Vermont Real Estate Laws & Taxes
Laws & Taxes Affecting Real Estate in Vermont

Ironically, part of what makes Vermont such an appealing place to live is the same thing that can make buying, owning, and selling real estate here unique—our real estate laws and taxes. What laws should you be aware of and how much can you expect to pay in taxes? Here’s a quick summary.

Vermont Property Transfer Tax
The Vermont Property Transfer Tax is a tax buyers must pay whenever they buy real estate in Vermont. The tax is due at the time the deed is recorded. The standard tax rate is 1.25 percent of the purchase price, however, if you are buying a home that will serve as your primary residence, the tax rate drops to 0.5 percent on the first $100,000 of your purchase price. Anything over $100,000 is taxed at the regular rate of 1.25 percent. An exception also applies for property that is classified for agricultural, farming, or forestry use.

Vermont Income Tax
Vermont Income Tax is a tax sellers must pay the State of Vermont for any capital gains realized from the sale of real estate. You are not taxed on gains of less than $250,000 if single and $500,000 if married, provided the real estate you sold served as your primary residence for at least two of the five years preceding the sale. If the real estate sold did not serve as your primary residence, the state will not tax you on the first 40 percent of your gains provided you owned the real estate for more than a year. The amount of tax owed on the remaining 60 percent will depend on your federal income tax bracket. It can range from a low of 3.6 percent to a high of 9.5 percent.

Vermont Real Estate Withholding Tax
The Vermont Real Estate Withholding Tax was passed to ensure that sellers who do not live in the State of Vermont pay the Vermont Income Tax discussed above. It means that if you buy real estate from a nonresident, you need to withhold 2.5 percent of the sale price and instead give that money to the state. The withheld amount is considered a payment against the Vermont Income Tax. The seller can get a refund if no gain occurred or if the amount withheld is more than the tax.


Vermont Land Gains Tax
The Vermont Land Gains Tax is a unique tax to the State of Vermont designed to discourage land speculation. Essentially it means that anyone who buys and sells land after less than six years of ownership is subject to a tax in addition to the Vermont Income Tax discussed above. The Land Gains Tax can be steep going from a high of 80 percent on land owned for less than four months to a low of 5 percent for land owned between five and six years. There are several exceptions to this tax including an exception is you improve the lot by building a home on it.


Property Taxes & Act 60
State & Local Property Taxes and Act 60 go hand in hand. Vermont has local property taxes and, as of 1997, with the passage of Act 60, a statewide property tax designed to ensure that all Vermont children have access to the same quality of education regardless of where they live—a wealthy community or a poor community. Property tax rates in the state are set each year after each individual town determines the value of all property in town and how much money it needs to cover municipal and school expenses, including Act 60. Taxes on a particular property are calculated by dividing the property’s listed value by 100 and multiplying that by the town tax rate.


Act 250
Act 250 was passed by the Vermont legislature in 1970 to control the amount and type of development in the state. As a result, the state closely watches development and requires permits for many different development scenarios including construction above an elevation of 2500 feet; commercial and industrial construction on more than one acre if a town does not have any permanent zoning laws and ten acres if it does; construction of ten or more housing units by the same owner within a five mile radius; the development of land with an average grade of 15 percent or more; and the sale or lease of ten or more lots regardless of lot size.


The above is a very brief overview of some of Vermont’s laws and taxes. It is designed to give you a feel for what you can expect when buying or selling in our state. It is by no means all-inclusive. Please contact me, at your convenience, to discuss the above in more detail.