Vermont collects a tax on the transfer of a Vermont estate of resident and nonresident deceased persons. Generally, Vermont Form EST-191, Estate Tax Return, must be filed if the deceased person has an interest in property located in Vermont and either (1) their federal gross estate plus federal adjusted taxable gifts made within two years of their death is worth more than $4.25 million, or (2) they are required to file federal Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return. For Vermont resident decedents, property located in Vermont means all property interests, excluding real or tangible property located outside of Vermont at the time of death. For nonresident decedents, intangible property is also excluded.
|Year of Death||Gross Estate Value Exceeds|
|2000 & 2001||$675,000|
|2002 & 2003||$1,000,000|
|2004 & 2005||$1,500,000|
|Year of Death||Value of GROSS ESTATE Plus Adjusted taxable Gifts Made within Two Years of Death EXCEEDS|
How to File
When a person dies, the person’s estate is responsible for filing:
- an income tax return for the months of the tax year the person was living and receiving income—from January of the tax year to the date of death. File Form IN-111, Vermont Income Tax Return
- a fiduciary return on behalf of the deceased person for the months of the tax year the estate earned income, such as rental income or an Investment Retirement Account (IRA) cashed in during administration of the estate. File Form FIT-161, Fiduciary Return of Income.
- an estate tax return on the transfer of a Vermont estate of resident and nonresident deceased persons. File Form E-1 (if death occurs on or before Dec. 31, 2015). File Form EST-191 (if death occurs on or after Jan. 1, 2016).
- to obtain a six-month extension to file the Estate Tax Return, file Form EST-195, Application for Extension of Time to File Vermont Estate Tax Return on or before the due date of the Estate Tax Return.
Filing a Vermont Income Tax Return
If a deceased taxpayer received Vermont income between the beginning of the taxable year and the date of death and is required to file a federal income tax return, a Form IN-111, Vermont Income Tax Return, also must be filed on the behalf of the deceased taxpayer. The return, reflecting income received from January until the date of death, should be filed with the Vermont Department of Taxes, along with payment for any tax due.
To claim an income refund on the deceased taxpayer’s behalf, attach one of the following documents to Form IN-111:
- Probate court certificate showing your appointment as administrator or executor (not needed if you are the surviving spouse) or
- Vermont Form 176, Statement of a Claimant to Refund Due on Behalf of Deceased Taxpayer or
- Federal Form 1310, Statement of a Person Claiming Refund Due a Deceased Taxpayer
Probate Estate and Tax Clearance
When the deceased person owns assets in his or her individual name, an estate must be opened in a Vermont Probate Court. Find a Probate Court.
The probate court requires a tax clearance from the Vermont Department of Taxes to close the estate. Complete Vermont Form E-2A, Vermont Estate Tax Information and Application for Tax Clearance, for this purpose.
The Department will not issue a tax clearance until all required Vermont tax returns are filed, which may include one or more of the following:
- Income Tax Return for current and (if applicable) prior year
- Fiduciary Tax Return (except final return)
- Estate Tax Return
Resident Estate: the estate of a decedent who was domiciled in Vermont at the time of death.
Vermont Income of a Resident Estate or Trust: the adjusted gross income of a resident estate or trust less income exempted from state taxation under the laws of the United States. 32 V.S.A. § 5823
Vermont Income of a Nonresident Estate or Trust: the sum of the following items as long as they are required to be included in federal adjusted gross income:
Rents and royalties from ownership of property located in Vermont
Gains from the sale or exchange of Vermont property
Wages, salaries, commissions or other income received for services performed in Vermont
Income from every business, trade, profession or occupation conducted in Vermont, including money received:
under an agreement not to compete with a business operation in Vermont,
for goodwill associated with the sale of a Vermont business, or
for contractual services associated with the sale of a Vermont business, unless it is shown that the compensation for services does not constitute income from the sale of the business.
Vermont income previously deferred under a non-qualified deferred compensation plan and income derived from such previously deferred income.
Examples of other income: gambling winnings including lotteries, raffles, or a lump-sum payment from the sale of a right to receive a future lottery annuity.
LAWS, REGULATIONS AND GUIDANCE
32 V.S.A. § 5822 Taxation of Individuals, Trusts, and Estates
32 V.S.A. § 7402 Estate and Gift Taxes