Tax Credits

Tax credits are available to certain taxpayers at both the state and federal levels. A tax credit is a tax incentive which allows qualified taxpayers to reduce their tax liability to the state.

Tax credits are available for individuals and businesses and provide incentives to support business growth and activities in Vermont.

Here is a list of tax credits available to individuals:

Charitable Housing Investment Credit
Credit for Income Tax Paid to Another State or Canadian Province
Credit Options for Child and Dependent Care
Qualified Sale of Mobile Home Park Credit
Research and Development Credit  
Vermont Earned Income Tax Credit
Vermont Higher Education Investment Plan (VHEIP) Credit


CHARITABLE HOUSING INVESTMENT CREDIT

This tax credit encourages investment in eligible housing charities. The eligible housing charity is determined by Vermont Department of Housing and Community Development.

Credit Amount: Difference between interest income that would have been received at charitable threshold rate and actual interest income received. 

Credit Limit: Not to exceed 3% of average outstanding principal balance of investment during taxable year. Aggregate of charitable investment allowed outstanding in any year is limited to $5 million.


CREDIT FOR INCOME TAX PAID TO ANOTHER STATE OR CANADIAN PROVINCE

If you are a Vermont resident or part-year resident and pay income tax to another state, territory, district, or province (but not city or county), Vermont allows a credit for that tax on the Vermont income tax return. This is income that is taxed by both Vermont and the other taxing jurisdiction.

To calculate the credit, use Schedule IN-117, VT Credit for Income Tax Paid to Other State or Canadian Province. If you have capital gain, business income, or made adjustments to calculate your federal adjusted gross income, see Technical Bulletin 38.


CREDIT OPTIONS FOR CHILD AND DEPENDENT CARE

Vermont offers tax relief to employees who have dependent care expenses in order to stay in the workforce. Taxpayers have two options for a child and dependent care credit:

  1. Credit for Child and Dependent Care or
  2. the Low Income Child and Dependent Care Credit.

You cannot take both credits.

Credit for Child and Dependent Care

If you are eligible for the federal Child and Dependent Care Credit you qualify for the state tax credit.

Credit Amount: The tax credit amount is 24% of the federal Child and Dependent Care Tax Credit.

Credit Limitation: You must be eligible for and receive the Federal tax credit. This credit is nonrefundable.

Low Income Child and Dependent Care Credit

To qualify for this credit, you must meet the following criteria:

Learn more from the Agency of Human Services

Credit Amount: The tax credit amount is 50% of the federal child and dependent care tax credit

Credit Limitation: You must be eligible for and receive the Federal tax credit. This is a refundable credit.


QUALIFIED SALE OF MOBILE HOME PARK CREDIT

The purpose of this tax credit is to encourage sales of mobile home parks to its residents, or to a nonprofit organization that represents them, in order to provide stability to the mobile home park community. For more information about this tax credit, contact the Vermont Department of Housing and Community Development.

Credit Amount: Credit amount is 7% of gain on sale of mobile home park that is subject to federal income tax for the taxable year. 

Credit Limitation: The credit limit cannot exceed Vermont tax liability, credit is nonrefundable. Unused credits may be carried forward for three years.


RESEARCH & DEVELOPMENT CREDIT

If you take the federal R&D credit, you may qualify for a state R&D credit on eligible expenditures made in Vermont. The Vermont credit can be taken in an amount equal to 27% of the federal tax credit allowed in the taxable year. This credit applies to personal income tax or business or corporate income tax. Any unused credit available may be carried forward up to 10 years.

Each year, we publish a list of taxpayers who claimed this credit during the most recently completed calendar year. For more information about this tax credit, contact the Vermont Department of Taxes.


VERMONT EARNED INCOME TAX CREDIT

The purpose of the Vermont Earned Income Tax Credit (EITC) is to help Vermonters remain in the workforce. Any taxpayer entitled to a federal earned income tax credit may claim a Vermont EITC. For more information about this tax credit, contact the Vermont Department of Taxes.

Credit Amount: The credit amount is 32% of the federal credit on income earned or received in Vermont.

Credit Limitation: You must be qualified for the federal EITC. This is a refundable credit.

To claim EITC in Vermont, you must:

  • Meet federal EITC requirements
  • Be a resident or part-year resident of Vermont
  • Have qualifying children or
  • Be at least age 25 but under age 65 at the end of the tax year for which you are filing

If you do not have qualifying children and do not meet age requirements, you are not eligible for the Vermont EITC.

If You Are Eligible To file for EITC, you must complete the following forms:


VERMONT HIGHER EDUCATION INVESTMENT PLAN (VHEIP) CREDIT

The purpose of this tax credit is to encourage savings for college. Any U.S. citizen or resident alien, including the account holder, can be the beneficiary. The beneficiary must have a valid Social Security number or taxpayer identification number. Refer to the Vermont Department of Taxes for more information about claiming this tax credit.

Credit Amount: The credit amount is 10% of the first $2,500 contributed annually to a beneficiary's account. Rollovers from another state's qualified tuition plan into VHEIP are also eligible for this tax credit.

Credit Limitation: The investment must be in a 529 plan administered by Vermont Student Assistance Corporation. This is a nonrefundable credit against Vermont personal income tax.

Contact Us

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

Taxpayer Assistance Window
Office Hours: 7:45 a.m. - 4:30 p.m. Monday - Friday

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