Vermont Income Tax Guide 2026 | Brackets, Rates & Calculator

Vermont is one of New England's highest-tax states — a reflection of the state's commitment to public education, healthcare, and social services in a small, rural state with a relatively modest tax base. For 2026, Vermont taxes individual income across four graduated brackets ranging from 3.35% on the first $49,400 up to 8.75% on income above $249,700.

What distinguishes Vermont's income tax system from many other states is its non-conformity to federal deduction amounts. Vermont sets its own standard deduction ($7,650 for single filers, the most recently confirmed figure) and personal exemption ($5,400 for single filers) — both substantially lower than the federal equivalents, and both subtracted directly from federal adjusted gross income. At $100,000 income, a single filer's Vermont taxable income is $86,950, generating approximately $4,133 in state tax at a 4.13% effective rate. Vermont also enacted a partial Social Security exemption for lower-income filers in recent years, reducing the tax burden for many retirees — though Vermont's estate tax, unlike its inheritance tax, was never repealed and still applies to estates above a $5 million exemption.

Vermont Income Tax Brackets for 2026 — and the $100K Worked Example

Vermont uses four graduated income tax brackets for 2026. Vermont starts from federal adjusted gross income (AGI) — not federal taxable income — and then applies its own standard deduction and personal exemption before the brackets take effect, per Vermont's own Form IN-111 worksheet.

The four brackets for single filers in 2026:

Worked example — $100,000 gross income, single filer:

1. Start with $100,000 federal AGI
2. Subtract Vermont standard deduction: $100,000 − $7,650 = $92,350
3. Subtract Vermont personal exemption: $92,350 − $5,400 = $86,950 Vermont taxable income
4. Apply brackets: 3.35% × $49,400 = $1,654.90
5. Apply second bracket: 6.60% × ($86,950 − $49,400) = 6.60% × $37,550 = $2,478.30
6. Total Vermont income tax: $1,654.90 + $2,478.30 = $4,133.20
7. Effective rate: $4,133.20 ÷ $100,000 = 4.13%

For comparison, a Vermont couple filing jointly with $100,000 combined income uses a $15,300 standard deduction and $10,800 personal exemption (two exemptions at $5,400 each) — leaving $73,900 Vermont taxable income, entirely within the 3.35% bracket, for a Vermont tax of about $2,476 and a significantly lower effective rate.

Filers with federal AGI above $150,000 should also check Vermont's minimum tax rule: the state charges the greater of 3% of federal AGI or the regular bracket-calculated tax shown above. For most filers taking only the standard deduction and exemption, the regular bracket calculation is already higher than 3% of AGI, so this floor rarely changes the result — it mainly matters for filers with large itemized deductions or credits that would otherwise push their Vermont tax unusually low relative to their true income.

Vermont's Own Standard Deduction — Not Federal-Conforming

One of Vermont's distinguishing characteristics is that it does not conform to the federal standard deduction amounts. While the federal standard deduction for 2026 is $16,100 for single filers, Vermont uses its own, much lower figure: $7,650 for single filers (the most recently confirmed figure — Vermont has not yet published its 2026 amount) and $15,300 for married filing jointly.

This non-conformity is significant in practice. At $100,000 income, a Vermont single filer deducts $7,650 rather than the federal $16,100 — an $8,450 difference that translates to several hundred dollars more in Vermont income tax than would apply if Vermont conformed to federal amounts.

Vermont also maintains a separate personal exemption of $5,400 per exemption for 2026 (confirmed via the state's own withholding formula). The personal exemption is applied after the standard deduction, further reducing Vermont taxable income:

• Single filer, one exemption: $7,650 standard deduction + $5,400 personal exemption = $13,050 total reduction
• MFJ, two exemptions: $15,300 standard deduction + $10,800 personal exemption = $26,100 total reduction

Taxpayers who itemize on their federal return should separately calculate whether itemizing makes sense for Vermont purposes, as the itemized deduction thresholds and allowed items may differ from federal rules. Vermont generally conforms to many federal itemized deduction categories, but the lower standard deduction means the itemizing threshold is also lower, making itemizing relatively more accessible in Vermont than at the federal level.

Social Security Partial Exemption — Vermont's Income Threshold

Vermont used to tax Social Security benefits in full, which was a significant burden on lower-income retirees who relied heavily on their benefits. The state has since enacted a phased exemption that provides meaningful relief below certain income thresholds:

• Fully exempt: If your federal adjusted gross income (AGI) is below $65,000 (single) or $85,000 (MFJ), Social Security benefits are fully exempt from Vermont income tax.
• Fully taxable: Above those thresholds, Social Security benefits are included in Vermont taxable income at the same rate as other income.

For a retiree receiving $20,000/year in Social Security with an AGI of $55,000 (single), the full $20,000 is exempt — saving approximately $858 in Vermont income tax at the 4.29% marginal rate that applies in that income range. This is a substantial improvement over the prior full-taxation approach.

The thresholds are not indexed for inflation, which means that over time, more retirees with fixed Social Security income may find themselves above the exemption threshold as other income sources grow. Vermont does not currently offer a partial phase-out — it is a hard cliff: below the threshold, fully exempt; at or above, fully taxable.

Vermont's Social Security treatment is more generous than some neighboring states (Massachusetts taxes all Social Security) but less comprehensive than New Hampshire (which has no broad income tax) or states that fully exempt Social Security for all filers regardless of income.

Vermont's Unique Statewide Education Property Tax

Vermont's property tax system is unlike any other state in New England — and arguably in the country. Vermont operates a statewide education property tax that funds public school spending on a roughly equalized basis across the state. This system was established following the 1997 Vermont Supreme Court ruling in Brigham v. State, which found that the prior property-tax-based school funding system created unconstitutional disparities between wealthy and less wealthy towns.

The result is a two-tier property tax system in Vermont:

• Residential education property tax: Applied statewide to fund education; all revenues flow into the Education Fund and are redistributed to towns based on their per-pupil spending needs
• Municipal property tax: Set locally by each town to fund local services (roads, fire, police), varying significantly by municipality

Vermont's combined effective property tax rate averages approximately 1.51% — among the highest in New England, and essentially tied with New Hampshire for the region's highest rate. On a $300,000 home, that translates to roughly $4,530/year. Homeowners with household income below certain thresholds may qualify for a property tax adjustment (Vermont's circuit-breaker program) that limits property tax as a percentage of household income.

The education property tax is the primary reason Vermont's overall property tax burden ranks high nationally despite the state's relatively modest home values compared to parts of Connecticut or Massachusetts.

New England Comparison — Vermont vs NH, ME, MA, RI

Vermont's income tax burden is among the highest in New England. Here is how the five states compare at $100,000 income for a single filer:

New Hampshire's income-tax advantage gets no meaningful offset from property taxes: Vermont and New Hampshire carry the two highest property tax rates in New England, essentially tied at around 1.50–1.51%. On a $300,000 home, that's roughly $4,530/year in Vermont versus $4,500/year in New Hampshire — a negligible $30 difference, far smaller than Vermont's income tax bill at $100,000. Vermont's combination of income tax and property tax creates a genuinely high total state-local burden, but the gap between Vermont and Massachusetts or Rhode Island on income tax alone is smaller than the headline rates suggest.

Vermont's high marginal rate of 8.75% (kicking in above $249,700) most sharply affects higher earners. At $200,000 income (single), Vermont's effective rate climbs toward 7%+ — significantly above Massachusetts's flat 5% and rivaling California-tier rates.

Capital Gains — Taxed as Ordinary Income in Vermont

Vermont provides no preferential tax rate for capital gains. Long-term capital gains — even on assets held for more than one year — are taxed at exactly the same rates as ordinary income under Vermont's four-bracket system (3.35% to 8.75%).

This stands in contrast to the federal system, where long-term capital gains are taxed at 0%, 15%, or 20% depending on income. A Vermont investor who sells appreciated stock with $100,000 in long-term capital gains and has a total income pushing them into the 8.75% bracket will pay Vermont income tax at 8.75% on those gains — regardless of how long the asset was held.

The practical implications:

• Real estate sales: Vermont also imposes a land gains tax (a separate tax on gains from the sale of land held less than 10 years), in addition to regular income tax on gains from property sales
• Investment decisions: High-income Vermont investors may weight their asset location carefully, since Vermont's tax treatment offers no reward for long holding periods
• Comparison to neighboring states: New Hampshire has no income tax on capital gains for most filers (investment income is no longer taxed after the Interest and Dividends Tax phase-out); Massachusetts taxes long-term capital gains at the standard 5% flat rate

Vermont's ordinary-income treatment of capital gains is consistent with the state's progressive tax philosophy but creates a meaningful additional consideration for investors, retirees drawing down investment accounts, or business owners planning exits.

Vermont Estate Tax — $5 Million Exemption, 16% Flat Rate

Vermont has an active state estate tax on estates above a $5 million exemption threshold, charged at a flat 16% rate on the amount above that threshold. This is separate from Vermont's inheritance tax, which was abolished decades ago — the two are easy to confuse, but the estate tax itself was never repealed.

Vermont is one of 12 states (plus Washington DC) that currently impose a state-level estate tax as of 2026. Its $5 million exemption sits in the middle of that group — higher than Massachusetts ($2M) or Oregon ($1M), lower than Connecticut ($13.6M, aligned with the federal exemption) or Maine ($6.41M).

The implications for Vermont residents:

• Estates below $5 million owe no Vermont estate tax
• Estates above $5 million owe 16% of the amount above the exemption, in addition to any federal estate tax owed
• Federal estate tax also applies for estates above the much higher federal exemption threshold (~$13.6 million per person in 2026 under current law)
• Vermont has no separate inheritance tax — there is no tax on the recipients of inherited assets at the state level, only on the estate itself above the exemption
• Vermont's estate tax applies to Vermont-situated property regardless of the decedent's domicile at death — relevant for anyone who moves away from Vermont but retains Vermont real estate or business property above the exemption

High-net-worth individuals with estates near or above $5 million should factor Vermont's estate tax into relocation and estate-planning decisions — moving to a state with no estate tax (like New Hampshire or Florida) eliminates this exposure for property situated there, though Vermont-situated property remains subject to it regardless of where the owner later resides.

Vermont's High-Tax, High-Service Profile

Vermont consistently ranks among the highest-tax small states in the US. This is not a political accident — Vermont voters and legislators have historically chosen to fund robust public services, including:

• Education funding: Vermont's statewide education property tax system (see the property tax section) ensures relatively equalized per-pupil spending across rich and poor towns alike
• Universal school meals: Vermont enacted universal free school meals for all students
• Healthcare: Vermont expanded Medicaid more aggressively than most states and has pursued near-universal coverage initiatives
• Environmental protection: Vermont ranks among the highest states for environmental program spending per capita

The total state and local tax burden for a Vermont single filer earning $100,000 looks roughly like this:

• Vermont income tax: ~$4,133
• Federal income tax (approximate, after standard deduction): ~$13,800
• Property tax (on a $300,000 home): ~$4,530/year
• Sales tax (on $30,000 annual spending, at 6%): ~$1,800

Vermont's tax system is best understood as a deliberate trade-off: higher taxes in exchange for strong public institutions, well-funded schools, and a high quality of life that consistently attracts residents who value those services. The state's small population and aging demographics create ongoing pressure to maintain this balance, however — a smaller working-age tax base must fund an increasingly retirement-age service demand.