the account is provided directly by the Vermont Student Assistance Corporation to the participant. (b) A taxpayer who has received a credit under subsection (a) of this section shall repay to the Commissioner 10 percent of any distribution from a higher education investment plan account, up to a maximum of the total credits received by the taxpayer under subsection (a) of this section minus any amount of repayment of such credits in prior tax years except when the distribution: (1) is used exclusively for costs of attendance at an approved postsecondary education institution as defined in 16 V.S.A. § 2822(6); (2) is used for a qualifying expense associated with a registered apprenticeship program pursuant to 26 U.S.C. § 529(c)(8); (3) is made after the death of the beneficiary or after the beneficiary becomes disabled pursuant to subdivisions (q)(2)(C) and (m)(7) of 26 U.S.C. § 72; or (4) is used for qualified higher education expense loan repayment pursuant to 26 U.S.C. § 529(c)(9), provided the loan being repaid was used exclusively for costs of attendance at an approved postsecondary education institution as defined in 16 V.S.A. § 2822(6). (c) Repayments under subsection (b) of this section shall be subject to assessment, notice, penalty and interest, collection, and other administration in the same manner as an income tax under this chapter. Added 2003, No. 65, § 2, eff. for tax years beginning on and after Jan. 1, 2004; amended 2005, No. 207 (Adj. Sess.), § 6, eff. May 31, 2006; 2019, No. 51, § 19, eff. Jan. 1, 2019; 2019, No. 154 (Adj. Sess.), § E.605.3, eff. Oct. 2, 2020; 2019, No. 175 (Adj. Sess.), § 19, eff. Oct. 8, 2020; 2021, No. 20, § 269; 2021, No. 179 (Adj. Sess.), § 18, eff. Jan. 1, 2022.

32 V.S.A. § 5826 Repealed. 2009, No. 160 (Adj. Sess.), § 51(a)(2), eff. Jan. 1, 2013.

32 V.S.A. § 5827 Repealed. 1989, No. 119, § 23(b), eff. June 22, 1989.

32 V.S.A. § 5828 Manufactured home park sale; capital gain credit

5828. Manufactured home park sale; capital gain credit A taxpayer of this State shall receive a credit against the tax imposed under section 5822 or 5832 of this title for a qualified sale of a manufactured home park. The credit shall be in the amount of seven percent of the taxpayer’s gain subject to federal income tax for the taxable year. Credit in excess of the taxpayer’s tax liability for the taxable year may be carried forward for credit in the next succeeding three taxable years. “Qualified sale of a manufactured home park” means the land comprising a manufactured home park that is transferred in a single purchase to a group composed of a majority of the manufactured home park leaseholders as defined in 10 V.S.A. § 6242(a) or to a nonprofit organization that represents such a group. Added 1997, No. 103 (Adj. Sess.), § 11, eff. April 23, 1998.

32 V.S.A. § 5828a Repealed. 1991, No. 32, § 7, eff. May 18, 1991.

32 V.S.A. § 5828b Earned income tax credit

5828b. Earned income tax credit (a) A resident individual or part-year resident individual who is entitled to an earned income tax credit granted under the laws of the United States shall be entitled to a credit against the tax imposed for each year by section 5822 of this title. The credit shall be for an individual who claims one or more qualifying children 38 percent or for an individual who does not claim one or more qualifying children 100 percent of the earned income tax credit granted to the individual under the laws of the United States, multiplied by the percentage that the individual’s income that is earned or received during the period of the individual’s residency in this State bears to the individual’s total income. A resident individual or part-year resident individual who would have been entitled to or granted an earned income tax credit under the laws of the United States but for the fact that the individual, the individual’s spouse, or one or more of the individual’s children does not have a qualifying taxpayer identification number shall be entitled to a credit under this section. (b) The tax credit claimed by a taxpayer under this section shall be deductible from the taxpayer’s income tax liability, if any, for the year in which the income is earned. In the event the credit exceeds the amount of the income tax payments due from the taxpayer, the excess of credits over payments due shall be paid to the taxpayer. Any payments due to a taxpayer under this subsection shall not bear interest. Added 1987, No. 258 (Adj. Sess.), § 1, eff. June 16, 1988; amended 1999, No. 49, § 36, eff. June 2, 1999; 1999, No. 119 (Adj. Sess.), § 2, eff. May 18, 2000; 2005, No. 14, § 1, eff. May 3, 2005; 2018, No. 11 (Sp. Sess.), § H.4, eff. Jan. 1, 2018; 2021, No. 138 (Adj. Sess.), § 4, eff. Jan. 1, 2022; 2023, No. 72, § 15, eff. Jan. 1, 2023; 2025, No. 71, § 2, eff. Jan. 1, 2025.

32 V.S.A. § 5828c Child and dependent care credit

5828c. Child and dependent care credit A resident or part-year resident of this State shall be eligible for a refundable credit against the tax imposed under section 5822 of this title. The credit shall be equal to 72 percent of the federal child and dependent care credit allowed to the taxpayer for the taxable year for child or dependent care services. The amount of the credit for a part-year resident shall be multiplied by the percentage that the individual’s income that is earned or received during the period of the individual’s residency in this State bears to the individual’s total income. Added 2001, No. 144 (Adj. Sess.), § 24, eff. June 21, 2002; amended 2003, No. 70 (Adj. Sess.), § 39, eff. March 1, 2004; 2021, No. 138 (Adj. Sess.), § 3, eff. Jan. 1, 2022; 2023, No. 72, § 14, eff. Jan. 1, 2023.

32 V.S.A. § 5829 Repealed. 1993, No. 210 (Adj. Sess.), § 40, eff. Jan. 1, 1994.

32 V.S.A. § 5830 Taxpayer identification numbers; credits

5830. Taxpayer identification numbers; credits (a) The Commissioner shall provide a process for an individual to claim the child tax credit or the earned income tax credit, or both, pursuant to subsections 5828b(a) and 5830f(a) of this title when the individual, the individual’s spouse, or one or more of the individual’s qualifying children does not have a taxpayer identification number. The Commissioner shall not inquire about or record the citizenship and immigration status of an individual, an individual’s spouse, or one or more of an individual’s qualifying children when an individual claims one or more credits pursuant to this section and subsections 5828b(a) and 5830f(a) of this title. (b) Upon the Commissioner’s request, an individual who claims one or more credits pursuant to subsections 5828b(a) and 5830f(a) of this title shall provide valid documents establishing the identity and income for the taxable year of the individual and, as applicable, the individual’s spouse and qualifying children. Upon receiving a valid Social Security number issued by the Social Security Administration, the individual shall notify the Commissioner in the time and manner prescribed by the Commissioner. (c) All claims submitted and records created pursuant to this section and subsections 5828b(a) and 5830f(a) of this title shall be exempt from public inspection and copying under the Public Records Act 1 V.S.A. § 317(c)(6) and shall be kept confidential as return or return information pursuant to section 3102 of this title. Added 2023, No. 72, § 17, eff. Jan. 1, 2023.

32 V.S.A. § 5830a Interest tax

5830a. Interest tax (a) When another state imposes a tax upon interest earned by its residents on deposits in a lending institution located in this State, but exempts from such taxation deposits by its residents in lending institutions located within that state, then there is hereby levied a tax in the amount of five percent upon interest earned by residents of this State on deposits in lending institutions located in such other state. As used in this section, “lending institution” includes any bank, savings bank, trust company, or building and loan association or other similar institution. (b) For each taxpayer, $600.00 of income otherwise taxable under this section shall be exempt in each tax year. A husband and wife filing a joint return constitute a single taxpayer. Added 1977, No. 67.

32 V.S.A. § 5830b Tax credits; Entrepreneurs’ Seed Capital Fund

5830b. Tax credits; Entrepreneurs’ Seed Capital Fund (a) The initial capitalization of the Entrepreneurs’ Seed Capital Fund, as established in 10 V.S.A. § 291, up to $7,150,000.00 raised from Vermont taxpayers on or before January 1, 2020, shall entitle those taxpayers to a credit against the tax imposed by section 5822, 5832, 5836, or 8551 of this title and by 8 V.S.A. § 6014. The credit may be claimed for the taxable year in which a contribution is made and each of the four succeeding taxable years. The amount of the credit for each year shall be the lesser of four percent of the taxpayer’s contribution or 50 percent of the taxpayer’s tax liability for that taxable year prior to the allowance of this credit; provided, however, that in no event shall the aggregate credit allowable under this section for all taxable years exceed 20 percent of the taxpayer’s contribution to the initial $7,150,000.00 capitalization of the Fund. The credit shall be nontransferable except as provided in subsection (b) of this section. (b) If the taxpayer disposes of an interest in the Fund within four years after the date on which the taxpayer acquired that interest, any unused credit attributable to the disposed-of interest is disallowed. This disallowance does not apply in the event of an involuntary transfer of the interest, including a transfer at death to any heir, devisee, legatee, or trustee, or in the event of a transfer without consideration to or in trust for the benefit of the taxpayer or one or more persons related to the taxpayer as spouse, descendant, parent, grandparent, or child. Added 1985, No. 171 (Adj. Sess.), § 2, eff. May 7, 1986; amended 1987, No. 80, § 7, eff. June 9, 1987; 1993, No. 78, § 1; 2003, No. 164 (Adj. Sess.), § 8, eff. June 12, 2004; 2005, No. 184 (Adj. Sess.), § 17b, eff. May 24, 2006; 2009, No. 54, § 27, eff. June 1, 2009.

32 V.S.A. § 5830c Tax credits; charitable investments in housing

5830c. Tax credits; charitable investments in housing (a) Credit authorized. A charitable investment approved by the Commissioner of Housing and Community Affairs in an eligible housing charity shall entitle a Vermont taxpayer to a credit against the tax imposed by sections 5822 (individual income), 5832 (corporate income), 5836 (banks and financial institutions), or 8551 (insurance companies) of this title. The credit may be claimed for any year in which a charitable investment is made and for each year thereafter until the principal is repaid, or the investment is transferred, or the taxpayer is notified or agrees or the Commissioner of Housing and Community Affairs determines that the principal is not likely to be repaid, or until the end of the year in which the housing charity ceases to be eligible, whichever is earlier. (b) Amount of credit. The amount of the credit shall be equal to the difference between the net income that would have been received by the taxpayer at the charitable threshold rate during the taxable year and the actual net income received by or credited to the taxpayer from a charitable investment in an eligible housing charity. However, the credit shall not exceed three percent of the average outstanding principal balance of the investment during the taxable year. (c) Definitions. As used in this section: (1) “Affordable housing” shall be defined by rule adopted by the Department of Housing and Community Affairs. The rule shall include the following provisions: (A) At least 50 percent of the units shall be occupied by households whose income does not exceed 100 percent of the greater of State or area median income. (B) The goal shall be to provide housing at a cost of no more than 30 percent of a household’s gross income. (C) The affordability of the unit shall be protected for a period of time not less than the term of any loan made pursuant to subdivision (d)(4) of this section for the unit or units or at least 15 years, whichever is greater, through a housing subsidy covenant or other legally binding instrument, which shall terminate upon the issuance of a judgment of foreclosure or a transfer of the property in lieu of foreclosure. This rule may also include additional provisions consistent with this section. (2) “Bank prime loan rate” means the March average prime loan rate, as of March 31 each year, used by insured U.S. chartered commercial banks to price short-term business loans, as published in the Federal Reserve Board’s statistical release. (3) “Charitable investment” means a loan or deposit made to an eligible housing charity, on which the actual annual rate of return is at or below the charitable threshold rate. (4) The “charitable threshold rate” means, for each year beginning July 1, a rate that is the greater of: two percentage points below the most recent bank prime loan rate or one percent. (5) “Eligible housing charity” means a governmental agency or private nonprofit organization determined eligible by the Commissioner of Housing and Community Affairs according to subsection (d) of this section. (6) “Net income” means interest income received or credited to the taxpayer. (d) Eligibility. Any organization seeking eligibility shall apply to the Commissioner of Housing and Community Affairs, who is authorized to issue certificates of eligibility for tax credits to eligible housing charities in specific amounts. In no event shall certificates of eligibility for tax credits for charitable investments be issued in excess of $5,000,000.00 in the aggregate for any fiscal year. The Commissioner by rule shall establish procedures and criteria for application to ensure the equitable distribution of tax credit certificates among eligible applicants. Subject to this limit, the Commissioner shall issue a certificate of eligibility to receive tax credit investments to an organization if it meets all of the following criteria: (1) It is either an agency or instrumentality of the State, or a private not-for-profit organization that has applied for and has not been denied tax-exempt status by the U.S. Internal Revenue Service. (2) It has as a major purpose to provide affordable housing. (3) It can demonstrate that as of the date of its application, it had loaned or invested at least $50,000.00 for the provision of affordable housing. (4) At least 70 percent of all investments subject to this section are disbursed within 12 months for: (A) the acquisition, rehabilitation, or construction of affordable housing in Vermont by the eligible housing charity; or (B) loans for affordable housing in Vermont; or (C) loans to individual borrowers in Vermont having no more than 100 percent of median income of the State or area, whichever is greater. (5) Loans of charitable investments made pursuant to subdivision (4) of this subsection shall be at an average rate of interest not more than two percent above the bank prime loan rate. (6) It can demonstrate that it has the administrative capacity to segregate funds to comply with and account for the requirements of subdivision (4) of this subsection. (e) Revocation. The Commissioner of Housing and Community Affairs may revoke the eligibility of any organization under this section after a hearing, upon a finding that it fails to meet substantially all of the criteria required for eligibility. Such organization shall immediately notify all investors of the revocation. Such organization shall reimburse the State for the full amount of any tax credits allowed its investors after revocation of eligibility, and shall pay to investors the full amount of any tax credits claimed by an investor but disallowed by the Commissioner due solely to revocation of eligibility. Any person aggrieved by the denial or revocation of eligibility may appeal to Superior Court. (f) Procedure for claiming tax credit. (1) Each eligible housing charity accepting investment funds for which a tax credit may be claimed by the investor under this section shall furnish investors with a copy of its certificate of eligibility to receive tax credit investments, plus a statement of the amount and terms of the investment on a form to be provided by the Commissioner of Taxes. The eligible housing charity shall keep a current list of the names, current addresses, and taxpayer identification numbers of all investors who may claim a tax credit under this section. (2) On or before January 31 of each year, the eligible housing charity shall furnish all investors who may claim a tax credit under this section with three copies of a tax credit statement, in a form specified by the Commissioner of Taxes, showing the principal balance of the investment at the beginning of the previous calendar year or at the date of the investment if made during that year, the principal balance at the end of the calendar year, the average outstanding principal balance during the year, the income that would have been received at the charitable threshold rate, the actual income received by or credited to the investor from the eligible housing charity during the calendar year and the amount of the tax credit. (3) On or before January 31 of each year, the eligible housing charity shall furnish the Commissioner of Taxes with a list of all investors who may claim a tax credit under this section, in a form specified by the Commissioner, showing the principal balance of the investment at the beginning of the previous calendar year or at the date of the investment if made during that year, the principal balance at the end of the calendar year, the average outstanding principal balance during the year, the income that would have been received at the charitable threshold rate, the actual income received by or credited to the investor from the eligible housing charity during the calendar year and the amount of the tax credit. (4) Each investor who claims a tax credit under this section shall claim the credit on a form to be provided by the Commissioner, which may be combined with the tax credit statement furnished by the eligible housing charity pursuant to subdivision (2) of this subsection. Each claimant shall also submit with his or her tax return a copy of the certificate of eligibility of the eligible housing charity and a copy of the tax credit statement furnished by the eligible housing charity. (5) If the amount of allowed tax credit exceeds the taxpayer’s income tax liability for the taxable year, the amount thereof that exceeds such tax liability may be carried over for deduction from the taxpayer’s income tax liability in the next succeeding taxable year or years until the total amount of the tax credit has been deducted from tax liability; provided, however, that no tax credit shall be carried over for deduction after the third taxable year succeeding the taxable year in which the credit was earned. (6) Investors in an eligible housing charity whose eligibility to receive tax credit investments is revoked during any calendar year may receive the credit for the year during which the revocation occurs, but not for any succeeding year unless eligibility is reinstated by the Commissioner of Housing and Community Affairs. Added 1989, No. 240 (Adj. Sess.), § 2; amended 2001, No. 144 (Adj. Sess.), §§ 39, 40, eff. June 21, 2002; 2005, No. 116 (Adj. Sess.), §§ 3, 4, eff. April 26, 2006.

32 V.S.A. § 5830d Deferral of income taxation; combat zone duty

5830d. Deferral of income taxation; combat zone duty The provisions of 26 U.S.C. § 7508 shall apply to this chapter for the benefit of: (1) individuals called up for full-time active military duty as the result of the existence of a military conflict in an area designated as a combat zone by the President of the United States, regardless of whether such duty is performed within the combat zone; and (2) individuals serving in an area treated by federal law in the same manner as if it were a combat zone. Added 1991, No. 110, § 2, eff. June 28, 1991; amended 1995, No. 169 (Adj. Sess.), § 25, eff. May 15, 1996.

32 V.S.A. § 5830e Retirement income; Social Security income

5830e. Retirement income; Social Security income (a) Social Security income. The portion of federally taxable Social Security benefits excluded from taxable income under subdivision 5811(21)(B)(iv) of this chapter shall be as follows: (1) For taxpayers whose filing status is single, married filing separately, head of household, or surviving spouse: (A) If the federal adjusted gross income of the taxpayer is less than or equal to $55,000.00, all federally taxable benefits received under the federal Social Security Act shall be excluded. (B) If the federal adjusted gross income of the taxpayer is greater than $55,000.00 but less than $65,000.00, the percentage of federally taxable benefits received under the Social Security Act to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $55,000.00, determined by: (i) subtracting the federal adjusted gross income of the taxpayer from $65,000.00; (ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and (iii) multiplying the value under subdivision (ii) of this subdivision (B) by the federally taxable benefits received under the Social Security Act. (C) If the federal adjusted gross income of the taxpayer is equal to or greater than $65,000.00, no amount of the federally taxable benefits received under the Social Security Act shall be excluded under this section. (2) For taxpayers whose filing status is married filing jointly: (A) If the federal adjusted gross income of the taxpayer is less than or equal to $70,000.00, all federally taxable benefits received under the Social Security Act shall be excluded. (B) If the federal adjusted gross income of the taxpayer is greater than $70,000.00 but less than $80,000.00, the percentage of federally taxable benefits received under the Social Security Act to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $70,000.00, determined by: (i) subtracting the federal adjusted gross income of the taxpayer from $80,000.00; (ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and (iii) multiplying the value under subdivision (ii) of this subdivision (B) by the federally taxable benefits received under the Social Security Act. (C) If the federal adjusted gross income of the taxpayer is equal to or greater than $80,000.00, no amount of the federally taxable benefits received under the Social Security Act shall be excluded under this section. (b) Civil Service Retirement System income. The portion of income received from the Civil Service Retirement System excluded from taxable income under subdivision 5811(21)(B)(iv) of this title shall be subject to the limitations under subsection (e) of this section and shall be determined as follows: (1) For taxpayers whose filing status is single, married filing separately, head of household, or surviving spouse: (A) If the federal adjusted gross income of the taxpayer is less than or equal to $55,000.00, the first $10,000.00 of income received from the Civil Service Retirement System shall be excluded. (B) If the federal adjusted gross income of the taxpayer is greater than $55,000.00 but less than $65,000.00, the percentage of the first $10,000.00 of income received from the Civil Service Retirement System to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $55,000.00, determined by: (i) subtracting the federal adjusted gross income of the taxpayer from $65,000.00; (ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and (iii) multiplying the value under subdivision (ii) of this subdivision (B) by the first $10,000.00 of income received from the Civil Service Retirement System. (C) If the federal adjusted gross income of the taxpayer is equal to or greater than $65,000.00, no amount of the income received from the Civil Service Retirement System shall be excluded under this section. (2) For taxpayers whose filing status is married filing jointly: (A) If the federal adjusted gross income of the taxpayer is less than or equal to $70,000.00, the first $10,000.00 of income received from the Civil Service Retirement System shall be excluded. (B) If the federal adjusted gross income of the taxpayer is greater than $70,000.00 but less than $80,000.00, the percentage of the first $10,000.00 of income received from the Civil Service Retirement System to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $70,000.00, determined by: (i) subtracting the federal adjusted gross income of the taxpayer from $80,000.00; (ii) dividing the value under subdivision (i) of this subdivision (B) by $10,000.00; and (iii) multiplying the value under subdivision (ii) of this subdivision (B) by the first $10,000.00 of income received from the Civil Service Retirement System. (C) If the federal adjusted gross income of the taxpayer is equal to or greater than $80,000.00, no amount of the income received from the Civil Service Retirement System shall be excluded under this section. (c) Other contributory retirement systems; earnings not covered by Social Security. Other retirement income, except U.S. military retirement income pursuant to subsection (d) of this section, received by a taxpayer of this State shall be excluded pursuant to subsection (b) of this section as though the income were received from the Civil Service Retirement System and shall be subject to the limitations under subsection (e) of this section, provided that: (1) the income is received from a contributory annuity, pension, endowment, or retirement system of: (A) the U.S. government or a political subdivision or instrumentality of the U.S. government; (B) this State or a political subdivision or instrumentality of this State; or (C) another state or a political subdivision or instrumentality of another state; and (2) the contributory system from which the income is received was based on earnings that were not covered by the Social Security Act. (d) U.S. military retirement income and U.S. military survivor benefit income. For taxpayers of any filing status, U.S. military retirement income, and U.S. military survivor benefit income received by an eligible beneficiary, received by a taxpayer of this State shall be excluded from taxable income under subdivision 5811(21)(B)(iv) of this chapter as follows: (1) If the federal adjusted gross income of the taxpayer is less than or equal to $125,000.00, all federally taxable U.S. military retirement income and survivor benefit income shall be excluded. (2) If the federal adjusted gross income of the taxpayer is greater than $125,000.00 but less than $175,000.00, the percentage of federally taxable U.S. military retirement income and survivor benefit income to be excluded shall be proportional to the amount of the taxpayer’s federal adjusted gross income over $125,000.00, determined by: (A) subtracting the federal adjusted gross income of the taxpayer from $175,000.00; (B) dividing the value under subdivision (A) of this subdivision (2) by $50,000.00; and (C) multiplying the value under subdivision (B) of this subdivision (2) by the federally taxable U.S. military retirement income and survivor benefit income received. (3) If the federal adjusted gross income of the taxpayer is equal to or greater than $175,000.00, no amount of the federally taxable U.S. military retirement income and survivor benefit income received shall be excluded under this section. (e)(1) Requirement to elect one exclusion. A taxpayer of this State who is eligible during the taxable year for more than one of the exclusions under subsections (a), (b), and (c) of this section shall elect only one of the exclusions for which the taxpayer is eligible. (2) A taxpayer of this State who is eligible during the taxable year for the military retirement and survivor benefit exclusion under subsection (d) of this section may elect that exclusion regardless of whether the taxpayer also elects an exclusion under subsections (a)–(c) of this section. Added 2018, No. 11 (Sp. Sess.), § H.5, eff. Jan. 1, 2018; amended 2021, No. 105 (Adj. Sess.), § 534, eff. July 1, 2022; 2021, No. 138 (Adj. Sess.), § 7, eff. Jan. 1, 2022; 2023, No. 6, §§ 376, 377, eff. July 1, 2023; 2025, No. 71, § 3, eff. Jan. 1, 2025.

32 V.S.A. § 5830f Vermont child tax credit

5830f. Vermont child tax credit (a) A resident individual or part-year resident individual who is entitled to a child tax credit under the laws of the United States or who would have been entitled to a child tax credit under the laws of the United States but for the fact that the individual or the individual’s spouse does not have a taxpayer identification number shall be entitled to a refundable credit against the tax imposed by section 5822 of this title for the taxable year. The total credit per taxable year shall be in the amount of $1,000.00 per qualifying child, as defined under 26 U.S.C. § 152(c) but notwithstanding the taxpayer identification number requirements under 26 U.S.C. § 24(e) and (h)(7), who is six years of age or younger as of the close of the calendar year in which the taxable year of the taxpayer begins. For a part-year resident individual, the amount of the credit shall be multiplied by the percentage that the individual’s income that is earned or received during the period of the individual’s residency in this State bears to the individual’s total income. An otherwise eligible individual shall be entitled to the credit under this section without regard for the laws of the United States pertaining to the amount of federal child tax credit that may be refunded. (b) Notwithstanding subsection (a) of this section, the amount of the credit per child under this section shall be reduced, but not below zero, by $20.00 for each $1,000.00, or fraction thereof, by which the individual’s adjusted gross income exceeds $125,000.00, irrespective of the individual’s filing status. For purposes of this subsection, spouses filing jointly shall be considered an individual. (c) Notwithstanding any provision of law to the contrary, the refundable credit and its payment authorized under this section shall be treated in the same manner as the federal Earned Income Tax Credit and shall not be considered as assets, income, or resources to the same extent the credit and its payment would be disregarded pursuant to 26 U.S.C. § 6409 and the general welfare doctrine for purposes of determining eligibility for benefits or assistance, or the amount or extent of those benefits or assistance, under any State or local program, including programs established under 33 V.S.A. § 3512 and chapters 11, 17, 19, 21, 25, and 26. This subsection shall only apply to the extent that it does not conflict with federal law relating to the benefit or assistance program and that any required federal approval or waiver is first obtained for that program. (d)(1) The Commissioner shall establish a program to make advance quarterly payments of the credit under this section during the calendar year that, in the aggregate, equal 50 percent of the annual amount of the credit allowed to each individual for the taxable year. The quarterly payments made to an individual during the calendar year shall be in equal amounts, except that the Commissioner may modify the quarterly amount upon receipt of any information furnished by the individual that allows the Commissioner to determine the annual amount. The remaining 50 percent of the annual amount of the credit allowed to each individual shall be determined at the time of filing a Vermont personal income tax return for the taxable year pursuant to section 5861 of this title. (2) The Commissioner shall provide a process by which individuals may elect not to receive advance payments under this subsection. Added 2021, No. 138 (Adj. Sess.), § 1, eff. Jan. 1, 2022; amended 2023, No. 72, § 16, eff. Jan. 1, 2023; 2023, No. 72, § 18; 2025, No. 71, § 1, eff. Jan. 1, 2025.

32 V.S.A. § 5830g Vermont veteran tax credit

5830g. Vermont veteran tax credit (a) A resident individual or part-year resident individual who served in the uniformed services shall be entitled to a refundable credit against the tax imposed by section 5822 of this title for the taxable year. (b) A taxpayer shall be eligible for the credit under this section provided the taxpayer has a discharge record, or other record of separation from active duty, verifying service in the uniformed services. (c)(1) If the federal adjusted gross income of the taxpayer is less than or equal to $25,000.00, the amount of tax credit provided under this section shall be $250.00. (2) If the federal adjusted gross income of the taxpayer is greater than $25,000.00 but less than $30,000.00, the amount of credit shall be $250.00 less $5.00 per $100.00 of federal adjusted gross income exceeding $25,000.00 of federal adjusted gross income. (3) If the federal adjusted gross income of the taxpayer is $30,000.00 or greater, no amount of credit shall be provided under this section. Added 2025, No. 71, § 5, eff. Jan. 1, 2025.

Source: Vermont General Assembly (legislature.vermont.gov)URL: https://legislature.vermont.gov/statutes/chapter/32/151Fetched: 10/21/2026