Individual Income

Estate

REPORTING INCOME
If a taxpayer received Vermont income and is required to file a federal income tax return, a Vermont income tax return (Form IN-111) must also be filed on the taxpayer's behalf.  The return, reflecting income received from January until the date of death, should be remitted to the Department, along with payment for any tax due.

For income received after the date of death, Federal Form 1041 and Vermont Form FI-161 (Fiduciary Tax Return) must be remitted to the Department.  Note that there is a filing requirement whenever a decedent receives gross income of $600 or more during a tax year after the date of death. Accordingly, it may be necessary to file several fiduciary returns while the estate remains open and continues to receive income.

ESTATE TAX
Although Vermont does not have an inheritance tax, it has an estate tax.  Vermont Estate Tax Return (Form E-1), must be filed if the decedent had Vermont income and filed U.S. Estate Tax Return (Federal Form 706).  Federal estate tax returns are required when an estate exceeds specified gross estate values:

Gross estate value generally includes the value at the time of death of all assets in which the deceased retained an interest (for example, jointly owned assets, individually owned assets, insurance policies with named beneficiaries, and trust assets).

If an estate meets the federal gross estate value, a Vermont return must also be filed, but Vermont's calculation differs from the federal.   Instructions for completing the form, a Vermont tax rate chart, and a worksheet are provided with the Vermont Estate Return (Form E-1).

PROBATE ESTATE and TAX CLEARANCE
When a decedent owns assets in his or her individual name, an estate must be opened in Vermont probate court.

Click here for information on Probate Courts

The probate court requires a tax clearance from the Department to close the estate. Vermont Form E-2A "Estate Tax Information and Application for Tax Clearance," should be completed for this purpose.

The Department will not issue a tax clearance until all required Vermont tax returns are filed, which may include one or more of the following:

• Income Tax Return for current and (if applicable) prior year

• Fiduciary Tax Return (except final return)

• Estate Tax Return

Taxpayer Information Line:
1.866.828.2865 (Toll-free in VT)
or 802.828.2865 (Local & Out-of-State)