Tax Glossary

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1099: tax form you fill out to report self-employment earnings, interest and dividends, government payments, and other forms of income

A

Adjusted gross income (AGI): gross income minus allowable reductions

Adjustment to income: an expense that can be deducted even if the taxpayer does not itemize deductions

Advance earned income credit: prepayments of the earned income credit by an employer to an employee

Aggregate ratio: the ratio, or the weighted mean, equal to the sum of the listed values divided by the sum of the fair market values (sales prices)

Administrative Procedures Act (APA): provides a procedure for the adoption of rules, including maximizing public involvement in the development of rules and consistent inclusion of public participation in the rule-making processes (3 V.S.A. § 800)

Appraised value: estimated value of a property as determined by a lister/assessor before any adjustments are made to that value for taxing purposes.  Adjustments could include an assessment ratio if the property is to be taxed at a value other than full fair market value, either a full or partial exemption, or at a value established under a stabilization agreement.

Assessed value: amount in dollars at which a property is put on the assessment rolls.  It differs from the appraised value in three ways: fractional assessment laws, exemptions or stabilization agreements, and decisions by assessing officials to override appraised value estimates.

Audit: when the IRS examines and verifies your return or any other transaction with tax consequences

Automated Clearing House (ACH): an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches.  ACH credit transfers include direct deposit, payroll and vendor payments.

B

Board of Civil Authority (BCA): a board consisting of the town clerk, the selectboard, and the elected justices of the peace, whose mandate is to assist with the running of elections, to act as a quasi-judicial board for grievances between taxpayers and listers, and to maintain the voter checklist.

C

Carryforward (CF): a special provision allowing part of a net loss or unused credit in a given year to be distributed over one or two subsequent years, in order to ease the tax burden

Casualty loss: a loss caused by the complete or partial destruction of property resulting from an unexpected event, i.e. floods, storms, fires, etc.

Category (of taxable properties): all taxable properties in Vermont are classified into 15 categories based on their use.  R1=residential properties <6 acres; R2=residential properties 6+ acres; MHU=mobile home unlanded; MHL=mobile home landed; S1=seasonal property <6 acres; S2=seasonal property 6+ acres; COMM=commercial property; CMA=commercial apartment w/5 and over; IND=industrial property; UE=utility electric; UO=utility other; MISC=open land; WOOD=woodland (see PVR annual report)

Charitable contribution: money or property donated to a qualified charity

Child and dependent care credit: a tax credit of a percentage of the amount spent on child or dependent care by an employed individual

Child tax credit: a tax credit available to people with children under the age of seventeen

Circuit breaker: additional adjustment a homeowner is entitled to when their household income is not more than $47,000, if the sum of the income-sensitized education taxes and municipal taxes exceed a certain percentage of the household income.  The additional adjustment is for the amount the combined municipal and income-sensitized taxes exceed the threshold.  The percentage of household income which determines the threshold depends on the household’s income bracket.

Class (of property): there are three classes of property that are formed by consolidating the 15 categories into like-use groups.  They are Residential (R1, R2, MHU, MHL, V1 and V2), commercial/industrial (COMM, CMA and IND), and open land (Farm, Wood and MISC).  The class grouping is used when equalization results are not reliable for smaller category groupings.

Coefficient of Dispersion (COD): a measure of uniformity of appraisals for all properties on the Grand List.  E.g. if a town has valued every property at 100% FMV (every property has an assessment to FMV ration of 100%), there is 0 dispersion.  Similarly, if every property is assessed at 80% of FMV, there is 0 dispersion.  However, if the town average assessment to sales ratio is 80% but individual assessments vary markedly either above or below the average, then the disparity of assessments will reflect in a COD greater than 0%.  Zero is a perfect COD score and indicates absolute fairness insofar as every taxpayer is appraised at the same percentage of FMV.  The higher the number, the greater the dispersion (or disparity in how properties are assessed).  Because of market fluctuations, a COD less than 10 is unusual.  Statistically, it is the average absolute deviation of a group of numbers from the mean expressed as a percentage of the median.

Commercial: property used for commercial purposes such as office space or retail space; does not include rental of up to 4 unit structures

Common Level of Appraisal (CLA): a measure of how close a municipality’s local appraisals are to the actual Fair Market Value.  The CLA is used to equalize education taxes statewide with the goal of having properties of equal value pay equal amounts of school taxes.  VT municipalities must reappraise the properties in their town when the CLA falls below 80% (32 VSA § 4041(a).  A town’s CLA has no effect on the amount of property taxes owed on the town portion of a property tax bill.  In VT law, it is “the ration of the aggregate value of local education property tax Grand List to the aggregate value of the equalized education property tax Grand List.”  (32 VSA § 5401(3))

Compensation: wages, commissions, tips, fees, or self-employment income from services rendered

Condominium: a single dwelling unit within a multi-unit complex

Corporation (Corp): an independent legal entity owned by shareholders

Credits: reductions of tax liability allowed by Congress for various purposes

Current Use (CU): see Use Value Appraisal

D

Deduction: a subtraction from taxable income

Dependent: a person who meets the five tests of dependency and thereby qualifies to be claimed as a dependent for tax purposes

Depreciation: deduction for the wear and tear of an item used for business

District Advisor (DA): oversees the listers/assessors of a municipality or region

Domicile: a legal concept of a person’s home (different than one’s residence) that has implications for Vermont income tax, the statewide education tax, and property tax adjustments. See Reg. § 1.5811(11)(A)(i).

E

Earned income: income derived from personal services, including wages, tips, bonuses, and any other type of compensation

Earned income credit: a tax credit allowed to employed individuals whose income and modified gross income is less than a certain amount

Easement/Row: when only an easement or right of way is being conveyed

Economic Advancement Tax Incentive (EATI): This program was repealed in 2006. Existing credits continue to be processed although the VT Economic Progress Council hasn’t granted EATI awards since December 31, 2006.  See VEGI.

Education Grand List (EGL): see Grand List

Effective Tax Rate (ETR): also called Equalized Tax Rate, what the tax rate would be if all taxable property were appraised at full value.  The effective school tax rate is calculated by dividing the school taxes assessed by the Equalized Education Grand List (EEGL).

Electronic Property Transfer Tax Return (ePTTR): system whereby property transfer tax returns are filed electronically

Electronic Current Use (eCuse): electronic filing application to go “live” online in 2015 for the Use Value Appraisal (UVA) program, aka “Current Use”

Employer Identification Number (EIN): a unique nine-digit number assigned by the IRS to business entities operating in the United States for the purposes of identification

Employment expenses: ordinary and necessary expenses for the employee to perform the duties for which they were hired

Entertainment expenses: employment expenses that have an element of entertainment that is directly related to conducting business

Equalization study: annually, PVR conducts a study based on sales data that results in estimates of the fair market value of all taxable property in all VT school districts.  The major product of the study is an estimate of the total fair market value of property that is taxable for school purposes (the equalized education Grand List – EEGL).

Equalized Education Property Tax Grand List (EEGL): 1% of the equalized education property value as defined in 32 VSA § 5401(6)  

Equalized Education Property Value: PVR’s estimate of the fair market value of all nonresidential and homestead real property that is required to be listed at fair market value, plus the aggregate value of property required to be listed at a stipulated value under a stabilization agreement, plus the aggregate use value of property enrolled in the Current Use program

Estimated tax: what the taxpayer expects to owe in taxes over the course of the year, generally paid quarterly with vouchers

Estimated income tax voucher: a form to file with your tax return in order to pay tax on estimated earned income

Exemption: a reduction of income that would otherwise be taxed

External offset: taxpayer overpayment is applied to a debt owed to another agency.  A letter is generated that states what agency the money was sent to.

F

Factory: includes property such as cheese-making facilities, microchip manufacturing plants, sawmills, creameries, ice cream factories, etc.

Fair Market Value (FMV): price that property would sell for on the open market.  It is the price that would be agreed on between a willing buyer and a willing seller.

Farm buildings: include barns

Fed/State E-file: income tax filing option open to taxpayers or their tax preparers that allows for the electronic filing of both the federal and Vermont income tax return

Federal Taxable Income (FTI): adjusted gross income minus allowances for personal exemptions and itemized deductions.  The amount computed on the federal tax return is generally the starting point for computing Vermont taxable income.

Fee simple: 100% of all interests in property are being conveyed, and there are no interests being retained by the seller

FEIN: Federal Employer Identification Number (see EIN)

FICA: Social Security and Medicare withholding

FY/FYE: Fiscal Year/Fiscal Year End

G

Government use: property owned and used by the government, but does not include property sold in tax sales, only property actually used by a government entity

Grand List (GL): 1% of the listed value established by the local assessing officials, and the value used to determine municipal taxes for a municipality.  It includes any business personal property taxable at the local level and excludes locally voted exemptions.  Properties subject to local stabilization agreements are included at their stabilized values.  The education GL is 1% of the education property values per 32 VSA§ 5404.  It is the value to be used to determine the State Education Tax and the Local Share Tax and generally doesn’t include inventory or business personal property.  It includes the value of properties exempted by local vote (if not “grandfathered”) as well as the full value of properties subject to local stabilization agreements as defined in 32 VSA § 5401(5).

H

Head of household: a filing status used by an unmarried taxpayer who pays over half of the cost of maintaining the home of a qualified individual

Home office expense: expenses of operating a business in a qualified manner in your home

Homestead: the principle dwelling owned/occupied by a VT resident as the individual’s domicile.  It includes the entire parcel of land surrounding the dwelling, determined without regard to any road, river or stream that intersects the land.  It does not include buildings or improvements detached from the home and used for business purposes and does not include that portion of a principle dwelling used for business purposes if the portion used for business purposes includes more than 25% of the floor space of the building.  The value of outbuildings and other improvements not used for business purposes includes more than 25 percent of the floor space of the building.  The value of outbuildings and other improvements not used for business purposes are included in the value of the homestead, e.g. swimming pools, tennis courts, landscaping.  See 32 VSA § 5401(7) and Reg. § 1.5401(7) for details and examples.

Housesite Equalization Value (HEV):  the value of the housesite on the grand list for April 1 of the taxable year, divided by the municipality's common level of appraisal determined by equalization of the grand list for April 1 of the year preceding the taxable year

Housesite and Housesite Value: housesite value is not used in the tax classification system.  It is used in the state’s income sensitivity programs.  A housesite is that portion of a homestead that includes the principal dwelling and as much of the land surrounding the dwelling as is reasonably necessary for use of the dwelling as a home, but in no event more than two acres per dwelling unit, and in the case of multiple dwelling units, no more than two acres per dwelling unit up to a maximum of 10 acres per parcel.  See 32 VSA § 5401(11).

HS-122: Homestead Declaration and/or Property Tax Adjustment

Health Savings Account (HSA): a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP).  The funds contributed to an account are not subject to federal income tax at the time of deposit.

I

Inc: income

Industrial: property primarily used for industrial sites

Intelligent Forms Processing System (IFPS): IBM processing system used for dv, DocQuery, imaging paper returns, checks, and attached documents for electronic archive; and scanning return information for upload to VIRCS

Internal offset: taxpayer overpayment that is applied to a debt owed

Internal Revenue Service: the Treasury Department division responsible for collecting taxes

International Association of Assessing Officers (IAAO): a non-profit educational association whose mission is to promote innovation and excellence in property appraisal and property tax policy and administration through professional development, education, research, and technical assistance

IRA: Individual Retirement Account, where you make tax-deferred investments to provide financial security when you retire

Itemized deductions: expenditures that the tax code deems appropriate for reducing adjusted gross income

ITS: Integrated Tax System

L

LC: Landlord Certificate, LC-142

Lease: subject to tax if lease is for a period of at least 50 years (including possible renewals) or if the lease is less than 50 years and the lessee has a purchase option and the right to construct a building or structure or make major capital improvements, such as water system, sewer systems, roads or parking facilities

Life estate: the retained life estate is created or a retained life estate is being transferred

LLC: Limited Liability Company

LLP: Limited Liability Partnership

Local/Municipal Grand List: see Grand List

M

Married filing jointly (MFJ): a filing status used by a couple that is married at the end of the tax year and uses one tax return

Married filing separately (MFS): a filing status used by a couple that is married at the end of the year and chooses to file separate tax returns

Mean: also called the arithmetic mean or the average, the result of adding all the values and dividing by the number of values.  For instance, the mean (average) of 3, 5 and 10 is 6. (3+5+10=18: 18/3=6). 

Median ratio: the midpoint or middle value when a set of values is ranked in order of magnitude; if the number of values is even, the midpoint or average of the two middle values

Modernized E-Filing or Electronic Filing (MeF): the IRS program which is an integrated, web-based electronic filing platform replacing the legacy e-file system which has been essentially unchanged for the IRS and the states since 1990

Modified adjusted gross income: usually, the adjusted gross income with various items added back in (though different definitions exist for different purposes)

MR: Meals & Rooms Tax

MSA: Medical Savings Account

Multi Family: a residential structure with more than one residential unit, such as a duplex

myVTax: myVTax is the secure online filing service for Vermont taxpayers. Different tax types will be rolled out over a four-year period. Corporate and business income taxpayers were the first to be granted access in 2014. In 2015, sales and use, meals and rooms, withholding, bank franchise tax, insurance premiums, fuel gross receipts, captive insurance, health care, natural gas, and aviation jet fuel taxes will be able to file, pay and review their accounts using myVTax.

N

Nonrefundable: A nonrefundable credit is subtracted from your income tax liability, up to the total amount you owe. But unlike a refundable tax credit, a nonrefundable credit cannot reduce your tax balance beyond zero. Any unused portion of a nonrefundable tax credit will expire in the year the credit is claimed and cannot be carried over.

Nontaxable income: income that is not taxed

NR: non-residential

NRW: Nonresident Shareholder Withholding

O

Open land: land with no buildings

Operating farm: property that is or will be a working farm

Orthophotograph: a composite product made from overlapping aerial photographs.  It appears similar to a standard enlarged aerial photograph, but because tilt and relief displacement have been eliminated (the land is essentially flattened out), the photo becomes close to being a map upon which property lines and other data can be plotted.

Other interest in property: for transfers such as a contingent remainder unrelated to life estates, boundary line adjustment, conservation easements, etc.

Other State Credit (OSCR): credit for residents paying tax to another state and Vermont on the same income

Other types of building construction: may include a garage, motels, hotels, filing station, restaurants, office buildings, telephone switching office, etc.

Outside Collection Agency (OCA): a collection agency under contract with the VT Department of Taxes to collect outstanding tax liabilities that have been inactive for more than sixty days.  The collection agency contract is awarded through the competitive bidding process.

P

Parcel: for tax administration, the base unit to be reported in the Grand List book and defined as “all contiguous land in the same ownership, together with all improvements thereon” (32 VSA § 4152(a) (3)).  This definition does not, however, govern the Listers’ value to property.  The following factors must be considered when making that decision: the highest and best use; whether or not the property was conveyed in one deed; the land’s character and use; whether separately deeded tracts are contiguous; and whether the property functions as one tract for the owner.

Payment-In-Lieu-of-Taxes (PILOT): a payment to a town or city to compensate for a part of the cost for services on property which is exempt from the regular tax.  For example, the State of Vermont makes a PILOT for state-owned buildings.  Towns and cities may enter agreements with owners of low- and moderate-income housing whereby a PILOT is paid, rather than the full tax based on fair market value.  See 32 VSA § 3843.

Permanent and total disability: a disability that is expected to last at least a year and keeps an individual from any gainful activity (employment earning income)

Price-Related Differential (PRD): also called the regressivity index, the mean ratio divided by the aggregate ratio.  This statistic is used to determine whether assessment practices are progressive or regressive.  A PRD above 1.03 tends to indicate assessment regressivity (lower valued properties are assessed at higher ratios).  A PRD below .98 tends to indicate assessment progressivity (higher valued properties are assessed at a higher ratio).

Primary residence: includes a building with four apartments or less and non-operating farms with the highest and best use as a year-round residence.  This does not mean that the seller or buyer used the property as their primary residence.  The best use of the property is capable as being used as a primary residence.  Even if the property will be a rental, it is still considered primary residence.  By choosing primary residence for the buyer you are not stating that they will be using it as their primary.  If primary is chosen it also does not automatically mean that the buyer is entitled to the lower rate; this only applies if the buyer will be using it as their primary residence.  If someone is adding additional contiguous land to their primary residence you can use primary residence as the use of the property.  Please note that additional acreage does not qualify for the lower rate.

Property tax adjustment claim: the Vermont Property Tax Adjustment assists many Vermont homeowners with paying their property taxes. Individuals who are eligible must file the HS-122 and HI-144. The property tax adjustment is sent directly to the town of residence and will be reflected on the property tax bill received by the taxpayer.

Proprietorship: a business owned and controlled by one person

PVR: Tax Department’s Division of Property Valuation and Review

PY: part year or prior year, depending on the context

Q

Qualified widow(er): a filing status used by a qualified person for the two years following a spouse’s death

R

Reappraisal: having property reassessed in order to find the real market value and adjust taxes owed

Refundable: A refundable tax credit is particularly advantageous because it can reduce your tax liability to below zero. If the amount of a refundable tax credit is more than the amount of taxes due, the difference will be given back to you as a tax refund. If you are already owed a tax refund, the refundable credit will be added to increase the amount of your refund.

Residential New Construction: house or modular home that was placed on the property after the purchase by the seller, such as open land purchase where a home was constructed and is now being sold

Return: a form submitted by taxpayer to the IRS with information regarding their income taxes and refund

REW: Real Estate Withholding

Regressivity Index (RI): see price-related differential 

S

Schedules: IRS forms used to report various kinds of income, deductions, and credits

Secondary residence: any residence that is not the primary residence of the buyer or seller nor will be used as a primary residence by anyone else (such as a tenant).  Any seasonal dwelling would fall under secondary residence, as would time-shares.  Any vacation property would be a secondary residence.

Self-employed (SE): a person who individually decides when and where to work, pays his or her own expenses, and must pay self-employment taxes

Sole Proprietor (Sole Prop): a person who is the exclusive owner of a business, entitled to keep all profits after tax has been paid but liable for all losses

School Property Account Number (SPAN): a unique 11-digit identification number assigned by a municipality to each property.  The property tax adjustment is credited to the property tax bill linked to this number.

Seasonal Dwelling: properties that are for seasonal occupancy, including hunting camps, camps and cottages on lakes and ponds, etc., which cannot be occupied year round

Single Family Dwelling: an existing structure that is already on the property prior to purchase, including properties that were rentals and modular homes, but not mobile homes

Social Security: tax deposits are collected by the IRS to fund several social welfare programs

SSN: Social Security Number

Standard deduction: a predetermined amount of income that is not subject to taxes and is claimed when an individual does not itemize deductions

T

Tangible personal property: personal property which may be seen, weighed, measured, felt, touched, or in any other manner perceived by the senses, and can be moved (including furniture, clothing, jewelry, art, writings, or household goods, but not including real property or land)

Taxable income (TI): adjusted gross income minus deductions and exemptions

TC: Town Clerk

TCE: Tax Counseling for the Elderly

Tax Compliance Officer (TCO): employees of the VT Department of Taxes who perform collection work on outstanding tax liabilities

Tax Examiner (TE): employees of the VT Department of Taxes who review, validate, and resolve issues related to tax filing obligations

Tax Increment Financing (TIF): some VT municipalities have approved TIF districts.  The education grand list figure used in the determination of the CLA includes the value of the “increment” for those towns and cities with active tax increment financing districts.  However, the education grand list figure for those municipalities that will be reported to the Department of Education and used to determine the education tax liability will not include the value of the increment.

Tax Implementation Group for E-Commerce Requirements Standardization (TIGERS): organization that standardizes and adopts what is referred to as Fed/State Modernized e-File for personal income tax

Taxpayer Identification (TI): the functions that manage the creation and editing of taxpayer data

Timberland: land that has marketable timber and no buildings

Town Officers Education Conference (TOEC): held in the spring at three different locations around the state and organized by UVM Extension

TP: Taxpayer

TPS: Tax Department’s Division of Taxpayer Services

U

Undivided ½ interest: only ½ interest in the property is being conveyed

Undivided % interest: when an interest other than 100% or 50% is being conveyed

Unearned income: income that is not earned from services performed, such as interest, dividends, and royalties

Use Value Appraisal (UVA): the value of property for a specific use (as opposed to the broader “highest and best use”).  Qualifying farm and forest land and farm buildings may enroll.  See 32 VSA § 3752(12) for more information.

Use Value Appraisal Program: also known as “Current Use,” enables eligible private lands where owners practice long-term forestry or agriculture to be appraised based on the property’s value of production of wood or food rather than its residential or commercial development value.  The Current Use Advisory Board sets the use values for farm and forest land annually.  See 32 VSA § 3752(12) for more information.  

V

VALA: Vermont Assessors and Listers Association

VEDA: Vermont Economic Development Authority

Vermont Employment Growth Incentive program (VEGI): a payroll-based growth incentive program which became law in Jan. 1, 2007

VEP: Vermont Estimated Payments

VEPC: Vermont Economic Progress Council

Vermont Integrated Revenue Collection System (VIRCS): umbrella term that describes the customized version of the Advantage Revenue Software.  This is the computer system that processes returns, generates bills, and manages collections. Beginning in 2014, the Department began phasing out VIRCS with the launch of VTax. See VTax.

VHEIP: Vermont Higher Education Investment Plan

VITA: Volunteer Income Tax Assistance

VITA/TCE: Vermont Income Tax Assistance and Tax Counseling for the Elderly

VLCT: Vermont League of Cities and Towns

VOVA: Vermont Office of Veterans Affairs

VPACP: Vermont Property Appraiser Certification Program

VSAC: Vermont Student Assistant Corporation

VTax: Vermont’s version of the FAST Enterprise’s software known as GenTax, an ITS (integrated tax system). New taxes are being added each year, and by the end of 2017, all tax types will exist in VTax.

VTBizFile: an online filing system which allowed businesses entities to file their Withholding Tax, Sales & Use Tax, and Meals & Rooms Tax electronically.   On November 5, 2015, this service was replaced by myVTax. It is no longer available online as of Feb. 29, 2016.

W

W-2: tax form that shows the amount of taxes withheld from your paycheck for the year

W-4: IRS form you fill out to tell your employer how much of your paycheck to withhold based on allowances

Weighted mean: see aggregate ratio

WH: Vermont Withholding Tax

Withholding: some amount taken out of your income by your employer and paid to the IRS in your name

Worksheet: an IRS document provided to the taxpayer to compile information and not usually filed with the return

Contact Us

Commissioner Kaj Samsom
133 State Street | Montpelier, VT 05633
(802) 828-2505

Taxpayer Assistance Window
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