Vermont State Taxes: What You’ll Owe in the 2026 Tax Season

How is property taxed?

The average property tax rate is 1.51 percent of a home’s assessed value, according to the latest data from the Tax Foundation. Actual rates vary by county, ranging from a low of 1.33 percent in Grand Isle County to a high of 1.65 percent in Rutland County. The lowest median property tax paid was $3,035 in Essex County, while the highest was $6,617 in Chittenden County.

What about sales and other taxes?

• Sales tax: The combined state and local average sales tax is 6.39 percent, according to the Tax Foundation. The statewide sales tax is 6 percent, while local sales taxes vary and can be as much as 1 percent. Exemptions include most clothing, food, medication and medical equipment. A more detailed list is available here.
• Gas and diesel: Gasoline is taxed at about 30 cents per gallon, and diesel is taxed at about 32 cents per gallon.
• Vehicle tax: Vehicle purchases are subject to the state’s 6 percent sales tax and no local sales tax.
• Alcohol: Alcoholic beverages served in bars and restaurants are subject to a 10 percent tax. Alcohol purchased for offsite consumption is subject to the state’s 6 percent sales tax.
• Lottery: The state automatically withholds 24 percent of lottery winnings above $5,000 for federal income tax and 6 percent for state taxes. Some state filers might owe more than 6 percent.

Will my heirs or estate have to pay inheritance and estate tax?

Estates worth $5 million or more are subject to a flat 16 percent tax on any amount above that $5 million.

Are there any tax breaks for older residents?

• Exemption for Civil Service Retirement System: Retirees enrolled in the federal Civil Service Retirement System are eligible for an exemption on the first $10,000 of their retirement pay if they meet income thresholds. To be eligible, taxpayers who are married and filing jointly must have a household income of $75,000 or less, and other filers (married filing separately, single or head of household) must have an income of $60,000 or less.
• Other retirement system exemption: Taxpayers can exclude the first $10,000 of retirement income from some retirement systems, including income received from a contributory annuity, pension, endowment, or state or federal retirement pension. The exemption does not apply to Social Security income. To be eligible, taxpayers who are married and filing jointly must have a household income of $75,000 or less, and other filers must have an income of $60,000 or less.

Note: Taxpayers can only claim one of the following exemptions, even if they are eligible for more than one: Social Security exemption; Civil Service Retirement System exemption; other retirement system exemption.

• Additional standard deduction for seniors and the blind: Residents who are 65 or older and/or blind may deduct an additional $1,000 from their income tax.
• Property tax exemption for disabled veterans: Disabled veteran homeowners may be eligible for a property tax exemption. The exemption reduces the assessed value of the home. The deadline to apply each year is May 1. Surviving spouses of veterans who haven’t remarried may also be eligible if their spouses had received the exemption in the past. The amount of the exemption varies by location.
• Elderly or permanently disabled tax credit: This credit is for people who are 65 or older and/or permanently disabled who have minimal tax-exempt retirement or disability income. Residents who qualify for the federal elderly or permanently disabled credit will qualify for the state credit. The income limits are: below $17,500 for taxpayers who are single, head of household or a qualifying surviving spouse; below $20,000 for those married and filing jointly when only one spouse qualifies; below $25,000 for those married and filing jointly when both spouses qualify; and $12,500 when married and filing separately from their spouse and living apart for all of the calendar year. Vermont’s credit is 24 percent of the federal credit.

Are military retirement pensions taxed?

Military retirement income is exempt for taxpayers, regardless of filing status, if they have an adjusted gross income of $125,000 or less. Retirees with an AGI between $125,000 to $175,000 can get a partial exemption that decreases for higher incomes. Those with more than $175,000 in AGI are not eligible for exemptions.

What is the deadline for filing taxes in 2026?

Vermont taxes were due on April 15. Taxpayers who filed for an extension have until Oct. 15 to file their returns, although any taxes due should have been paid by April 15.

More AARP Financial Resources

• AARP Retirement Calculator Determine if you are saving enough to retire when — and how — you want.
• AARP Social Security Calculator Figure out when to claim and how to maximize your Social Security benefits.
• AARP Tax Tools Explore resources to help you calculate and prepare taxes.