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COVID-19: RESOURCES FOR TAXPAYERS

LAST UPDATED ON APRIL 28, 2021 AT 5:00 PM

*Updated New Federal Exclusion of Unemployment Compensation
*Updated Tax Treatment of Forgiven PPP Loans in Vermont
Tax Year 2020 Personal Income Tax Filing Due Date
American Rescue Plan (ARP): Key Provisions
Filing Guidance for Remote Workers
COVID-19 Related Repayment Provisions
Coronavirus-related Relief for Retirement Plans and IRAs
View Closed Grant Program Guidance
Additional Resources 

This page will be updated as new information is available. For up-to-date information on how the state of Vermont is responding to COVID-19, please go to the Vermont Department of Health’s website http://healthvermont.gov/covid.

*Updated New Federal Exclusion of Unemployment Compensation

The American Rescue Plan, signed into law on March 11, 2021, includes a retroactive provision for tax year 2020 excluding from income up to $10,200 of unemployment insurance (UI) benefits received per individual, so long as the modified adjusted gross income (AGI) on the tax return is less than $150,000 in 2020. Read more from the IRS here on this new exclusion.

Will the unemployment insurance benefits exclusion apply to Vermont state income taxes?

Yes. On April 17, 2021, H.315 became law in Vermont with language linking up to the federal tax code for tax year 2020, including the retroactive UI exclusion. Federal tax changes do not automatically apply to Vermont state income taxes until action is taken from the Legislature.

I have not filed my Vermont tax return yet for 2020 and received UI benefits. Can I still file now?

Yes. The Vermont personal income tax filing due date is May 17, 2021.

Is there a particular form or schedule that I need to fill out when preparing my taxes this year in order to exclude the first $10,200 of UI benefits from my Vermont income?

No. Vermont personal income tax forms begin with federal adjusted gross income (AGI), line 11 of federal form 1040. This means that for taxpayers who filed on or after March 15, 2021 and took the UI exclusion on their federal tax return, their Vermont tax forms will automatically include this exclusion.

I filed my Vermont state tax return for 2020, before the federal law regarding the exclusion went into effect on March 15. Should I amend my Vermont return to take advantage of this exclusion?

No, you should not file an amended return at this time. The Department is recommending taxpayers await further guidance from both the IRS and Vermont Department of Taxes before filing amended returns for this issue. It is possible that an amended return will not be necessary.

Do I need to report the first $10,200 of unemployment insurance benefits when I complete my Household Income Schedule, HI-144? 

Yes. All UI benefits received during 2020, including the first $10,200 per person, must be included on the HI-144, Line c. Household Income includes all the funds available to support a household, both taxable and nontaxable.


*Updated 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.

H.315 became law on April 17, 2021, which makes PPP loans forgiven in 2020 not taxable in Vermont. Ordinarily deductible business expenses paid using forgiven PPP loans are also deductible for tax year 2020.

H.315 also includes a provision that PPP loans forgiven in 2021 would be taxable in Vermont for tax year 2021 state income taxes. Business expenses paid using PPP loans would still be deductible in tax year 2021.

The legislature has continued discussing PPP tax treatment for 2021 since the passage of H.315. The Department of Taxes will continue to update this page throughout the 2021 legislative session.


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. 


American Rescue Plan (ARP): Key Provisions

The ARP contains other 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

  • The IRS is 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.
  • Taxpayers can check the status of their stimulus payment with the IRS Get My Payment tool.

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 would need to pass a law “linking 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 ARP significantly expands this federal credit and makes the credit fully refundable for tax year 2021 at the federal level. The ARP 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 would need to pass a law “linking 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 ARP 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.


Filing Guidance for Remote Workers

Guidance for Individuals Temporarily Living and Working Remotely in Vermont

If you are a non-resident but you are temporarily living and working in Vermont, you have an obligation to pay Vermont income taxes on the income earned while you were living and performing work in Vermont. This is true even if you were in Vermont due to the COVID-19 pandemic, and regardless of whether your employer is located inside or outside of Vermont. Review our income tax guidance for remote or relocated workers.

For businesses who have remote workers located in Vermont only on a temporary basis, Vermont will not require that business to change the employee’s withholding state. However, businesses and their employees who have temporary remote workers in Vermont may wish to discuss a change to the employee’s withholding state if the employee intends to be here for an extended time period, albeit temporarily. Workers who have moved to Vermont permanently and make Vermont their domicile will need to have their withholding location changed. Find additional information about who needs to file.


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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