VT Income Tax

Key thresholds table

| Item | Amount | Source | |------|--------|--------| | Standard deduction | Uses federal amounts | 32 V.S.A. §5811(21) | | Personal exemption | Uses federal amounts (pre-TCJA equivalent via VT credit) | 32 V.S.A. §5822 | | Filing deadline | April 15 | 32 V.S.A. §5848 | | Extension | October 15 (automatic with federal) | 32 V.S.A. §5848 | | Estimated tax threshold | $500 expected liability | 32 V.S.A. §5851 | | VT Earned Income Credit | 38% of federal EIC (refundable) | 32 V.S.A. §5828b | | VT Child and Dependent Care Credit | 72% of federal credit (for AGI ≤$30,000) | 32 V.S.A. §5828c | | State sales tax rate | 6% | 32 V.S.A. §9771 |

Self-employment tax deduction

The federal deduction for 50% of self-employment tax reduces federal AGI → reduces federal taxable income → flows through to Vermont automatically.

Retirement contributions

SEP-IRA, SIMPLE IRA, solo 401(k) contributions reduce federal AGI → flow through automatically.

Health insurance deduction

The self-employed health insurance deduction reduces federal AGI → flows through automatically.

QBI deduction (§199A)

Vermont conforms — the QBI deduction is included in federal taxable income (it reduces FTI), so it benefits the Vermont computation. No add-back.

Home office deduction

Reduces Schedule C net profit → reduces federal AGI → reduces federal taxable income → flows through.

Estimated tax payments

Vermont requires estimated payments if expected tax liability (after credits and withholding) exceeds $500. Due dates follow federal: April 15, June 15, September 15, January 15.

[T1-VT-1] Tax computation

Apply the graduated rate schedule to Vermont taxable income based on filing status. Use the Vermont rate schedules or tax tables published annually by the Department of Taxes.

[T1-VT-2] Starting point

Begin with federal taxable income from Form 1040, Line 15. Enter on Form IN-111, Line 1.

[T1-VT-3] Vermont additions (Form IN-112)

Common additions: - State and local bond interest from non-Vermont issuers (if excluded federally — rare since most muni interest is excluded from federal AGI, not TI) - Capital gains exclusion recapture (Vermont does not conform to certain federal exclusions) - IRC §168(k) bonus depreciation add-back (Vermont decoupled — requires add-back and substitution of VT depreciation)

[T1-VT-4] Vermont subtractions (Form IN-113)

Common subtractions: - Interest from US government obligations (Treasury bonds, savings bonds) - Vermont depreciation allowance (replacement for disallowed federal bonus depreciation) - 40% capital gains exclusion on qualifying Vermont assets held 3+ years (32 V.S.A. §5811(21))32 V.S.A. §5811(21)

[T1-VT-5] Vermont Earned Income Credit

38% of the federal Earned Income Credit (fully refundable). Claimed on IN-111. If the taxpayer qualifies for federal EIC, they automatically qualify for VT EIC.

[T1-VT-6] Filing due date

April 15 following the tax year (April 15, 2026 for TY 2025). Extension: October 15 (automatic with federal, no separate VT form needed). Payment is still due by April 15.

[T1-VT-7] Estimated tax payments

Required if expected VT tax liability after withholding and credits exceeds $500. Quarterly due dates: April 15, June 15, September 15, January 15. Form IN-114 (voucher).

[T1-VT-8] Use tax reporting

Form IN-111 includes a line for reporting use tax on out-of-state purchases. Self-employed individuals who purchase equipment/supplies online without VT sales tax should report use tax here.

[T2-VT-1] Residency determination

Vermont defines a resident as a person domiciled in Vermont or maintaining a permanent home in Vermont and spending 183+ days there. Domicile requires intent analysis. Freelancers splitting time between VT and another state need careful documentation.

[T2-VT-2] Bonus depreciation add-back

Vermont requires add-back of federal §168(k) bonus depreciation and substitutes its own depreciation schedule. This creates timing differences. Reviewer must track the Vermont depreciation schedule separately and ensure proper subtraction in subsequent years.

[T2-VT-3] Capital gains exclusion

Vermont allows a 40% exclusion on net long-term capital gains from the sale of qualifying Vermont-connected assets held for 3+ years. The asset must be a business, farm, or rental property located in Vermont, or an interest in certain Vermont businesses. Reviewer must verify the asset qualifies.

[T2-VT-4] Multi-state credit

Vermont allows a credit for income taxes paid to other states/jurisdictions. The credit is the lesser of: (a) tax paid to the other state, or (b) Vermont tax attributable to the income taxed by the other state. Requires careful allocation for multi-state freelancers.

[T2-VT-5] Renter credit / property tax credit

Vermont offers a property tax credit (via HS-122) and renter credit for eligible residents. Income limits and homestead value limits apply. These interact with overall VT tax liability.

Supplier pattern library table

| Income/deduction type | Vermont treatment | Notes | |----------------------|-------------------|-------| | Schedule C net profit | Included via federal taxable income | No adjustment | | Self-employment tax deduction | Included via federal AGI → FTI reduction | No adjustment | | SEP/SIMPLE/solo 401(k) | Included via federal AGI → FTI reduction | No adjustment | | QBI deduction (§199A) | Included via federal taxable income | Vermont conforms | | Self-employed health insurance | Included via federal AGI → FTI reduction | No adjustment | | Home office deduction | Included via Schedule C → FTI reduction | No adjustment | | Federal bonus depreciation (§168(k)) | Add back, substitute VT depreciation | Timing difference | | US government bond interest | Subtract | Exempt from state tax | | Out-of-state municipal bond interest | Generally no adjustment (already excluded from federal AGI) | Confirm per situation | | VT capital gains (qualifying assets, 3+ yr) | 40% exclusion available | Must verify qualification |

Form mapping table

| IN-111 Line | Description | Source | |-------------|-------------|--------| | Line 1 | Federal taxable income | Form 1040, Line 15 | | Line 2 | Vermont additions (from IN-112) | Computed | | Line 3 | Vermont subtractions (from IN-113) | Computed | | Line 4 | Vermont taxable income (Line 1 + 2 − 3) | Computed | | Line 5 | Vermont income tax (from rate schedule/table) | Per brackets | | Line 7 | Vermont earned income credit (38% of federal EIC) | Computed | | Line 8 | Other credits | Various | | Line 9 | Net Vermont tax | Computed | | Line 14+ | Payments (withholding, estimated, extension) | W-2s, IN-114 | | Line 18 | Use tax | Self-reported |

Refusal catalogue table

| ID | Refusal | Reason | |----|---------|--------| | R-VT-1 | Part-year resident return | Requires allocation computation | | R-VT-2 | Nonresident return (Form IN-111, Schedule IN-119) | Different sourcing rules | | R-VT-3 | Vermont corporate income tax (Form CO-411) | Different tax type | | R-VT-4 | Vermont estate tax | Different form and threshold analysis | | R-VT-5 | Vermont meals and rooms tax | Separate tax system (9%) | | R-VT-6 | Homestead declaration / property tax credit | Requires property valuation analysis | | R-VT-7 | Amended returns | Requires additional procedures | | R-VT-8 | Farm income averaging | Specialized computation |

R-VT-1

Part-year resident returnRequires allocation computation

R-VT-2

Nonresident return (Form IN-111, Schedule IN-119)Different sourcing rules

R-VT-3

Vermont corporate income tax (Form CO-411)Different tax type

R-VT-4

Vermont estate taxDifferent form and threshold analysis

R-VT-5

Vermont meals and rooms taxSeparate tax system (9%)

R-VT-6

Homestead declaration / property tax creditRequires property valuation analysis

R-VT-7

Amended returnsRequires additional procedures

R-VT-8

Farm income averagingSpecialized computation