Vermont Capital Gains Tax Rate (2026)
Vermont capital gains tax overview
Four brackets from 3.35% to 8.75%. No special treatment for capital gains.
Federal + Vermont combined rates
Your total capital gains tax bill includes both layers — federal and state. Here is what a Vermont investor pays in 2026 for long-term gains:
| Federal Long-Term Rate | Vermont State Rate | Combined Rate | Plus NIIT (if applicable) |
|---|---|---|---|
| 0% | 8.75% | 8.75% | 12.6% |
| 15% | 8.75% | 23.8% | 27.6% |
| 20% | 8.75% | 28.8% | 32.5% |
The NIIT (Net Investment Income Tax) adds an extra 3.8% for taxpayers whose MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It is a federal tax only — Vermont does not have an equivalent.
How Vermont compares to other states
Vermont's top rate of 8.75% places it in the upper-middle tier of state capital gains taxation. For comparison:
- Zero-tax states (FL, TX, NV, etc.): 0% — total with 15% federal = 15%
- Low-rate states (AZ, IN, PA): 2.5–3.1% — total with 15% federal = 17.5–18.1%
- Vermont: 8.75% — total with 15% federal = 23.8%
- High-rate states (NY, NJ): 10.75–10.9% — total with 15% federal = ~26%
- California: 13.3% — total with 15% federal = 28.3%
Tax-reduction strategies for Vermont residents
With a top state rate of 8.75%, minimizing capital gains tax is particularly important in Vermont. Key strategies:
- Hold over 1 year for long-term federal rates (0/15/20%). Vermont does not offer a preferential state rate, but federal savings alone are often 7–17%.
- Tax-loss harvesting: Offset your gains with losses realized in the same year. A $20,000 loss offsets $20,000 of gains dollar-for-dollar, saving up to 29% ($5,750) on that $20,000 at top rates.
- 0% bracket planning: In lower-income years (retirement, sabbatical, between jobs), realize gains at the federal 0% rate. You still owe Vermont state tax, but eliminating the federal component is significant.
- Donate appreciated stock directly to charity or a donor-advised fund to avoid capital gains tax entirely while generating a charitable deduction for the full fair market value.
- Installment sales: If selling a business or real estate, structuring as an installment sale spreads the gain over multiple years, potentially keeping each year's gain in a lower bracket.
Detailed Vermont capital gains tax rules
Tax history and legal basis
Vermont taxes capital gains as ordinary income with a progressive system and a top rate of 8.75% on income over $229,550.
Exemptions and special treatment
Vermont does not offer preferential capital gains rates. However, the state provides a partial exclusion for gains from the sale of a Vermont farm (farm-to-farm transfer). General investment gains are fully taxable at ordinary rates.
Filing requirements
File Form IN-111 (resident). Vermont starts with federal taxable income and makes adjustments. Estimated payments required if owing $500+. Filing deadline is April 15.
Recent changes and legislative updates
Vermont's 8.75% top rate is among the highest in New England. The state has resisted rate reductions despite surrounding states cutting taxes. Combined with high property taxes and a high cost of living, Vermont's investment tax burden is significant. The farm sale exclusion reflects the state's agricultural heritage.
Worked example: $50,000 capital gain in Vermont
Here's exactly what a Vermont resident would owe on a $50,000 long-term capital gain with $80,000 in other income (single filer, 2026):
| Component | Amount | Notes |
|---|---|---|
| Capital gain | $50,000 | Long-term (held over 1 year) |
| Federal tax (15%) | −$7,500 | Based on $80,000 ordinary income + gain |
| Vermont state tax (6.6%) | −$3,300 | Applied to the full gain amount |
| Total tax owed | −$10,800 | Federal + state combined |
| You keep | $39,200 | 78.4% of your gain |
After both federal and Vermont state tax, you keep $39,200 of your original $50,000 gain. The effective combined rate is 21.6%.
Frequently asked questions — Vermont
Does Vermont tax short-term and long-term gains differently?
No — Vermont taxes both short-term and long-term capital gains as ordinary income at the same rates as wages. There is no state-level preferential rate for patience. The federal system, however, taxes long-term gains at 0/15/20% vs. up to 37% for short-term — a significant difference that applies regardless of state.
Do I need to file a Vermont tax return if I only have capital gains?
If you have capital gains income and meet Vermont's filing threshold, you are required to file a Vermont state income tax return. The threshold is typically similar to the standard deduction amount — check the VT Department of Revenue for the current year's filing requirements.
What if I moved to Vermont mid-year?
If you moved to Vermont during the year, you are a part-year resident. Vermont generally taxes capital gains realized while you were a Vermont resident. Gains realized before you moved may be taxable by your prior state. Keep detailed records of when each sale occurred relative to your move date.