Vermont Estate Tax: What It Is and Who Pays
Learn about the Vermont estate tax landscape, including why the tax exists and important deadlines and practical steps for residents on property owners.
If you live in the Green Mountain State (or own property there), it’s smart to understand the Vermont estate tax. The rules are straightforward: a high exemption, a flat rate above that line, and timelines that mirror the federal system. Here’s the plain-English version so you can plan with confidence.
Vermont levies an estate tax only when an estate exceeds $5 million. Anything above that threshold is taxed at a flat 16%. Amounts under $5 million aren’t taxed at the state level.
When a Vermont estate meets the filing threshold, the return is generally due nine months after the person’s passing. The state follows the common approach of allowing an extension to file (typically up to six months). However, an extension doesn’t extend the time to pay. These timelines track the federal estate tax calendar.
While Vermont is one of a handful of places with a state-level estate tax, it does not impose an inheritance tax. That means beneficiaries don’t pay a separate tax on what they receive.
Vermont Estate Tax vs. Federal Estate Tax
At the federal level, the estate tax exemption is much higher—$13.99 million for 2025. Therefore, many Vermont estates that clear the state line may still be under the federal threshold. Unlike the federal system’s progressive brackets, Vermont uses a single flat 16% rate on amounts above $5 million.
Another important difference: portability. Federally, a surviving spouse can use a deceased spouse’s unused exemption with the right election. Vermont does not offer portability. Thus, each spouse has their own $5 million exclusion. Also, any unused amount doesn’t transfer automatically to the survivor.
What Counts Toward the Vermont Estate Tax
Vermont calculates the tax on the value of the taxable estate above $5 million. Some deductions can reduce the taxable amount before the 16% rate applies. (Think marital and charitable transfers, debts, and administration expenses.)
One wrinkle many people ask about: lifetime gifts. Resources that track Vermont law note that certain gifts made shortly before passing can be pulled back into the Vermont taxable estate (commonly discussed as a two-year look-back). If gifts are part of your strategy, it’s worth understanding how timing interacts with the state rules.
A Simple Example
Say an estate totals $7.25 million. Vermont excludes the first $5 million and taxes the remaining $2.25 million at 16%, for $360,000 in Vermont estate tax. That same estate would be below the federal threshold for 2025, so no federal estate tax would apply.
Deadlines, Documents, and Practical Steps
Coordinate among spouses. Because the Vermont exclusion isn’t portable, couples often coordinate asset titling and lifetime gifts so that each person can make full use of their own $5 million exclusion. The goal is simple: avoid having most assets concentrated in one spouse’s estate where more than $5 million would face the 16% Vermont rate.
Mark the calendar. Nine months from the date of passing is the general filing and payment deadline; request any extension before that date.
Gather records. Asset values, debts, and any recent gifts help determine whether the Vermont estate tax is in play and whether deductions reduce exposure.
Coordinate federal and state filings. Even when the federal tax isn’t due, the federal timeline and forms framework guide the process and timing. Federal rules differ—especially the much higher exemption and portability—so plan with both systems in mind.
Overall, a bit of early organization—asset lists, thoughtful titling, and awareness of gift timing—goes a long way. With the essentials of the Vermont estate tax clear, you can structure things so more of what matters most reaches the people and causes you care about.
(Learn More: Read about revocable trusts in Vermont versus Nevada.)