A Guide for Lawyers, Real Estate Agents and Financial Institutions
Purchasing real estate is a major event in most people’s lives, and property taxes are an important consideration in that decision. We know you work hard for your client to make sure the purchase goes as smoothly as possible. This guide offers information on the Homestead Declaration and will help eliminate surprises later. Please contact the Vermont Department of Taxes if you have further questions.
A Homestead Declaration must be filed each year by every Vermont resident whose property meets the definition of a homestead.
What are the seller’s obligations?
When selling a property declared as a homestead, the seller must notify the Vermont Department of Taxes of the sale and withdraw the homestead declaration on the property within thirty (30) days of the date that ownership of the property is transferred to the new owner(s).
- The Seller can complete Form HS-122-W, Vermont Homestead Declaration and/or Property Tax Adjustment Withdrawal and send it to the Department at the time of the closing.
- Sale also includes transfer of title to an estate, a trust and creation of a life estate.
Please note: The Seller can complete the homestead withdrawal at the time of the closing and file it immediately with the Department. The Buyer also can complete and file a Homestead Declaration at the time of closing and file it immediately with the Department. Based on the transaction date, the Department will hold the forms and notify the town for the appropriate grand list year.
How to Withdraw a Homestead Declaration
Circumstances in which a homestead declaration may be withdrawn:
- Property no longer used as a homestead
- Property owned by a decedent’s estate qualifies as homestead only until the following April 1 following the homeowner’s death
- The declaration submitted in error
Use Form HS-122-W, Vermont Homestead Declaration and/or Property Tax Adjustment Withdrawal. There are several ways to file the form:
The withdrawal form must be filed with the Department within thirty (30) days of the property transfer. Penalties may be assessed if the property transfer is not filed in a timely manner. The penalty is assessed and billed by the town.
Property Tax Adjustment
The property tax adjustment remains with the property.
Unless the seller and buyer agree otherwise, any property tax adjustment based on the seller’s claim should be treated as a payment of property tax by the seller and allocated upon closing.
What are the buyer’s obligations?
If the buyer will use the property as the homestead Form HS-122, Homestead Declaration and Property Tax Adjustment Claim must be filed. The homestead declaration must be filed if the buyer:
- expects to be a Vermont resident on April 1, and
- owns and occupies the property on April 1 as the principle home
How to file a homestead declaration
Circumstances in which a homestead declaration may be filed:
- A change of use of the declared homestead. Change of use means the percentage of the homestead used for business or for rental has increased or decreased
- A Declared Homestead is transferred to revocable trust or life estate is created.
Use Form HS-122, Homestead Declaration and Property Tax Adjustment Claim. There are several ways to file the form:
Please note: The Buyer can complete and file the Homestead Declaration at the time of closing and file it immediately with the Department. Based on the transaction date, the Department will hold the form and notify the town for the appropriate grand list year.
Additional Property Transactions
Filing a new homestead declaration when the name of the owner on the grand list will differ from the name on the Department records alerts the Department to these exceptions. This facilitates processing the declaration and any property tax adjustment claim.
Homestead Conveyed to a Revocable Trust
Property conveyed to a revocable trust may qualify as a homestead of the donor if:
- The property was the homestead of the person who made the transfer; and
- That person is the sole beneficiary of the revocable trust. See 32 V.S.A. §§5401(7)(D) and 6062(e) and Reg. §1.5401(7)(e)(3).
For purposes of this provision, spouses are considered a sole beneficiary.
A life estate in the property qualifies as a homestead. A deed filed in the office of the town or city clerk where the property is located is evidence of a life estate. The life estate holder must occupy the property as the principle dwelling. See Reg. §1.5407(7)(e)(2). The life estate holder files Form HS-122, Homestead Declaration and Property Tax Adjustment Claim.
Homestead Held by an Estate
A dwelling that is held by the decedent’s estate may retain the homestead classification until the next April 1 grand list if:
- The property was declared by the decedent as a homestead for the year of death;
- The property was the decedent’s homestead at the date of death; and
- The property is not rented during the estate ownership.
The estate files Form HS-122, Homestead Declaration and Property Tax Adjustment Claim with the Department listing the owner as Estate of [Name].
The estate must file Form HS-122W, Homestead Declaration and/or Property Tax Adjustment Withdrawal if it still holds the property on April 1 following the date of death.