A Vermont second home tax bill will run higher than what a year-round resident pays on a comparable house next door, and the gap shows up in almost every direction: a higher annual education tax rate, a property transfer tax at closing that reaches 3.62% on a year-round vacation home, a land gains tax if you sell within six years, Vermont income tax on any rental revenue, and 2.5% withholding from the sale price when a non-resident sells. Here is what each of those costs and when you pay it.
Annual Property Tax on a Second Home
Vermont sorts every parcel into one of two categories for education tax purposes. A homestead is the principal dwelling the owner occupies as a permanent home; everything else, including second homes, vacation rentals, seasonal camps, and unimproved land, falls into the nonhomestead category.1Vermont General Assembly. Vermont Code 32 – Definitions2Vermont Department of Taxes. Statewide Adjustment A second home cannot be declared a homestead and will always be taxed at the nonhomestead rate.
The nonhomestead rate is set statewide each year to fund Vermont’s Education Fund. For FY2026 (the 2025–2026 property tax year), the rate is $1.703 per $100 of property value.3Vermont Department of Taxes. Education Tax Rate Calculations – Frequently Asked Questions Unlike the homestead rate, which varies town to town based on local school spending, the nonhomestead rate is uniform across Vermont.
How the Common Level of Appraisal Changes Your Rate
The effective rate you actually pay depends on your town’s Common Level of Appraisal (CLA). The CLA is the ratio between your town’s assessed values and actual fair market values, calculated annually by the Department of Taxes from three years of local sale data. When listed values fall behind the market, the CLA drops below 100%, and the statewide rate gets divided by that CLA to produce your local rate.4Vermont Legislative Joint Fiscal Office. Understanding the Common Level of Appraisal A town with an 85% CLA pushes the effective nonhomestead rate to roughly $2.00 per $100.
A working example: a second home assessed at $350,000 in a town with a 90% CLA sees an adjusted nonhomestead rate of about $1.892 per $100 ($1.703 ÷ 0.90), producing an education tax bill near $6,622 before the municipal portion.
The Municipal Tax Line
Nearly every Vermont town also levies a municipal property tax for roads, fire protection, and other local services. This rate is the same for homestead and nonhomestead properties in the same town, and it appears as a separate line on your bill.3Vermont Department of Taxes. Education Tax Rate Calculations – Frequently Asked Questions Rates vary widely based on town budgets and grand list values.
Transfer Tax When You Buy
Vermont charges a property transfer tax every time real estate changes hands, and the rate for a second home is much higher than for a primary residence.
If the property is fit for year-round habitation, won’t be your principal residence, and won’t be operated as a long-term rental requiring a landlord certificate, the rate is 3.40% of the full purchase price plus a 0.22% Clean Water Surcharge, for a combined 3.62%.5Vermont General Assembly. Vermont Code 32 – Tax on Transfer of Title to Property6Vermont Department of Taxes. Property Transfer Tax On a $400,000 year-round vacation home, that comes to $14,480 due at closing.
Non-principal residences that don’t fit that description, such as seasonal camps without year-round heating, unimproved land, and long-term rental properties, pay the general rate of 1.25% plus the 0.22% surcharge, totaling 1.47%.6Vermont Department of Taxes. Property Transfer Tax
Compare that to a principal residence, which is taxed at just 0.50% on the first $200,000 (with no Clean Water Surcharge on that portion) and 1.47% on any value above.6Vermont Department of Taxes. Property Transfer Tax The same $400,000 house would generate about $3,940 in transfer tax as a primary residence, versus $14,480 as a year-round second home.
The tax must be paid at closing. The deed cannot be recorded without a completed Property Transfer Tax Return (Form PTT-172), and recording itself costs $15 per page.7Vermont General Assembly. Vermont Code 32 – Fees for Town Clerks
Land Gains Tax If You Sell Within Six Years
Vermont imposes a separate tax on gains from selling land held less than six years, designed to discourage speculation.8Vermont General Assembly. Vermont Code 32 – Tax Imposed It applies to the gain on the land component of a sale, not the residential structure, so second-home owners selling parcels with significant acreage need to allocate value between land and buildings.9Vermont General Assembly. Vermont Code 32 – Land and Residences
Rates depend on how long you held the property and how large your gain was as a percentage of your cost basis. The steepest rate, 80%, applies to land held less than four months with a gain of 200% or more. Rates drop as the holding period lengthens:10Vermont General Assembly. Vermont Code 32 – Rate of Tax
- Less than 4 months: 60% (gain under 100%), 70% (100–199%), 80% (200%+)
- 4 to 8 months: 35%, 52.5%, or 70%
- 8 months to 1 year: 30%, 45%, or 60%
- 1 to 2 years: 25%, 37.5%, or 50%
- 2 to 3 years: 20%, 30%, or 40%
- 3 to 4 years: 15%, 22.5%, or 30%
- 4 to 5 years: 10%, 15%, or 20%
- 5 to 6 years: 5%, 7.5%, or 10%
After six years of ownership, the tax drops to zero. Sellers report it on Form LGT-178 at the time of transfer.11Vermont Department of Taxes. Form LGT-178 Instructions Buyers who improve a property and try to resell quickly are the ones most often surprised by it.
Income Tax on Rental Revenue
Out-of-state owners who rent out a Vermont second home owe Vermont income tax on that rental income. The state taxes rents and royalties from Vermont-located property regardless of where the owner lives.12Vermont General Assembly. Vermont Code 32 – Vermont Income of Individuals, Estates, and Trusts Non-residents must file a Vermont income tax return if they earn more than $1,000 in gross income from Vermont sources during the year.13Vermont General Assembly. Vermont Code 32 – Returns by Individuals, Trusts, and Estates
Short-term rentals bring a second obligation. Owners renting stays under 30 days need a Vermont Business Tax Account to collect and remit the meals and rooms tax, which runs 9% of the rental price.14Vermont Department of Taxes. Meals and Rooms Tax Casual listings on Airbnb and similar platforms create this obligation, and many owners don’t discover it until a state notice arrives.
Withholding When a Non-Resident Sells
When a non-resident sells Vermont real property, the buyer must withhold 2.5% of the sale price and send it to the Vermont Department of Taxes within 30 days of the transfer.15Vermont General Assembly. Vermont Code 32 – Withholding at Source The buyer files Form RW-171. A buyer who fails to withhold becomes personally liable for the amount.16Vermont Department of Taxes. Real Estate Withholding
The withholding is a credit against your Vermont income tax for the sale year, not an extra tax on top of it. If it exceeds what you actually owe on the gain, the difference comes back when you file. Sellers who can show little or no Vermont tax liability on the sale can apply for a Commissioner’s Certificate before closing to reduce or eliminate the withholding, and sellers doing a 1031 exchange can request an exemption certificate.
Estate Tax Exposure for Non-Resident Owners
Vermont is one of the states with its own estate tax, and it reaches non-resident property owners whose estates include Vermont real estate. The tax applies to estates valued above $5,000,000 at a flat rate of 16% on the excess.17Vermont General Assembly. Vermont Code 32 – Tax Computation For non-residents, the liability is prorated based on the ratio of Vermont property to total estate value.
Form EST-191 and payment are both due within nine months of death; a filing extension does not extend the time to pay.18Vermont Department of Taxes. Estate Tax Return Instructions The $5 million threshold is not indexed for inflation and has not changed since 2021.19Vermont Department of Taxes. Estate Tax For owners with a valuable Vermont vacation property, this deserves planning attention.
Forms, Deadlines, and Late Payment
A second-home owner touches several forms and offices depending on the transaction:
- At purchase: Form PTT-172 (Property Transfer Tax Return) filed when the deed is delivered for recording, typically through the myVTax online portal. The town clerk cannot record the deed without it.
- If you sell within six years: Form LGT-178 (Land Gains Tax Return) filed at the time of transfer.11Vermont Department of Taxes. Form LGT-178 Instructions
- Annual property taxes: paid through the local town clerk or treasurer, usually on a quarterly or semiannual cycle.
- Rental income: non-residents file a Vermont income tax return, and short-term rental operators remit the 9% meals and rooms tax through a Vermont Business Tax Account.
Late payment gets expensive. Towns that vote to charge interest on overdue property taxes can impose up to 1% per month for the first three months, then up to 1.5% per month after that, with partial months counted as full.20Vermont General Assembly. Vermont Code 32 – Collection of Current Taxes Unpaid taxes can produce a lien, and Vermont towns can sell tax-delinquent parcels to recover what is owed. Owners who don’t live locally should confirm the billing schedule with the town clerk and set reminders, since a mailed bill to an out-of-state address is easy to miss.