What Changes in Your Paycheck in Vermont
Your paycheck in Vermont shows a Vermont state income tax line item that grows progressively with income, starting at 3.35% for the first $1-$1. For a $1 salary, you might see ~ $1-$1 annually (~ $1-$1 per biweekly paycheck) for state tax, reflecting the progressive brackets with effective rates around 5%-6.5%. Vermont paychecks only show state and federal tax deductions—no local income tax line items. The progressive brackets mean your state tax increases as you move through brackets, with very high earners reaching the 8.75% top rate. The high starting rate (3.35%) means even lower earners pay relatively high taxes compared to states with lower starting brackets. Retirees see no state tax on retirement income distributions.
Example State Tax in Vermont
What you'll pay in Vermont state income tax at different salary levels (single filer, no deductions):
| Gross Salary | State Tax (Year) | Effective Rate |
|---|---|---|
| $50,000 | $1,847 | 3.7% |
| $75,000 | $3,497 | 4.7% |
| $100,000 | $5,147 | 5.1% |
| $150,000 | $8,863 | 5.9% |
Use the calculator above to see your exact take-home pay with your filing status and deductions.
Is Vermont Better for You?
Vermont works well for:
Vermont is relatively challenging for most income levels due to the high starting rate (3.35%), but lower-income earners (under ~ $1 for singles, $1 for couples) benefit slightly from the 3.35%-6.6% rates compared to the higher 7.6%-8.75% rates for higher earners. Retirees also benefit from exemptions on Social Security and most retirement income, making Vermont attractive for those relying on retirement savings However, Vermont's high rates mean most earners pay relatively high effective rates compared to other states.
Vermont may not be ideal if:
Vermont is challenging for most earners due to the high starting rate (3.35%) and high top rate (8.75%). A $1 earner pays an effective rate around 5%-6.5% (~ $1-$1 annually), while the same earner in a flat-tax state like Pennsylvania would pay $1 (3.07% flat, though PA may have local EIT), and in North Carolina would pay $1 (4.75% flat). High earners face the 8.75% rate, making Vermont one of the higher-tax states. Most earners with geographic flexibility would save $1-$1+ annually by moving to lower-tax states.
Common Mistakes People Make
Misconception: 'Progressive tax means I'll pay the top 8.75% on all my income in Vermont.' Reality: Vermont's progressive system starts at 3.35% for the first $1-$1 of income (depending on filing status), and most middle-income earners pay effective rates around 5%-6.5%, not 8.75%. The 8.75% rate only applies to income above $1 (single) or $1 (married). Someone earning $1 pays an effective rate around 5%-6.5% (~ $1-$1 annually).
Misconception: 'Vermont has low taxes because it's a small state.' Reality: Vermont's income tax starts at 3.35% (relatively high starting rate) and tops out at 8.75%, which is among the higher rates in the nation. A $1 earner pays an effective rate around 5%-6.5%, while the same earner in a flat-tax state like Pennsylvania would pay $1 (3.07% flat, though PA may have local EIT). Vermont's high starting rate means even lower earners pay more than in many other states, and high earners face the 8.75% top rate.
Misconception: 'The four brackets mean my tax is simple like flat-tax states.' Reality: While Vermont has only four brackets (simpler than states with many brackets), the brackets are progressive with rates ranging from 3.35% to 8.75%. Unlike flat-tax states where everyone pays the same percentage, Vermont's progressive system means higher earners pay significantly higher effective rates The high starting rate (3.35%) also means even lower earners pay more than in states with lower starting brackets or flat taxes.
Key Facts That Affect Your Take-Home Pay
- Vermont uses a progressive income tax system with four brackets, starting at 3.35% for the first $1 of income (single) or $1 (married) and escalating to a top rate of 8.75% for income above $1 (single) or $1 (married), making Vermont's bracket structure relatively simple but with high rates across all brackets.
- Vermont's progressive brackets have a relatively high starting rate (3.35%) compared to many other progressive states that start at 1%-3%, meaning even lower earners pay a higher percentage in Vermont. For a $1 earner, income is taxed across multiple brackets creating an effective rate around 5%-6.5%, not the top 8.75% rate.
- Vermont does not levy income taxes locally, ensuring no geographic variations in income tax. All Vermont residents have the same income tax structure—only the state progressive brackets apply.
One Thing to Know
Vermont's first bracket covers $1-$1 (unusually large), meaning most middle-income earners pay the same 3.35% rate on most of their income. However, the starting rate of 3.35% is higher than many progressive states, which means even lower earners pay more than they might expect.
Important Notes
These calculations are estimates based on current tax law. Your actual take-home pay varies based on:
- Pre-tax deductions (401(k), health insurance, HSA, etc.)
- Your W-4 withholding elections
- Additional income or deductions at tax time
- Individual circumstances and tax situations
Tax rates are subject to change. Federal and state tax laws may be updated annually. This is not tax advice. For personalized help, consult a tax professional familiar with Vermont tax laws.