The Vermont real estate transfer tax, formally known as the Vermont Property Transfer Tax, is due whenever property is sold and the deed transferred. Who pays the tax, or if the tax is paid at all, depends on the individual circumstances, although it is generally paid by the buyer. Several exemptions pertain to the tax.
Vermont Property Transfer Tax
Enacted by the state legislature in 1968, the Vermont Property Transfer Tax is levied on the sale of real estate. The buyer must pay the tax unless the parties involved in the sale come to an agreement that the seller will pay it. The property transfer tax is paid at the time the deed is submitted to the town clerk in the Vermont municipality for recording.
As of 2011, the tax rate is 1.25 percent on the sale property, with two exceptions. The property tax transfer rate on a dwelling the buyer intends to use as a primary residence is 0.5 percent on the initial $100,000 of the sale price and 1.25 percent on the amount of sale price over $100,000. Lower-income purchasers receive some tax relief. If the buyer's income falls below a certain threshold, no tax is due on the initial $100,000.
Farm and Agricultural Use Properties
Buyers pay reduced tax for agricultural properties or those lands enrolled in the Vermont current use program. Under the current use program, working farms or forest land pay less in property tax. For qualifying properties, the transfer tax on the entire parcel is 0.5 percent of the entire price. However, if the property use changes within three years after the sale, or if the land is no longer used for agriculture within six years of the sale date, the buyer paying the reduced transfer tax must pay 0.5 percent more.
In certain circumstances, the state does not charge property transfer tax. These exemptions include the transfer of property to creditors to secure debts; transfers between some family members if there is no payment for the property, including spouses, parents and children or grandparents and grandchildren; and transfers to partnerships, corporations or limited liability corporations at the time such entities are formed. If a person bestows a real estate gift to an unrelated person, property transfer tax is due.