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.
Laws regarding taxation of income earned while living in Vermont have not changed. Individuals are subject to Vermont income tax under two circumstances:
- they are residents of Vermont, either by domicile or presence in the state for more than 183 days; or,
- they earn Vermont income.
The pandemic caused some individuals to alter their living situation and/or work location. Based on your living and working situation you may be required to pay income tax to the State of Vermont.
The Department recommends that you consult your tax preparer to discuss your specific living and working situation.
Residency is established by domicile or by maintaining a home in Vermont and being physically present within the State for more than 183 days per year. This is true even if the taxpayer has a “domicile” in another state.
Domicile means the place where an individual has a true, fixed permanent home, and to which place, whenever the person is absent, he or she has the intention of returning. An individual may reside in several places in a year, but at no time can he or she have more than one domicile. Domicile is not limited to a specific structure but refers rather to a place or an area to which the individual expects to return.
Frequently Asked Questions
I have been residing in Vermont for most of 2020, due to the pandemic, but I generally live and work in another state. Am I required to pay income tax on the money that I’ve earned while I’ve been in Vermont even though it was paid by my out-of-state employer?
Yes. If you were in Vermont for more than two weeks, income earned while in Vermont is subject to income tax in Vermont.
I live in (am domiciled in) another state but I work in Vermont. Do I have to pay income taxes to the State of Vermont?
The State of Vermont taxes non-residents only on their income earned in Vermont. This could be wages earned while in Vermont, income from a business located in Vermont, or income from the rental of real estate or other property in Vermont.
During “normal” times, I live in (am domiciled in) New Hampshire and drive to Vermont every day for work. Since the beginning of the state of emergency, I am working at my Vermont job remotely from my home in New Hampshire. Do I still need to pay Vermont Income Tax?
Prior to the pandemic, you were required to pay Vermont income tax as a nonresident on the income earned in Vermont. Presently, however, given your New Hampshire domicile and your remote worker status, the income you earn while at home is not Vermont income (even though your employer is still located in Vermont) and is not subject to Vermont income tax.
I usually reside in New York where I work for a New York employer. However, during the pandemic I have resided at my second home in Vermont. Do I have to pay Vermont income tax on the income that I’ve earned while living at my second home in Vermont?
Yes, if you are living at your second home in Vermont for more than two weeks the income earned while you are in Vermont is Vermont income.
What if I reside in Vermont at my second home, in a rental, or with family or friends for an extended period of time?
If you stay in Vermont for more than 183 days, you are a statutory resident of Vermont and must file taxes as a Vermont resident. Statutory residents of Vermont are taxed on all of their income wherever earned, and Vermont provides a credit for taxes paid to other states.
Prior to the pandemic, I was a Vermont resident but drove to Massachusetts every day to work. Now I am working at home. Do I still pay income tax to Massachusetts?
As far as the State of Vermont is concerned, there is no change to the Vermont filings, as Vermont taxes all of your income as a Vermont resident. However, your Massachusetts tax filings may be affected. The Department also recommends that you review other state’s guidance and consult with your tax professional.
Is Vermont’s treatment of in-state income different than treatment in other states?
Vermont’s treatment of in-state income is the same as or very similar to several other states. Most states have the 183 days statutory resident requirement. There are, however, exceptions. You should review other state’s guidance for more information and consult with your tax professional.