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 $45,400 up to 8.75% on income above $229,550.

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 ($7,000 for single filers) and personal exemption ($4,500 for single filers) — both substantially lower than the federal equivalents. At $100,000 income, a single filer's Vermont taxable income is $88,500, generating approximately $4,365 in state tax at a 4.37% effective rate. Vermont also abolished its estate tax in 2022 and has enacted a partial Social Security exemption for lower-income filers — two meaningful changes in recent years that reduce the tax burden for retirees.

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

Vermont uses four graduated income tax brackets for 2026. Unlike states that conform closely to federal taxable income, Vermont applies its own standard deduction and personal exemption before the brackets take effect, which means Vermont taxable income differs from federal taxable income.

The four brackets for single filers in 2026 (approximate thresholds):

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

1. Start with $100,000 gross income
2. Subtract Vermont standard deduction: $100,000 − $7,000 = $93,000
3. Subtract Vermont personal exemption: $93,000 − $4,500 = $88,500 Vermont taxable income
4. Apply brackets: 3.35% × $45,400 = $1,520.90
5. Apply second bracket: 6.60% × ($88,500 − $45,400) = 6.60% × $43,100 = $2,844.60
6. Total Vermont income tax: $1,520.90 + $2,844.60 = $4,365.50
7. Effective rate: $4,365.50 ÷ $100,000 = 4.37%

For comparison, a Vermont couple filing jointly with $100,000 combined income uses a $14,050 standard deduction and $9,000 personal exemption — leaving $76,950 Vermont taxable income and a significantly lower effective rate.

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 $15,000 for single filers, Vermont uses its own, much lower figures: $7,000 for single filers and $14,050 for married filing jointly.

This non-conformity is significant in practice. At $100,000 income, a Vermont single filer deducts $7,000 rather than the federal $15,000 — a $8,000 difference that translates to approximately $528 more in Vermont income tax (at the 6.60% bracket) than would apply if Vermont conformed to federal amounts.

Vermont also maintains a separate personal exemption of $4,500 (single) or $9,000 (MFJ). The personal exemption is applied after the standard deduction, further reducing Vermont taxable income:

• Single filer: $7,000 standard deduction + $4,500 personal exemption = $11,500 total reduction
• MFJ: $14,050 standard deduction + $9,000 personal exemption = $23,050 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 1.78% — one of the highest in New England. On a $300,000 home, that translates to roughly $5,340/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 advantage disappears quickly when property taxes are considered: NH's ~2.18% average property tax rate is the highest in New England, and on a $300,000 home costs roughly $6,540/year — far more than Vermont's income tax 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 $229,550) 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 Abolished — What Changed in 2022

One of the most significant Vermont tax changes in recent years is the abolishment of the Vermont estate tax effective January 1, 2022. Prior to this change, Vermont imposed a state estate tax on estates above a $5 million exemption threshold, with rates that could reach 16%.

With the repeal, Vermont estates no longer face any state-level estate or inheritance tax. This brings Vermont in line with most US states — only 12 states and Washington DC currently impose a state estate or inheritance tax as of 2026.

The implications for Vermont residents:

• Estates of any size are no longer subject to Vermont state estate tax
• Federal estate tax still applies for estates above the federal exemption threshold (~$13.6 million per person in 2026 under current law)
• Vermont also has no inheritance tax — there is no tax on the recipients of inherited assets at the state level
• The repeal particularly benefited family farms and business owners whose asset-rich but cash-poor estates previously faced tax bills requiring forced sales or liquidations

Vermont's estate tax repeal makes it meaningfully more attractive for high-net-worth individuals who previously considered relocating to New Hampshire or Florida to avoid Vermont estate taxes.

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: ~$4,365
• Federal income tax (approximate, after standard deduction): ~$13,800
• Property tax (on a $300,000 home): ~$5,340/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.