The Real Estate and Property Tax Blog

Vermont Property Transfer Tax

By the Real Estate Attorney

First enacted in 1968, the Vermont Property Transfer Tax is a tax on the sale of Vermont real estate which is imposed at the time a deed is presented to the town clerk for recording. The buyer is liable for the tax unless the parties agree that the seller will pay the tax.

At present, the tax rate is 1.25% of the sale price of the real estate being sold. Two lower tax rates exist for particular types of property:

1) For property that will be the primary residence of the buyer, the transfer tax is lowered to .5% on the first $100,000 of the sale price, but rises to the regular rate of 1.25% for that portion of the sale price that is above $100,000. Some lower income buyers pay 0% on the first part of the tax.

2) For property that is enrolled in the state’s current use program (a program which reduces property taxes on agricultural and forest land) or for property which is a working farm at the time of the transfer, the transfer tax is lowered to .5% of the entire sale price. Under a bill (H.485) that was vetoed in 2010, the transfer tax on enrolled current use land would have risen to 1.25%. [Current use land which is “developed” may also be subject to a penalty of 10% or 20% of the fair market value of the property at the time it leaves the program, depending on how long it was in the program.]

The law provides for several exemptions from the tax. Some of these include: a transfer directly to a creditor to secure a debt; a transfer without payment between a husband and wife, parent and child, grandparent and grandchild, or partners in a civil union; and transfers to a corporation, partnership or LLC at the time of formation, if no gain or loss is recognized under the federal tax code.

Usually the property transfer tax form is filled out by the seller’s attorney and signed by the parties at the closing. Note that the tax only applies to real property, so any personal property – such as kitchen appliances, furniture, etc. – is not taxed. The greater the percentage of the total sale price that is allocated to personal property, the lower the property transfer tax will be.

Read the full article here