Land Gains Tax is a tax on the gain from the sale or exchange of Vermont land that was held for less than six (6) years. The definition of land may include the sale of timber or timber rights.
Land Gains Tax on Foreclosure Property applies when determining the basis of land transferred by a mortgagee or judgment lien creditor who acquired the land by foreclosure or transfer in lieu of foreclosure. Use the Land Gains Basis Calculation Foreclosure Property form to determine the amount due.
Land Gains Withholding is a withholding of land gains tax by the buyer at the rate of 10% of the value of the land. If the seller does not provide the buyer with either a completed LG-2 showing what tax is due and will be withheld or a Commissioner’s Certificate from the Department, the buyer is required to withholding 10% of the value of the land and submits it to the Department after the closing. The withholding for land gains cannot be held in escrow.
Anyone who sells Vermont property that was held by the seller for less than six years and the seller does not qualify for an exemption on the property transfer for land gains purposes is required to file this return within 30 days after the sale, even if no tax is due.
Paper copies are only accepted for those persons filing 5 or fewer returns per year. To request a paper copy, call (800) 828-2515.
If the seller does not provide the buyer with a completed Form LG-2, Vermont Land Gains Tax Return at the closing and has not procured a Commissioner’s Certificate, the buyer is required to withhold 10% of the value of the land submitted the withholding on Form LG-1, Vermont Land Gains Withholding Tax Return. The seller has 30 days from the date of closing to file the LG-2 showing what if any tax is due and requesting a refund of any overpayment of the land gains withholding. The withholding is not required if the buyer has claimed an exemption on the LG-1. See instructions for requesting a Commissioner’s Certificate for land gains.
The LG-1 and LG-2 can be simultaneously filed with the seller paying any tax due.
If the buyer claims an exemption on the LG-1 such as:
- the builder’s exemption
- the agricultural exemption
- the affordable housing exemption
- or the purchaser’s principal residence exemption
When the buyer claims an exemption on the LG-1 and they do not comply with the condition of the exemption, the buyer become liable for the land gain tax that would have been due from the seller. Land may include timber and timber rights sold providing the underlying land is also sold within six years (some conditions may apply).