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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 before 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 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 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 the seller determines 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 or no tax is due, or both.

Online

Electronically file through myVTax.

Paper Returns

Tax preparers who file more than five returns or certificate requests per calendar year are required to use myVTax for filing. If you file fewer than five returns, you can order forms online or by contacting us at (802) 828-2515.

How to Make a Payment

A buyer of Vermont land held for less than six years is required to withhold 10% of the consideration attributable to land. At the time of transfer, withholding must be submitted to the Vermont Department of Taxes. If the buyer does not remit withholding, the Department will seek relief directly against the buyer for any tax due up to the amount of withholding.

Online

You may pay electronically at myVTax.

By Mail

Please make checks payable to the Vermont Department of Taxes and mail them to:

Vermont Department of Taxes
133 State Street
Montpelier, VT 05633-1401

Request a Commissioner's Certificate

If a Commissioner's Certificate is presented at the time of closing which certifies that tax was paid in advance, that no tax is due, or a conditional amount is required to be withheld the buyer can rely on this certification and will not be held liable if in the future any tax is due with respect to that particular transaction.

Sellers: Request a Commissioner's Certificate

A buyer may also simultaneously file form LGT-177 with the seller paying the exact amount of tax due shown on the sellers Land Gains Tax Return LGT-178, and no withholding is necessary. In this case if it is later determined any tax is due the buyer will be liable to pay that amount up to 10% of the consideration originally exchanged.

Certain exemptions may be claimed by the buyer on form LGT-177. When an exemption is claimed the buyer certifies that if they do not comply with that exemption, they agree to take personal liability for any tax that would have been due from the seller. If an exemption is claimed and there are acres transferred beyond the amount allowed by that exemption, withholding must be remitted for 10% of the value attributable to the nonexempt portion of the land.

Forms and Instructions

Number 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 and Guidance

Number   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
GB-1294   myVTax Guide: How to file Form LGT-178 (Sellers)
GB-1222   myVTax Guide: Registering an Attorney, Tax Professional, or Landlord Account

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.