VermontH.9332025-2026 SessionHouseWALLET

An act relating to miscellaneous administrative and policy changes to the tax laws

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Signed by Governor

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Bill Overview

Analyzed Economic Effects

27 provisions identified: 11 benefits, 3 costs, 13 mixed.

Full property tax credit during separation

Vermont counts 100% of the homestead property tax when calculating the credit for a qualifying separated spouse. The claimant must jointly own the home with a spouse outside the household and be in a court divorce or separation case. This changes the tax share used in the calculation, not the final credit amount.

Bigger credit for Vermont research businesses

Beginning with tax years starting in 2027, Vermont’s research credit rises from 27% to 75% of the federal credit. The credit covers federally eligible research expenses incurred within Vermont. Unused credit can carry forward for up to 10 years. The Department of Taxes must publish an annual list of claimants.

Higher transfer tax on second homes

The law keeps the base property transfer tax at 1.25%, with a $1 minimum. A 3.4% rate applies to year-round residential property that is not the buyer’s main home and requires no landlord certificate. The Commissioner also applies 3.4% when a filed landlord certificate does not reflect a genuine landlord-tenant relationship.

State tax limits for small-company investors

Vermont includes qualified small-business stock gains in taxable income even when federal law excludes them. Those gains can qualify for Vermont’s capital-gain subtraction, subject to existing holding-period and excluded-asset rules. The subtraction covers the first $5,000 or 40% of qualifying gains. It cannot exceed the lesser of 40% of federal taxable income or $350,000.

Businesses spread bonus depreciation tax deductions

Taxpayers must add federal bonus depreciation deductions back to Vermont taxable income, including covered amounts carried through operating losses. They can subtract depreciation calculated without the federal bonus. When property is sold or otherwise disposed of, unrecovered depreciation can also be deducted. Total deductions are limited by the relevant federal deduction and Vermont amounts previously added back.

Research businesses face new deduction rules

Taxpayers outside the eligible-business test must add specified federal domestic research deductions back to Vermont income. Eligible taxpayers must meet the federal gross-receipts test and cannot be prohibited tax shelters. With the required federal election and amended returns, they can deduct remaining qualifying 2022–2024 costs in 2025 or across 2025–2026. Total Vermont deductions cannot exceed the applicable federal deduction or Vermont amounts previously added back.

Fewer estates need state tax returns

The Vermont estate return filing threshold rises from $2.75 million to $5 million. For a deceased person with Vermont property, the test counts the federal gross estate plus adjusted taxable gifts made within two years of death. A required federal estate return remains a separate reason to file in Vermont. This change concerns filing, not the estate tax rate.

S corporations can seek interstate credits

The law removes the rule denying S corporations Vermont credits for taxes paid to another state. Affected corporations can seek those credits. The repeal does not set a credit amount.

Foresters can sign landowners’ management reports

Owners of land in Vermont’s use-value appraisal program can have their forester sign the required management activity report. Owners can still sign it themselves. Reports remain due to the state property valuation office by February 1 of the year after the activity.

Scholarship donations get federal credit pathway

The Governor can send Treasury a list of qualifying scholarship groups by December 1 each year for the federal school-scholarship tax credit. Groups must meet nonprofit, education-program, school-participation, and nondiscrimination requirements; previously listed groups remain presumed eligible unless found noncompliant. Previously listed groups must report scholarship, donation, expense, and personnel information to legislative education committees by January 15. If federal law, an agency rule, or a court invalidates the credit provision, listing must stop until the legislature acts.

Health technology fund lasts five years longer

The law delays the Health IT Fund’s scheduled sunset from July 1, 2026, to July 1, 2031. The fund’s legal continuation lasts five years longer. This provision does not provide a funding amount or a direct household benefit.

Flood-hit towns get five-year revenue replacement

Towns receive annual stabilization payments for eligible flood-damaged or flood-prone properties for five years, due by January 1. State public-safety notification triggers the compensation process. Payments use the property’s grand-list value and the municipal tax rate from the year before flood damage or flood-prone designation. The rate includes submunicipal taxes; payments go to towns, not homeowners.

More credit authority for down-payment assistance

For fiscal years 2027–2031, the agency can award up to $350,000 in total first-year credit allocations for down-payment assistance loans. The prior limit for fiscal years 2020–2026 was $250,000. These are program-wide credit limits, not amounts paid to each borrower.

Higher ceiling for business tax incentives

The annual combined ceiling for covered tax-credit awards and sales tax reallocations rises from $3 million to $3.5 million. Applicants must qualify for the covered credit program. Combined awards and reallocations cannot exceed $3.5 million, and no applicant is guaranteed an award.

State funds study of taxpayer burdens

The law provides $100,000 in fiscal year 2027 General Fund money for a ten-year tax-system study. Implementation depends on the specified appropriation being provided to the Joint Fiscal Office. The study is due January 15, 2027, under the Joint Fiscal Committee’s direction, with Legislative Counsel’s help. It examines tax comparisons, who pays, revenue sources, tax-driven moves, avoidance, enforcement gaps, and benefit eligibility gaps.

Earlier tax paperwork for affordable rentals

Owners claiming the education property tax exemption for qualified rental units must submit their housing-agency certificate by January 1, not April 1. Units must have rent limits under state or federal law. Units restricted only under the listed Section 8, Section 236, or Section 515 programs do not qualify. This provision changes the deadline, not the exemption percentage.

Development tax requires timely town valuations

Beginning October 1, 2026, development of enrolled agricultural or managed forestland carries a 10% tax on full market value. The value is divided proportionally when only part of a parcel is developed, and tax is due after valuation. A town receives the lesser of half the tax paid or $2,000 only when local officials determine market value on time. Missing the deadline forfeits the town’s share; state receipts go 75% to the Education Fund and 25% to the General Fund.

Wildlife land access protected; fees regulated

The Fish and Wildlife Commissioner cannot adopt a rule requiring individuals to hold a license or permit simply to access Department lands. With the Secretary’s approval, the Commissioner can license long-term research, academic, commercial, and utility uses and set conservation-camp tuition. Fees and tuition must be adopted by rule, and collected fees go to the Fish and Wildlife Fund. The existing land-and-facility fee rule remains through June 30, 2027, and is repealed July 1, 2027; this does not end all fees.

Earlier dates for property tax records

Covered property assessment, listing, valuation, and homestead status dates move from April 1 to January 1. Required taxable property inventories are due January 20 instead of April 20. Related dates also shift for construction equipment, trailer locations, municipal districts, valuation rates, exempt-property insurance records, and managed-forest plans. Homestead declarations remain due by the income tax filing deadline.

State ends overdue tax collection oversight

The law repeals the state Director’s duties to oversee municipal delinquent-tax collection. Those duties included advising collectors, holding meetings, and requiring information from local officials. The repeal does not itself change household tax liability or payment deadlines.

School funding benchmarks track government prices

The annual base education amount is $6,800, adjusted from fiscal year 2005 by a government-spending price index plus 0.1%. The same specified index adjusts the fiscal year 2025 spending average used for the 118% per-pupil spending benchmark. It also adjusts the $25 million threshold for allocating excess school Medicaid reimbursements. After specified school payments, 25% of excess funds goes to incentives for supervisory unions with student participation above 80%. The index measures state and local government consumption and investment prices.

Schools can renew contracts within limits

School and supervisory union boards can renew contracts without seeking bids when annual cost increases stay within the specified price index. The index is the latest government-spending price measure available as of November 15. The renewal’s total amount cannot exceed the original contract amount by more than 30%. Renewals must allow termination after an annual performance review.

Network providers face stricter property reporting

Beginning January 1, 2027, two-way communications infrastructure generally counts as real property for appraisal, starting with grand lists lodged April 1, 2027. Property used solely for public one-way radio or television broadcasts is excluded when a licensed broadcaster owns and operates it. Providers must submit sworn inventories by March 31; improper or missing submission by April 15 can bring fines up to $100 per violation, unless beyond their control. Willful omissions, false statements, or failures to swear to or submit an inventory allow valuation from available information and bar statutory appeals.

New town property valuation and counting

Municipal housing development sites use fair market value, rather than original taxable value, in equalized education tax lists. After state certification of a townwide reappraisal, the town’s appraisal level counts as 100% when education tax rates are set. For specified mapping and per-parcel payments, each separate, sellable lot counts as a parcel. The general parcel definition remains unchanged for other purposes.

School funding shares shift between taxes

Beginning July 1, 2026, the Education Fund receives 29% of meals and rooms taxes and 27% of vehicle purchase and use taxes. Beginning July 1, 2027, its meals-tax share rises to 32.5%, while its vehicle-tax share falls to 21%. A separate meals-tax allocation falls from 69% to 65% in fiscal year 2027, then to 61.5% in fiscal year 2028. These changes move revenue between state funds; they do not change the tax rates customers pay.

State land payments follow January ownership

The state must make annual payments to towns for eligible Agency of Natural Resources land held on January 1. Payments are due by October 31 and exclude buildings and other improvements. Existing formulas still distinguish land acquired before April 1, 2016, from land acquired on or after that date.

Vermont updates its federal tax baseline

Vermont’s income-tax and chapter 190 federal references advance from December 31, 2024, to December 31, 2025. Vermont does not adopt federal income tax rates. Separate state adjustments limit federal bonus depreciation, research deductions, operating-loss treatment, and cannabis deductions, and address foreign tax gross-ups. Specified adjustments take effect retroactively January 1, 2026, for tax years beginning January 1, 2025.

Sponsors & Cosponsors

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 13 • No: 43

Senate vote • 5/1/2026

Roll Call, requested by Senator Vyhovsky, Failed -- Needed 15 of 29 to Pass -- Yeas = 2, Nays = 27

Yes: 2 • No: 27