Land Gains Tax

Notice: Effective with returns filed after Jan. 1, 2020 H.541 of the 2019 Legislative Session changed the definition of “land” subject to the Land Gains Tax. Under the revised definition, Vermont land is only subject to the tax when it has been purchased and subdivided by the transferor within six years prior to the sale or exchange of the land. “Subdivision”  means a tract or tracts of land that have been partitioned or divided for the purpose of sale or transfer by the person who owns or controls the land. Subdivision occurs when the first lot is transferred from the transferor to the transferee or a plat, plan, or deed is filed in the town records, whichever occurs first. The exemption for transfer of land in a Vermont neighborhood or neighborhood development area has been expanded to include a downtown development district, a village center, a growth center, or a new town center development district. Read more >>

Overview

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.

How to File

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.

Online
E-File using myVTax. Complete the return using the instructions for Form LGT-178, Vermont Land Gains Tax Return and Form LGT-179, Vermont Land Gains Schedules.

Paper Returns
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.

Forms and Publications

No. Instructions Title
Commissioner's Certificate Instructions

All certificate requests must be submitted online through myVTax

LGT-174   Land Gains Installment Payment Voucher
LGT-177

Instructions

Vermont Land Gains Withholding Tax Return To Be Completed By Buyer (Transferee)
LGT-178 Instructions Vermont Land Gains Tax Return To Be Completed By Seller (Transferor)
LGT-179 Instructions Vermont Land Gains Schedules
LGT-181 Instructions

Land Gains Basis Calculation Foreclosure Property

PUBLICATIONS
No.   Title
FS-1155   The Land Gains Certificate: Three Options for Filing Land Gains Tax
GB-1131   myVTax Guide: How to File the Land Gains Tax Return
Watch   Video: How to File a Land Gains Tax Return

Exemptions

If the buyer claims an exemption on the LGT-177 return, 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.

Special Situations

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.