Vermont Estate Tax

Vermont is one of twelve states, plus Washington, D.C., that levies an estate tax. Unlike the other states, though, Vermont’s estate tax is flat. If your estate is worth more than the $5 million exemption, the state taxes the excess at a rate of 16%, with no progressive rates or tax brackets involved. If you are a resident of the Green Mountain State and you’re starting to think about estate planning, this guide will take you through what you need to know.

A financial advisor can answer all your questions about estate planning, taxes, and other long-term goals.

Vermont Estate Tax Exemption

In 2026, Vermont also increased its estate tax filing threshold to $5 million, matching the threshold at which the estate tax applies. The change took effect June 18, 2026. Generally, Vermont requires an estate tax return when the decedent had an interest in property located in Vermont and the federal gross estate plus federal adjusted taxable gifts made within two years of death exceeds $5 million, or when the IRS requires a federal estate tax return. ¹

Vermont Estate Tax Rate

While many estate taxes are progressive, Vermont’s is flat. The state charges a flat rate of 16%. ² Let’s say your total estate is worth $7.25 million. The first $5 million is exempt, leaving a taxable estate of $2.25 million. Vermont taxes the estate at a rate of 16%, giving you a total estate tax burden of $360,000.

Vermont includes federal adjusted taxable gifts made within two years of death when determining the estate for state estate tax purposes.

What Is the Estate Tax?

The estate tax, sometimes referred to as the “death tax,” is a tax on the estate of a person who recently died. It is levied on the money or assets in an estate before it is passed on to a person’s designated heirs. The estate tax only applies to estates that reach a certain threshold.

The estate tax is different from the inheritance tax. The inheritance tax is levied by some states on money or property after it’s dispersed to beneficiaries.

Vermont Inheritance Tax

Vermont has no inheritance tax, but inheritance taxes from others states could in theory apply to you. Kentucky, for example, has an inheritance tax that applies to all property within the state, even if it is passed on to an inheritor who lives out of state. If you inherit assets from someone living in another state, check the local laws to see if you’ll owe taxes.

Vermont Gift Tax

There is no gift tax in Vermont. The federal gift tax has a $19,000 exemption per recipient in 2026. That means you can give up to $19,000 to as many people as you want in 2026 without worrying about the gift tax. You generally must report gifts to a person that exceed that amount in a given year, although exceptions apply. The taxable portion of a gift generally counts against your $15 million federal lifetime basic exclusion amount in 2026, which applies to taxable gifts and transfers at death. ³

Vermont Estate Tax for Married Couples

The Vermont estate tax exemption is not portable for married couples. If your spouse dies before you do, you still will only get to apply one $5 million exemption.

Federal Estate Tax

In addition to the Vermont estate tax, some Vermont residents may need to consider the federal estate tax, which has a much higher threshold. The threshold for the federal estate tax is $15 million for deaths in 2026, up from $13.99 million for deaths in 2025. Any estate worth less than that is not subject to the federal estate tax. The federal exemption is portable between spouses when the applicable requirements and election are satisfied, potentially allowing a surviving spouse to add a deceased spouse’s unused exclusion to their own.

Unlike the Vermont estate tax, the federal estate tax is progressive. Tax rates increase the larger the estate.

Here’s a simplified example: Let’s say you have an estate worth $17.82 million and you are not married, and assume the full $15 million basic exclusion amount is available with no prior taxable gifts. Subtracting the $15 million exclusion leaves $2.82 million above the exclusion. Using the federal estate tax rate schedule, the tentative tax on $2.82 million is $1,073,800, before accounting for other applicable adjustments, deductions, or credits.

Federal Estate Tax Rates

*The taxable estate is the total above the 2026 exemption of $15 million.

**The rate threshold is the point at which the marginal estate tax rate kicks in. The table shows the federal estate tax rate schedule used in calculating tentative tax. The actual federal estate tax calculation can also depend on taxable lifetime gifts, deductions and available credits.

Overall Vermont Tax Picture

Vermont is not very tax-friendly for retirees. The state fully taxes income from both retirement accounts like 401(k) plans and public and private pension plans. Vermont also taxes Social Security benefits, although state exemptions may reduce or eliminate the tax for eligible taxpayers based on income and filing status. Vermont has a progressive income tax, with rates ranging from 3.35% to 8.75%. ⁴ Vermont’s property taxes are among the highest in the country, with an average effective rate of 1.42%. ⁵

Bottom Line

If you have a large estate and worry about estate taxes, Vermont may not be the right home for you. As one of only a handful of states with an estate tax, Vermont will take 16% of a qualifying estate. This can occur on top of any estate taxes owed to the federal government. If Vermont is already your home, you will need to factor this tax into your estate planning strategy.

A financial advisor can help you figure out the best combination of deductions, charitable giving, types of trusts, and tax-friendly gifts to keep your liability as low as posisble.

Estate Planning Tips

• Estate planning can be complex, so a financial advisor’s services could be helpful. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• One of the most common will-writing mistakes is to not accurately take stock of your assets. Consider everything, from bank accounts and homes to less obvious items like family heirlooms and jewelry.

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