Land Gains Tax is a tax on the gain from the sale or exchange of Vermont land that was held by the seller(s) for less than six (6) years. The value of the land may include the proceeds from the sale of timber or timber rights.
Unless the seller cites an exemption from Land Gains Tax on the Property Transfer Tax return filed for the transfer, they must file a Land Gains Tax Return LGT-178. Even if they determine no tax is due by completing their LGT-178 return,or by obtaining a Commissioner's Certificate for no tax due. Buyers must also complete an LGT-177 even if no withholding and/or no tax is due.
Preparers who file more than five returns per calendar year are required to use myVTax for filing. This does not mean you can file up to five on paper and then file subsequent returns online this means if you know you will file more than five returns for the year you must file all of them electronically through myVTax.
If you file fewer than five returns, you can request that these forms be mailed to you.
If the buyer claims an exemption on the LGT-177return, the seller must also cite that exemption on their LGT-178 return. All exemptions have an acreage limitation so even if an exemption is claimed both seller and buyer must complete the “acres beyond those allowed by exemption” schedule to determine if any tax is due at the time of closing or if all tax is deferred dependent on the buyer’s compliance with that exemption. If a buyer does not comply with the conditions of the exemption, the buyer becomes liable for the deferred land gains tax.
Land Gains Tax on Foreclosure Property
Vermont land transferred by a mortgagee or judgment lien creditor who acquired the land by foreclosure, or by transfer in lieu of foreclosure must use the Land Gains Basis Calculation Foreclosure Property, Schedule LGT-181 to determine their basis in the property. For more information about this schedule review the schedule instructions.
Land Gains Withholding of 10% of the value attributable to the land must be withheld from the sale proceeds by the buyer at the closing. Unless the buyer agrees to become personally liable for the tax due by claiming an exemption or because the seller provided the buyer with a completed LGT-178 showing the tax due, and the buyer chooses to assume the liability and simultaneously file paying that amount.
A buyer will not be liable for any additional tax due if they withhold the amount shown on a Commissioner’s Certificate from the Department. Under no circumstance can withholding for land gains be held in escrow by either party or their attorney(s). The seller should claim any withholding paid to the Department by the buyer as a credit on their LGT-178 return filed.