The Vermont child care payroll tax is a 0.44% contribution on wages earned in the state, paid by employers who withhold Vermont income tax. Employers owe the full amount to the state but may recover up to a quarter of it by withholding from employee paychecks. The tax has been collected since July 1, 2024, and funds early childhood and afterschool programs.
Who Owes the Contribution
Any employer required to withhold Vermont income tax from employee wages also owes the Child Care Contribution (CCC). The statute defines an employer as any person who employs one or more workers and withholds Vermont income tax from their pay.1Vermont General Assembly. Vermont Code 32 Chapter 246 – Child Care Contribution That reaches out-of-state companies with employees working inside Vermont, not just businesses based in the state.
Household employers count too. Families that pay a nanny, au pair, or other domestic worker owe the contribution if they withhold Vermont income tax from that worker’s pay. The federal coverage threshold for a domestic employee in 2026 is $3,000 in calendar-year wages, so most families with regular child care arrangements meet it.2Social Security Administration. Employment Coverage Thresholds
The Rate and the Employer-Employee Split
The total rate is 0.44% of covered wages. The employer is on the hook for the full amount, but may withhold up to 25% of the cost from the employee’s paycheck.3Vermont Department of Taxes. Child Care Contribution In dollar terms, the maximum an employer can withhold from any employee is 0.11% of that employee’s wages. Some employers absorb the full 0.44% as a benefit; others pass along the entire 0.11% share. The split does not have to be uniform across staff.
On $50,000 in annual wages, the total CCC is $220. If the employer withholds the maximum employee share, the employee sees about $55 per year come out of pay (roughly $2.12 per biweekly check), and the employer covers the remaining $165.
What Wages Are Covered
The statute borrows the federal withholding definition of wages under 26 U.S.C. § 3401.1Vermont General Assembly. Vermont Code 32 Chapter 246 – Child Care Contribution In practice, if a payment is subject to federal income tax withholding, it is subject to the CCC.3Vermont Department of Taxes. Child Care Contribution That covers:
- Salary, hourly wages, and overtime
- Bonuses, commissions, severance, and awards
- Cash and non-cash tips reported to the employer
- Back pay and paid-out sick leave
Pre-tax deductions through a Section 125 cafeteria plan, such as health insurance premiums and FSA contributions, reduce wages before the CCC is calculated, because those amounts also reduce wages subject to federal income tax withholding. There is no wage cap on the employer-side contribution, so every dollar of covered pay generates the 0.44% obligation.
Self-Employed Vermonters
Self-employment income is handled separately. A self-employed person owes 0.11% on net self-employment income earned in Vermont, using the federal definition under 26 U.S.C. § 1402. Income subject to federal self-employment tax and earned in Vermont is subject to the state contribution. There is no income cap.3Vermont Department of Taxes. Child Care Contribution
How to File and Pay
Employers report the CCC on Form WHT-436, the “Quarterly Withholding Reconciliation, Child Care Contribution and Health Care Contribution.”4Vermont Department of Taxes. Forms and Instructions The form combines standard income tax withholding, the CCC, and the separate Health Care Fund assessment in a single quarterly filing.
The Vermont Department of Taxes directs filers to myVTax, the state’s free online portal.5Vermont Department of Taxes. Form WHT-436 Instructions After logging into your withholding tax account, select the quarter, enter total Vermont wages, and enter the calculated CCC amounts. The portal issues a digital receipt on submission.
Paper filing remains available. Mail Form WHT-436 with any payment to:
Vermont Department of Taxes
PO Box 1779
Montpelier, Vermont 05601-17796Vermont Department of Taxes. File and Pay By Mail
Monthly payers send in payments for the first two months of each quarter by their respective due dates, then submit the third month’s payment when they file Form WHT-436. Quarterly payers pay when they file.
Quarterly Due Dates
Form WHT-436 is due the 25th of the month after each calendar quarter ends:5Vermont Department of Taxes. Form WHT-436 Instructions
- Q1 (January–March): April 25
- Q2 (April–June): July 25
- Q3 (July–September): October 25
- Q4 (October–December): January 25
If a due date falls on a weekend or holiday, the deadline moves to the next business day. File every quarter even if no tax is owed.
Late Filing and Late Payment
The penalties that apply to Vermont income tax withholding also apply to the CCC.3Vermont Department of Taxes. Child Care Contribution Late filings and late payments trigger interest and penalty charges calculated the same way as any missed withholding deposit. Because amounts withheld from employees are trust fund taxes held on behalf of the state, the exposure is more serious than for ordinary business debts.
W-2 Reporting
Any CCC amount withheld from an employee during the year is reported on that employee’s W-2.3Vermont Department of Taxes. Child Care Contribution Employers who absorb the full 0.44% and withhold nothing have nothing to report on the W-2 for this item. Track which employees had amounts withheld, and how much, so year-end forms are accurate.