Vermont Estate Tax: Exemption and Rate Guide

Vermont exempts the first $5 million of the Vermont taxable estate and taxes the excess at a flat 16 percent, then scales that bill down to the share of the estate located in Vermont.1

No tiers, no ladder. The $5 million line has applied to deaths since January 1, 2021.1 Whether an estate has to file a Vermont return is a separate question from whether it owes the tax, and the two are measured differently.1

In This Guide

• Vermont Estate Tax at a Glance
• How the Vermont Estate Tax Works
• Estate Tax vs. Inheritance Tax
• The Federal Estate Tax Is Separate
• This Is Not Medicaid Estate Recovery
• Frequently Asked Questions
• Next Steps

Vermont Estate Tax at a Glance

Here is the whole picture in one place.

The rate structure is short: a flat $5 million exemption, and a single flat rate above it.1 The one wrinkle is geography, because only the Vermont share of the estate is taxed.

How the Vermont Estate Tax Works

An estate tax is charged on the taxable value of a deceased person's estate, and the estate itself is liable for it.2 Vermont's rate table is two lines long.1

The exemption. The statute applies its rates to what it calls the Vermont taxable estate, and a Vermont taxable estate under $5 million pays none.1 The $5 million figure has applied to deaths on or after January 1, 2021.1

The flat rate. Value above the $5 million exemption is taxed at a flat 16 percent, before the Vermont-share apportionment below is applied.1 There are no graduated brackets, and the first $5 million of the Vermont taxable estate is not taxed.1

Property outside Vermont. The rate table is not the whole calculation. Vermont works out the 16 percent, then multiplies it by a fraction that can never exceed one: the Vermont gross estate plus Vermont-situs gifts, over the federal gross estate plus the same class of gifts wherever they sit.1 For a Vermont resident, everything counts toward the Vermont side except real or tangible property located outside Vermont at death; for a nonresident decedent, intangible property is left out as well.1 So a Vermont resident who dies owning an $8 million estate that includes a $2 million Florida condominium is not taxed as though all of it sat in Vermont: the condominium is apportioned out of the Vermont share before the bill is set. Every value in the calculation is the one finally determined for federal estate tax purposes.1

Spouses and deductions. The rates apply to what the statute calls the Vermont taxable estate, while the filing test is measured on a different base: the federal gross estate plus taxable gifts from the two years before death.1 Vermont law defines the Vermont taxable estate as the federal taxable estate under 26 U.S.C. § 2051, whether or not the estate is subject to the federal estate tax, with three amounts added back: the federal deduction for state death taxes and the federal deduction for foreign death taxes, each to the extent it was deducted in computing the federal taxable estate, and the taxable gifts the person made within two years of death.1 A gift is added at its value under 26 U.S.C. § 2512, and any part of it already included in the federal gross estate is left out, so it is not counted twice.1 The statute reads the federal rules as of a fixed date, which is December 31, 2024 in the online copy of the Vermont statutes that runs through the 2025 legislative session.1

So Vermont takes the federal taxable estate by reference. Its definitions section does not itself set out a deduction for property passing to a surviving spouse or to a charity.1 Do not read that as a yes or a no on transfers to a spouse: the starting point is the federal figure, and this guide does not cover what the federal taxable estate deducts. Ask the estate's attorney or the Department of Taxes how property left to a spouse is treated in your case before you rely on a figure.

Married couples have a second question. On the federal side, a surviving spouse can use a deceased spouse's unused exclusion only if the executor files a federal estate tax return and makes the election on it.3 That election belongs to the federal return. Ask an estate attorney whether, and how, a couple can use both spouses' Vermont exemptions, and ask before the first death.

Filing. The Vermont Department of Taxes administers the estate tax on Form EST-191, which is due within nine months of the date of death.1 Form EST-195 buys a six-month extension to file, but an extension of time to file is not an extension of time to pay, so the tax itself is still due at nine months.1

Filing and owing are separate questions. The Department says the Legislature raised the filing threshold to $5 million in 2026 to match the payment threshold, effective June 18, 2026.1 A Vermont return is required when the person who died had an interest in property located in Vermont and either the federal gross estate plus federal adjusted taxable gifts made within two years of death is worth more than $5 million, or the estate has to file federal Form 706.1 So an estate with Vermont property and less than $5 million still files in Vermont if a federal Form 706 is required of it.1 And an estate whose gross value is over $5 million has met the dollar part of the filing test without necessarily owing tax, because the tax is figured on the Vermont taxable estate.1 The Department of Taxes estate tax page carries the current forms, the thresholds, and the filing instructions.

If your estate is near or over $5 million, talk to an estate attorney, who can tell you whether trusts or lifetime gifts would change the picture. Taxable gifts made within two years of death count toward the filing test.1

Estate Tax vs. Inheritance Tax

These two terms get used interchangeably, but they are different taxes paid by different people.

• An estate tax falls on the estate. It applies to the taxable value of the estate, and the estate itself is liable for it.2 This is the kind of tax Vermont's statute imposes: a tax on the transfer of the estates of decedents.1
• An inheritance tax falls on the heirs. It applies to the property left to them. The heirs are liable for it, although the estate pays it.2

Vermont is on the estate tax side. A fifty-state survey by the Connecticut legislature's Office of Legislative Research, current to December 31, 2024, names Vermont among the states with an estate tax and does not name it among the states with an inheritance tax.2 Its inheritance tax list has six names: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania, and Iowa's tax is repealed for deaths on or after January 1, 2025.2

The Vermont Department of Taxes lists three returns a deceased person's estate is responsible for filing: an income tax return, a fiduciary return, and an estate tax return.1 The estate tax return is the one that covers the transfer at death, and the estate files it.1

A document presented to a legislative committee says Vermont once had an inheritance tax. A presentation to the Vermont House Committee on Ways and Means dated January 29, 2026, published on the General Assembly's website, states that "Vermont had an inheritance tax from 1955 to 1971."1 It gives those years as history and does not say in so many words whether Vermont imposes an inheritance tax today.1 The Connecticut Office of Legislative Research survey is current to December 31, 2024, so if you are an heir and want to confirm nothing is due on your own share, ask the estate's attorney or the Department of Taxes.

The Federal Estate Tax Is Separate

Vermont's estate tax sits alongside a separate federal estate tax, and each has its own return.

For deaths in 2026, the federal basic exclusion is $15,000,000 per decedent, and the federal tax is filed on IRS Form 706.3 The IRS figures that tax on lifetime taxable gifts and the estate together, so gifts made during life use up part of the exclusion, and the top bracket is taxed at 40 percent.3 Being under the federal line does not mean no death tax is owed: a state estate tax can fall on an estate that owes nothing federally.3

Vermont's $5 million exemption is well below the federal figure, so an estate between $5 million and $15,000,000 can owe Vermont estate tax while owing the IRS nothing, as long as lifetime taxable gifts haven't used up the federal exclusion.1,3 Check the lower state line first.

This Is Not Medicaid Estate Recovery

Families often confuse the estate tax with Medicaid estate recovery. They come from different agencies. The estate tax return goes to the Vermont Department of Taxes.1

Estate recovery is run by the Department of Vermont Health Access (DVHA). DVHA files a claim in probate court to recover Medicaid benefits from the estate of someone who was 55 or older when Medicaid paid for their nursing facility or home-based long-term care.4 It seeks recovery only after the death of a surviving spouse, and only when there is no surviving child who is under 21, blind, or permanently and totally disabled.4 DVHA does not seek recovery from estates under $2,000, or where it finds recovery would cause an undue hardship.4

Our guide to Vermont Medicaid estate recovery covers the homestead protections and how to ask for a hardship exemption.

Next Steps

If your estate, counting taxable gifts made in the last two years, is comfortably under $5 million, Vermont's estate tax is unlikely to reach it. If you are near or over it, plan early, because the flat 16 percent starts on the first dollar over the line.1

• Add up the whole gross estate, not just the house. That gross figure, with taxable gifts from the two years before death, is what the $5 million filing test measures, while the tax itself is figured on the Vermont taxable estate.1 An estate attorney can tell you which assets count.
• Remember the rate is flat, so there is no gentle lower bracket: value over the line is taxed at 16 percent immediately, then apportioned to the Vermont share of the estate.1
• Ask about the spousal picture before the first death. How property left to a spouse is treated, and whether a couple can use both exemptions, are questions for an estate attorney.
• See an estate attorney if you are near or over $5 million.
• Mind the nine-month clock if you are settling an estate: Form EST-191 is due nine months after the death, and the six-month extension covers filing only, not payment.1

For the bigger financial picture, our guide to building a senior care funding plan ties taxes, benefits, and care costs together, and if a home is part of the estate, selling or renting a home for care covers that trade-off.

Learn More

Find personalized help understanding the Vermont estate tax and your family's plan at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.