The Vermont property transfer tax is charged on nearly every real estate transaction in the state, at rates from 0.5% to 3.4% depending on how the buyer will use the property. Most transfers are taxed at a base rate of 1.25%, principal residences get a break on the first $200,000 of value, and non-rental second homes face a much steeper 3.4%. The buyer typically pays at closing, and the town clerk cannot record the deed until the return and payment come in together.
Rates by How You’ll Use the Property
Act 181, effective August 1, 2024, restructured the tax into tiers based on the buyer’s intended use. On top of the base rate, most transfers also carry a Clean Water Surcharge of 0.22%, which funds statewide water quality programs. That surcharge is scheduled to drop to 0.04% after July 1, 2027, but any closing before then pays the full 0.22%.1Department of Taxes. Property Transfer Tax
Principal Residence
If you’re buying a home to live in as your primary residence, the first $200,000 of value is taxed at 0.5%, with no Clean Water Surcharge on that portion. Value above $200,000 is taxed at 1.25% plus the 0.22% surcharge, an effective 1.47% on the excess.2Vermont General Assembly. Vermont Code 32-9602 – Tax on Transfer of Title to Property On a $350,000 home, the math is $1,000 on the first $200,000 and $2,205 on the remaining $150,000, for $3,205 total.
A better break exists for buyers whose purchase money mortgage is funded through a homeland grant from the Vermont Housing and Conservation Trust Fund, or through a loan the Vermont Housing and Finance Agency or USDA Rural Development has committed to make or purchase. Those buyers pay no transfer tax on the first $250,000, with the 1.25% rate applying only above that threshold.2Vermont General Assembly. Vermont Code 32-9602 – Tax on Transfer of Title to Property
Non-Rental Vacation and Second Homes
This is the rate that catches out-of-state buyers off guard. A residential property that could be lived in year-round, but that you won’t use as your principal residence and won’t rent out (no landlord certificate filed under 32 V.S.A. ยง 6069), is taxed at 3.4% of the full value.2Vermont General Assembly. Vermont Code 32-9602 – Tax on Transfer of Title to Property On a $500,000 ski house you’ll use a few weeks a year, that’s $17,000 in transfer tax. If you intend to rent it out and provide a landlord certificate, the general 1.47% rate applies instead.
Everything Else
Commercial property, undeveloped land, rental properties, and any other transfer that doesn’t qualify for a reduced rate is taxed at 1.25% plus the 0.22% surcharge, for a combined 1.47%. The minimum tax on any transfer is $1.00.2Vermont General Assembly. Vermont Code 32-9602 – Tax on Transfer of Title to Property
What Counts as a Taxable Transfer
The tax is triggered whenever a deed transferring title to Vermont real property is delivered to a town clerk for recording. Sales of houses, commercial buildings, and raw land are all covered. So are transactions with only nominal consideration, like selling a property to a family member for a dollar, because the tax is calculated on the value of the property, not the cash paid.1Department of Taxes. Property Transfer Tax
The tax also reaches transactions where no deed changes hands. If someone acquires a controlling interest (50% or more) in a business entity that holds Vermont real property, the transfer tax applies to the value of that property. When multiple buyers act together, their interests are combined to determine whether the threshold is crossed. These transactions are reported on Form PTT-182 through myVTax rather than through a town clerk.1Department of Taxes. Property Transfer Tax
Exempt Transfers
The exemptions are narrower than many people assume, so check the categories carefully rather than guessing.
Family Transfers
Transfers between spouses, between a parent and child (or child’s spouse), and between a grandparent and grandchild (or grandchild’s spouse) are exempt, as long as no actual payment is made for the property. This covers most inheritance situations and gifts between qualifying relatives. Transfers under a court decree dividing property between spouses are also exempt, as are transfers into a trust for these same family members and transfers back out of such a trust to those relatives.3Vermont General Assembly. Vermont Code 32-9603 – Exemptions
Two limits to note. If a parent sells a home to their child at fair market value, the exemption doesn’t apply because there’s actual consideration. And transfers to more distant relatives, such as siblings, aunts, or cousins, are not covered.
Government and Nonprofit Transfers
Transfers to or from the United States, the State of Vermont, and their agencies or subdivisions are exempt.3Vermont General Assembly. Vermont Code 32-9603 – Exemptions
Some 501(c)(3) nonprofits qualify, but not all. The statute limits the exemption to organizations whose stated purpose is preserving housing for low-income families, operating a statewide public television station, or running a food clearinghouse to reduce hunger in Vermont. A general charity buying office space wouldn’t qualify, and the property must be held for the qualifying purpose.3Vermont General Assembly. Vermont Code 32-9603 – Exemptions
Foreclosure and Restructuring
Transfers between a borrower and the primary lender arising from a foreclosure proceeding or a deed in lieu of foreclosure are exempt. So are transfers that only change the form of ownership without changing who actually benefits, such as moving property into your own LLC.3Vermont General Assembly. Vermont Code 32-9603 – Exemptions Placing property into a revocable trust for the benefit of yourself or qualifying family members generally falls under the family transfer and change-of-form exemptions.
One important boundary: even when a transfer qualifies for an exemption, you still have to file a property transfer tax return with the specific exemption number claimed. The town clerk won’t record the deed without a completed form.1Department of Taxes. Property Transfer Tax
How and When You Pay
The property transfer tax return (Form PTT-172) is delivered to the town clerk along with the deed. Because the clerk cannot record a deed without a completed return, the tax effectively has to be paid at closing.4Vermont General Assembly. Vermont Code 32-9606 – Property Transfer Return The return asks for each party’s name, address, Social Security or federal ID number, the property’s 911 address or description, the SPAN number, and the full value paid.
The state encourages electronic filing through myVTax, and tax preparers who expect to file more than five returns a year must file that way. Controlling-interest transfers on Form PTT-182 also require myVTax. Individual buyers filing on their own behalf can still use paper.1Department of Taxes. Property Transfer Tax
The statute doesn’t explicitly assign payment to buyer or seller. In practice, buyers pay at closing, though the parties can negotiate a different split, and closing attorneys or title companies typically handle the filing.
Withholding When the Seller Lives Out of State
If you’re buying Vermont property from a nonresident seller, you (the buyer) are required to withhold 2.5% of the sale price and send it to the Vermont Department of Taxes. This applies whether or not the seller will owe Vermont income tax on the sale. If you fail to withhold, you’re personally liable for the amount.5Vermont General Assembly. Vermont Code 32-5847 – Withholding on Sale or Transfer of Real Property
The withholding is reported on Form RW-171, filed with payment within 30 days of the transfer. A seller can reduce or eliminate the requirement by obtaining a Commissioner’s Certificate before closing. If even one seller on a multi-party deed is a nonresident, the entire sale is subject to withholding unless a certificate has been obtained.6Department of Taxes. Real Estate Withholding
For partnerships, LLCs, and S corporations, the entity counts as a nonresident if its controlling interest is held by nonresidents. A corporation other than an S corp incorporated outside Vermont is a nonresident unless its principal place of business is in Vermont and it does no business in the state of incorporation.6Department of Taxes. Real Estate Withholding
Penalties for Late or Missing Payment
Unpaid tax accrues a penalty of 5% per month, capped at 25% of the amount owed, plus interest at a rate the Commissioner of Taxes sets annually.7Department of Taxes. Interest and Penalties A separate 5%-per-month penalty applies for failing to file the return itself, even if the underlying tax was paid.
Unpaid transfer taxes become a personal debt to the state. The Attorney General can bring a collection action within six years of the date the tax was due, but that six-year limit doesn’t apply in cases of fraud or when no return was ever filed, meaning the state can pursue those cases indefinitely.8Vermont General Assembly. Vermont Code 32-9614 – Taxes as Personal Debt to State Outstanding tax debts can also result in a lien on the property, blocking future sales or refinancing until they’re resolved.
Two Other Vermont Taxes on Real Estate
The transfer tax isn’t the only tax that can hit a Vermont real estate transaction. Two others often get confused with it.
Land Gains Tax
Vermont imposes a separate land gains tax on the sale of subdivided land held for fewer than six years. The rates are steep by design and discourage speculative flipping, running from 5% to 80% of the gain depending on how long you held the land and how large your profit was relative to what you paid.9Vermont General Assembly. Vermont Code 32-10003 – Rate of Tax At the extreme end, land held less than four months and sold at a gain of 200% or more of its cost is taxed at 80% of the gain. After six years of ownership, no land gains tax applies. Certain exemptions exist, all with acreage limits, and if an exemption is claimed the buyer and seller must complete a schedule showing whether tax is owed at closing or deferred. If the buyer later fails to meet the exemption’s conditions, the buyer owes the deferred tax.10Department of Taxes. Land Gains Tax It’s reported on Form LGT-178.
Land Use Change Tax
Vermont’s Use Value Appraisal (Current Use) program lets owners of agricultural and managed forestland pay property tax based on productive use rather than fair market value. Developing that land triggers a land use change tax of 10% of the property’s full fair market value.11Vermont General Assembly. Vermont Code 32-3757 – Land Use Change Tax
Buying enrolled land doesn’t automatically trigger this tax, and no new maps are required just because ownership changed. But the new owner must provide updated application information to the Division of Property Valuation and Review within 30 days of a certified mail request, or the parcel is removed from the program.11Vermont General Assembly. Vermont Code 32-3757 – Land Use Change Tax The land use change tax attaches to the land itself as a lien rather than as a personal debt of the owner, and a contingent lien is recorded against all enrolled parcels to put future buyers on notice. On a parcel with a $300,000 fair market value, developing it would cost $30,000 in this tax alone.