Estate Taxes by State - Understanding Vermont Estate Taxes

Vermont's estate tax is based on the federal estate tax laws that were in effect as of January 1, 2001, which means that the Vermont tax is calculated based on the state credit for death taxes in effect in 2001. What this means for Vermont residents and nonresidents who own real estate or tangible personal property located in Vermont is the following:

• A Vermont estate tax return, Form E-1, is required to be filed only if a federal estate tax return, IRS Form 706, is required to be filed.
• For Vermont residents, the Vermont gross estate equals the federal gross estate reduced by the value of all real estate and tangible personal property located outside of Vermont.
• For nonresidents, the Vermont gross estate is further reduced by all of the decedent's intangible personal property.
• Form E-1 is due at the same time as Form 706, which is nine months after the decedent's date of death.
• Vermont estate tax is due and payable at the time Form E-1 is required to be filed.
• An extension of time to file Form E-1 doesn't extend the time to pay - the tax estimated to be due must be paid with the extension of time request.
• The tax rate is a progressive one that maxes out at 16%.

This information is courtesy of the Vermont Department of Taxes.

The bottom line - if you're a Vermont resident and your estate is passing to someone other than your spouse and the gross value is more than $3,500,000, or if you're a nonresident who owns real estate and/or tangible personal property located in Vermont and your gross estate is valued at more than $3,500,000, then your estate may owe a Vermont estate tax. Up last but not least, Washington estate taxes.

UPDATE: On June 2, 2009, the Vermont legislature overrode Gov. Jim Douglas' veto of a bill that reduced Vermont's state estate tax exemption from $3,500,000 down to $2,000,000. To make matters even worse, the $2,000,000 state estate tax exemption has been made retroactive to January 1, 2009. What does all of this mean? Wherever above the Vermont estate tax exemption is mentioned, the number should be reduced from $3,500,000 to $2,000,000.

• Understanding Death, Estate and Inheritance Taxes
• State Estate Tax Chart
• Vermont Estate Taxes - A Recent Boon for the State
• Update on Vermont Estate Taxes
• When is a Federal Estate Tax Return Required to Be Filed?
• How to Calculate Your Federal Estate Tax Liability
• How to Reduce or Even Eliminate Your Estate Tax Bill