Is there a separate state and federal capital gains tax in VT?

6 Replies

I'm looking at a promising flip in Vermont, but I read that the state of VT charges a cap gains tax. Is this in addition to the federal cap gains and if so what is the rate? Wow, feeling like everyone will make money but me :-(

The tax you are probably referring to is land gains tax. Originally instituted to prevent land speculation by ski resorts, it is applicable for the first 7 years of ownership. I believe the tax is waived if the buyer uses the house for a primary residency. A quick google search should bring up the state’s website with all the details.

Ben

@Micaiah Cormier

Fortunately, if cap gain was your concern, flipping income is an ordinary income taxed or ordinary income tax rate both at state and federal level. It is not taxed at a capital gain. 

I live in NH where there is no state income tax. I was reading the VT state tax laws and while the language somewhat confuses me it looks like I'm subject to their state income tax as well as the federal cap gains for my tax bracket. The land gains tax is a small tax in this case as the house is sitting on less than one acre. thank you for the feedback, it's appreciated. 

land gains happens once you sell the property again. so, hold the property for 7 years and you're set

http://tax.vermont.gov/property-owners/understanding-property-taxes

@Micaiah Cormier   I went through the VT lands gain tax a few years when I did a sale.  It's not as bad as you think.  The tax is on the gain in the value of the land, and if you're doing a rehab or a flip, the land itself generally doesn't increase much.  

The main goal of the tax was to prevent people from buying large lots of land, subdividing, and selling.

And yes, it doesn't apply if it's your primary home, expires after 7 years, and is pro-rated less and less throughout those seven years.

Hope that helps,

- Tom

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