Taxes For Purchaser: VT Property Transfer Tax

Vermont Property Transfer Tax:

The Vermont Property Transfer Tax is a tax on the sale of Vermont real estate which is imposed at the time a deed is presented to the town clerk for recording. The buyer is liable for the tax unless the parties agree that the seller will pay the tax.

At present, the tax rate is 1.25% of the sale price of the real estate being sold. Two lower tax rates exist for particular types of property:

1) For property that will be the primary residence of the buyer, the transfer tax is lowered to .5% on the first $100,000 of the sale price, but rises to the regular rate of 1.25% for that portion of the sale price that is above $100,000.

2) For property that is enrolled in the state's current use program (a program which reduces property taxes on agricultural and forest land) or for property which is a working farm at the time of the transfer, the transfer tax is lowered to .5% of the entire sale price. If current use land is converted to another use within three years, or a working farm is taken out of agriculture within six years, a buyer who paid the lower transfer tax rate of .5% must pay an additional tax of .5%. Land in the current use program which is developed may also be subject to a penalty of either 20% of the fair market value of the property at the time it leaves the program, or 10% if the property was enrolled for more than ten years.

The law provides for several exemptions from the transfer tax. Some of these include: a transfer directly to a creditor to secure a debt; a transfer without payment between a husband and wife, parent and child, or grandparent and grandchild; and transfers to a corporation, partnership or LLC at the time of formation, if no gain or loss is recognized under the Internal Revenue Code. Gifts of real estate between unrelated individuals are not exempt.

Usually the property transfer tax form is filled out by the seller's attorney and signed by the parties at the closing. Note that the tax only applies to real property, so any personal property such as kitchen appliances, furniture, etc. is not taxed. The greater the percentage of the total sale price that is allocated to personal property, the lower the property transfer tax will be.

For information on the property transfer tax, call the Vermont Tax Department at 802-828-2542.

This information is courtesy of Vermont Property Owners Report , PO Box 1564, Montpelier, VT 05601