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COVID-19: RESOURCES FOR TAXPAYERS

LAST UPDATED ON OCTOBER 21, 2021 AT 11:27 AM

Unemployment Exclusion Adjustments
Tax Treatment of Forgiven PPP Loans in Vermont
Economic Recovery Bridge Program
Tax Year 2020 Personal Income Tax Filing Due Date
American Rescue Plan (ARPA): Key Provisions
Guidance for Remote Workers and their Employers
COVID-19 Related Repayment Provisions
Coronavirus-related Relief for Retirement Plans and IRAs
View Closed Grant Program Guidance
Additional Resources 

On June 14, Governor Scott removed all State COVID-19 restrictions and the State of Emergency expired on June 15. For more information, current considerations, and operational recommendations, please visit Vermont.gov/Vermont-Forward.

Tax Treatment of Forgiven PPP Loans in Vermont

The federal CARES Act established the Paycheck Protection Program (PPP) that provided loans to businesses to pay certain business expenses. Subsequently, the Consolidated Appropriations Act of 2021 provided that PPP loan recipients may deduct expenses paid for using PPP loan amounts on their federal income taxes, even if the PPP loans are ultimately forgiven.

As per action taken during the 2021 Vermont legislative session, forgiven PPP loans are not taxable in Vermont. Ordinarily deductible business expenses paid using forgiven PPP loans are also deductible for tax year 2020 and beyond.


Economic Recovery Bridge Program 

The Economic Recovery Bridge Program is now open and accepting applications. The program is expected to deliver $30 million in financial relief to businesses who have either not received prior state and federal funding or to businesses who have received prior assistance but can show a continued net loss due to the COVID-19 pandemic. More information on the program is available at the ACCD Recovery Resource Center, including a video recording of a webinar on the program and a video tutorial on how to apply.


Tax Year 2020 Personal Income Tax Filing Due Date

On March 17, the IRS extended the federal income tax filing due date for individuals for the 2020 tax year from April 15, 2021 to May 17, 2021. By Vermont law, the Vermont personal income tax filing due date for tax year 2020 is also extended to May 17, 2021. This means taxpayers can file their 2020 personal income tax return, and pay any tax owed, by May 17, 2021 without any penalties or interest. If a taxpayer is expecting a refund, they are still encouraged to file as soon as they have all of their tax information and are able to do so, in order to get their refund as soon as possible. The best way to get your refund quickly is to file electronically and select direct deposit for your refund.

This extension also applies to Fiduciary Tax, Homestead Declarations and Property Tax Credit Claims. Taxpayers can file these along with their personal income tax return by May 17 without penalty or interest.

Please be aware that at this time, the due date for any tax year 2021 estimated payments due on April 15, 2021 has not been extended, and should still be paid by April 15, 2021. 


The American Rescue Plan Act (ARPA): Key Provisions

The ARPA contains new tax provisions effective for 2021 and beyond. Some of these would require a corresponding change in Vermont law to have that change apply to Vermont state taxes. Some provisions affecting Vermonters are:

Third round of stimulus payments

  • In early 2021, the IRS began issuing a third round of Economic Impact Payments directly to taxpayers at $1,400 per adult and the same amount for any dependents. The payments begin to phase out at $75,000 for single filers, $112,500 for Head of Household filers, and $150,000 for joint filers.
  • The IRS is using the most recent tax return on file to determine eligibility; if taxpayers have not filed for 2020 yet, the IRS will use their 2019 return until updated information is available.
  • These stimulus payments are structured as tax credits for tax year 2021 and therefore not considered taxable income at the federal level or in Vermont.

Get my Payment - Internal Revenue Service

Earned Income Tax Credit (EITC) expansion

  • Effective for tax year 2021, eligibility for the federal EITC is expanded to younger and older workers and workers without qualifying children. Similar to this year, workers can elect to calculate their TY21 credit using the higher of 2019 or 2021 wages. Vermont offers a state credit equal to 36% of the federal EITC.
  • The Vermont Legislature has “linked up” to the 2021 federal tax laws to have this program expansion flow through to the Vermont credit.

Child and Dependent Care Tax Credit (CDCTC) expansion

  • The ARPA significantly expands this federal credit and makes the credit fully refundable for tax year 2021 at the federal level. The ARPA also allows individuals to put $10,500 into a tax-free dependent care Flexible Spending Account, as opposed to normal $5,000 limit.
  • Vermont offers a nonrefundable state tax credit equal to 24% of the federal credit amount, with lower-income Vermonters eligible for a refundable credit equal to 50% of the federal amount. The Vermont Legislature has “linked up” to the 2021 federal tax laws to have this program expansion flow through to the Vermont credits.

Child Tax Credit expansion for 2021

  • For tax year 2021, the ARPA significantly expands the federal credit from a partially-refundable $2,000 per eligible child up to a fully-refundable $3,000 per child (and $3,600 for ages 5 and under). The age limit for qualifying children is also increased from 16 to 17. Families can receive advanced monthly installments of the credit throughout the year. Vermont has no state version of the Child Tax Credit.


COVID-19 Related Repayment Provisions

Special repayment provisions:

  • Duration of payment plans have been extended to allow for lower installments; 
  • Down payments or first payments can be delayed up to 60 days; and, 
  • All associated penalties on periods included in the payment plan will be forgiven.

To take advantage of the special repayment provisions noted above: 

  1. Call 802-828-2518 to establish a payment plan.  Payments may be mailed or be accomplished by ACH debit transactions, initiated on the day that works best for you. 
  2. Submit and pay taxes on future reports when they are due. 

Please note: If you collect taxes and wish to submit them as they are collected (i.e. weekly; bi-weekly), we can explain how to submit the taxes before the due date.


Coronavirus-related Relief for Retirement Plans and IRAs

For qualified individuals, the CARES Act allows up to $100,000 of “coronavirus-related distributions” to be excluded from the additional 10% tax on distributions from eligible retirement plans and IRAs. An individual qualifies if either they or their spouse contracted coronavirus or had an adverse negative impact from being quarantined, furloughed, or laid off because of the virus. The individual must certify this to the administrator of a plan.

For personal income tax purposes, the distributions are included in federal gross income over three tax years with one-third being included in each year, starting with the year the distribution is received. An individual may also choose to include the entire amount in the first year. Distributions that are repaid within three years are not subject to federal personal income tax. Read our frequently asked questions for more information.

Are the COVID-related distributions included in AGI and therefore taxable in Vermont? 

Yes, these distributions will be treated like other distributions, and taxed in AGI.  The CARES Act affects AGI by allowing distributions to be taxed over three years. For individuals who choose this option, the distribution income will also be spread across three tax years in Vermont.

Are COVID-related distributions included in Household Income? 

Household Income includes AGI, as well as ROTH IRA distributions that are not included in AGI.  COVID-related distributions will be included in AGI, so will be included in Household Income. The distributions that are spread across three years will also be spread across three years of household income.

Will Vermont’s tax of 24% of a taxpayer’s federal liability for additional taxes on qualified retirement plans apply to these distributions? 

No. Since the COVID-related distributions will be taxed as gross income and will not be subject to the Federal 10% additional tax on distributions from eligible plans, there will not be any additional Vermont tax under this section.


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