Land Gains Withholding Tax is a tax on the gain from the sale or exchange of land that has been held for fewer than six (6) years. Land may include timber and timber rights sold providing the underlying land is also sold within six (6) years (some conditions may apply).
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 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.
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.
Paper copies only accepted for those persons filing 5 or fewer returns per year. To request a paper copy, call (800) 828-2515.
The withholding is not required if the buyer has claimed an exemption on the LG-1. Exemptions that the buyer may claim are:
- 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.