Education Tax Rate Calculations | Frequently Asked Questions

The FY24 (2023 – 2024 property tax year) nonhomestead education tax rate, income yield, and homestead property yield were set by the Legislature during the 2023 legislative session.

• The statewide nonhomestead (formerly called “nonresidential”) tax rate is $1.391 per $100 of property value.

• The homestead property yield is $15,443 which applies to  base rate of $1.00 per $100 of property value.

• The income yield is $17,537 which goes with a base income rate of 2%. 

The nonhomestead tax rate and homestead yields were set to generate enough property tax revenue to support the school budgets approved by voters after all other sources of revenue to the education fund revenue were accounted for.

Act 46 of 2015 introduced the “property dollar equivalent yield,” often called the “homestead property yield” or just the “yield.” The homestead property yield is set to raise enough homestead property tax revenue for the education fund, and the income yield is (usually) set so that homesteads who get an income-based credit will experience the same tax change as those who pay entirely based on property value.  Despite their name, the yields are not related to how much per pupil spending would be supported by a homestead property tax rate of $1.00 or an income rate of 2%.

Suppose a school district votes to spend $19,000 per (equalized) pupil.

Households that pay education tax based on property will have a rate (before the CLA is applied) of:

Please see the question “How is the CLA used” for the final step in the tax rate calculation process.

For those households that receive an income-based credit, the calculation is similar, but the yield amount is different:

Income eligible households in this town will receive a credit on their FY25 bill (2024-2025 property tax year) for the amount that their education property taxes in FY24 exceeded 2.17% percent of their 2023 household income (with certain limitations). This credit will show up on the “education taxes” portion of the FY25 bill with the label “education state payment.”

Per pupil spending is a measure of how much a school district spends per “equalized” pupil. The equalization process weighs different types of students at differing amounts because the education costs vary for different populations of students. For example, a high school student is determined to be more costly to educate than a kindergarten or elementary school student. A higher weight is placed on the high school student to reflect this cost differential. Effective for FY25 (the 2024-2025 school year and property tax year), Act 127 of 2022 will substantially change the weights that are applied to calculate equalized pupils, with increased weights for students in poverty, students in sparsely-populated areas, and students who are learning English as a second language. These new weights will significantly change the number of equalized pupils in many districts, which will therefore change the per pupil spending and homestead tax rates for their member town(s).

CLA stands for “Common Level of Appraisal.” It is a method of ensuring that each town is paying its fair share of education property tax to the state’s Education Fund even if its grand list is not at 100% of fair market value.

In 1997 the Vermont Legislature passed Act 60 to make education funding more equitable across the state. Before Act 60 was passed, the amount a town could raise to fund its school(s) was limited by the amount of property value in that town. Because of that relationship, levels of school funding and therefore educational opportunity varied widely across the state. Act 60 shifted education funding to the state level, creating a statewide education property tax rate and a state “Education Fund” to collect the revenue. This new arrangement of shared education funding responsibility made it necessary to check the accuracy of the town grand lists since they are maintained by town listers, not the state. If the grand list in a town did not reflect fair market value, then the town would have ended up sending more or less tax revenue than its fair share to the statewide Education Fund. Since towns don’t reappraise every year, and real estate markets are constantly changing, a correction factor, or “Common Level of Appraisal,” is used to equalize what is paid in education property taxes across towns.

The Common Level of Appraisal (CLA) for every Vermont town is the primary result of the Equalization Study performed by the Department of Taxes every year. The equalization study compares the ratio of the grand list listed value to the sale price for all the arm’s length sales in the town over the prior three-year period. The study considers sales price as the best measurement of fair market value. If grand list values are generally less than sale prices for the recent sales, the town will end up with a CLA less than one hundred percent. If grand list values are generally more than sale prices for the recent sales, the town will end up with a CLA of more than one-hundred percent. Once the CLA is determined, it is used to adjust the homestead and nonhomestead education property tax rates. The CLA doesn’t change property values, only the education tax rate in a town - an example of indirect equalization.

Suppose the equalization study determined that a town’s a CLA will be 90%, indicating that property in the town is generally listed for 90% of its fair market value, on average. If the homestead education property tax rate in the town is $1.50 (per $100 of property value) before the CLA is applied, then the actual (final) tax rate would be $1.50/.90 = $1.6667 (per $100 of property value) after the CLA is applied.

The nonhomestead rate is $1.391 (per $100 of property value) before the CLA is applied in all Vermont towns in FY24. In this example town, the actual (final) nonhomestead education property tax rate will be $1.391/.90 = $1.5456 (per $100 of property value) after the CLA is applied.

These final rates are what will appear on the property tax bills issued by the town.

The amount your town votes to spend per pupil (not in total) will determine the tax rate. This means that your town could vote to spend less on education than the prior school year, but if the count of equalized pupils in your town declines, the tax rate may actually increase from the prior year.

In this example a school district plans to spend $19,000 per pupil in FY24 (the 2023-2024 school year). The school district has an education spending of $19M to educate 1,000 equalized pupils.

The homesteads who pay education tax based on property will pay (before the CLA is applied):

Keep in mind that some towns are members of multiple school districts. In those cases, the town gets a tax rate that is a prorated blend of the rates from any districts where the town sends students, based on the proportion of students going to each district. Then that blended rate is then adjusted by the town’s CLA before it is applied to the tax bill.

No. The base rate for nonhomestead property is the same for all towns in Vermont. It is adjusted only by the common level of appraisal (CLA) of the town. If the CLA in a town is 90%, the final nonhomestead rate for the town will be:

Yes – because the homestead rate is impacted by per-pupil spending while the nonhomestead rate is not. Therefore, beyond some per-pupil spending amount, the homestead rate will be higher. That amount happens to be $21,482 for FY24. Here’s the FY24 homestead tax rate in a town that votes to spend $21,482 per pupil:

The nonhomestead rate in that town is also $1.391 (the statewide rate), so the example town above has a homestead rate that is the exact same as the statewide nonhomestead rate. That means any spending beyond $21,482 per pupil will result in the homestead rate being higher than the nonhomestead rate. The CLA would then be applied to both these rates, but since it is the same for both, the rates will still end up being identical.

Importantly, there are no Vermont towns that can pay for their education spending through the revenue generated from their homestead grand list alone. All towns depend on the other sources of revenue to the Education Fund to pay for the school budgets they approve. The other major sources are (for FY24) all the Sales and Use tax (about 28% of the Education Fund) and the nonhomestead property tax (about 39% of the education fund). Both of these revenue sources are considered statewide resources and not town-specific ones, even though some towns may have more nonhomestead property or more businesses remitting sales tax than other towns. For example, a major retailer may have a store located in Chittenden County that has a large nonhomestead grand list value and also remits a lot of sales tax revenue to the State. Because the store’s patrons are not just people from that town, the nonhomestead property tax the store pays and the sales tax it remits are considered a statewide resource. These revenues flow into the Education Fund and are accessible to all districts on an equal basis (along with all homestead property tax revenue). The municipal property taxes the retailer pays, however, are controlled by the town where the store is located because that town is responsible for delivering local services to that business.

No. The municipal tax rate depends on the size of the grand list, but the education tax rate does not.

The municipal tax rate is calculated as the amount of money needed to provide municipal services (after any other sources of funding are accounted for) divided by the total value of the grand list in that town. At a given level of services, if the grand list grows from one year to the next, the municipal tax rate could go down because the taxable base got bigger.

The education tax rate used to be calculated in the same way as the municipal tax rate until Act 60 passed in 1997. Since then, it no longer matters how much property value the town has, the education tax yields and rates are driven by the statewide equalized education grand list and total statewide education spending. A town’s homestead rate depends on how much per pupil spending it votes for, but not how much property tax base is in the town. The current system is designed to ensure that approved budgets are fully funded and that towns that spend the same amount per pupil will have the same tax rate (before the CLA is applied), irrespective of how much property value the towns have. Similarly, the cost of state property tax credits distributed to a particular town is not borne by the taxpayers in that town but is distributed across all property owners statewide. For FY24, that cost is forecast to be $151M, adding roughly 14 cents ($140 per $100,000 of property value) to both the homestead and nonhomestead rates paid by property owners.

No. A moratorium was placed on the excess spending threshold for fiscal years 2022 and 2023 while a legislative task force considers how to adjust the current law pupil weighting formula. See Act 59 of 2021.

The effects of a reappraisal on an individual property owner will differ based on how their property value changes compared to the town average. Owners of properties that increase more than the town average (on a percentage basis) will pay more, owners of properties increasing less than the average will pay less, and if the change is in line with the town average then taxes will be the same as they otherwise would have been. In the current market, a large increase in property value does not necessarily mean a bigger bill because the town’s education property tax rate and municipal rate will go down.

In a reappraisal year, the CLA for a town is calculated differently. If the Director of Property Valuation and Review has certified that a town has completed a town-wide reappraisal, the common level of appraisal (CLA) for that town is equal to its new grand list value from the reappraisal divided by its most recent equalized grand list value for purposes of determining education property tax rates. 32 V.S.A. §5406(c).

No. Municipal taxes that pay for roads and other municipal services are levied on the municipal grand list. The town’s governing body determines the amount needed to be raised for town services and divides that figure by the total municipal grand list established by the town listers to arrive at a municipal property tax rate. Please note that your property tax bill has an education property tax component and (almost always) a municipal property tax component. The rates for each will vary from year to year and increases in total property tax liability could be attributed to either source. The education taxes and municipal taxes appear in separate columns on the bill.

A Homestead Declaration, Form HS-122, must be filed each year by any Vermont resident who owns their property and will occupy it as their domicile in the coming year. Once the residence is declared as a homestead, it is taxed at the homestead education tax rate (rather than the nonhomestead tax rate). Resident households with 2022 income under $134,800 may be eligible for a property tax credit and should complete section B of the HS-122 and the HI-144, Household Income Schedule, to claim a property tax credit. The property tax credit claim compares education property taxes for FY23 against the town’s household income percentage which is calculated from its per pupil spending. If education property taxes exceeded that percentage of income, the difference (with some limitations) will be applied as a credit to the FY24 property tax bill, reducing the total amount due. About two-thirds of all resident homeowners in Vermont receive an income-based property tax credit each year.

Households with income less than $47,000 are eligible for additional credits that compare their remaining education property taxes (with some limitations) after the first credit is applied against fixed statutory percentages of income, and the difference is added to their education tax credit. 32 V.S.A. §6066(a). Those households are also eligible for a municipal property tax credit which compares their municipal property taxes paid to fixed statutory percentages of income.

The maximum education property tax credit is $5,600 and the maximum municipal property tax credit is $2,400. Income-based municipal credits appear in the “Municipal Taxes” column of the bill as a “Municipal State Payment” and income-based education credits appear in the “Education Taxes” column of the bill as “Education State Payment.”

When you apply for a property tax credit you report your property taxes from the current property tax year year (at the time of tax filing) and your household income from the prior calendar year (that you are filing taxes on). For example, in early 2023 you probably paid your 2022 Vermont income taxes. Included in your tax return, along with your 2023 homestead declaration and you might have applied for a property tax credit where you reported your total household income for 2022 and the total 2022-2023 housesite property taxes from the “housesite tax information” box on your property tax bill (only the property taxes on the housesite which is the house and up to two surrounding acres property taxes are eligible for a credit).

The tax department calculated your credit as the difference between your housesite property taxes based on property value (with some limitations) and the amount based on income, which is your household income from the prior year times your town’s education income tax rate. If the housesite property taxes were higher than taxes based on income, a credit for the difference (with some limitations) will appear on the following property tax year’s property tax bill on the “Education State Payments” line. If the tax rates in your town change a lot, your property substantially changes in value, or your income situation changes, you will have to wait a year to get the property tax credit that reflects for those changes because the credit is based on the prior year. For that reason, many people say there is a “lag” or “lookback” in the property tax credit system.    

Unused property tax credit amounts are reimbursed from buyer to seller at closing. These are credit amounts that haven’t yet been applied to an installment to date. The parties are also free to alter the terms of the contract, if they wish. 32 V.S.A. § 6063.

For sales between April 1 and June 30, the buyer pays the seller for the entire credit that will be applied to the upcoming property tax year’s bill, and any unused remaining credit from the current year. The Department of Taxes can provide the amount for the upcoming year once the prior owner’s claim has been processed. For sales between July 1 and March 31, the buyer pays the seller for any unused credit for the current tax year.