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Vermont Federal Estate Tax
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Vermont Federal Estate Tax

Vermont taxes an estate above $5,000,000 at 16 percent of the excess, not the whole. There is no inheritance tax, and the federal line is $15,000,000.

By Settled Editorial

Vermont charges its own estate tax and no inheritance tax. Under 32 V.S.A. § 7442a a Vermont taxable estate under $5,000,000 owes nothing, and an estate at or above that line pays 16 percent of the excess rather than 16 percent of everything. The federal exclusion sits far higher, at $15,000,000 for a death during 2026.

Two returns can land on the same Vermont executor, and they run on different measures. Here is how each threshold is built, why the Vermont filing test starts lower than the taxing test, what the nine-month clock costs when it slips, and which two repealed chapters keep getting cited as live Vermont law.

Two Estate Taxes, Two Different Lines

TaxThresholdRateReturnDeadline
Federal estate tax$15,000,000 for a 2026 deathGraduated to 40 percentIRS Form 7069 months after death
Vermont estate tax$5,000,000 Vermont taxable estate16 percent of the excessForm EST-1919 months after death
Vermont inheritance taxNoneNoneNoneNone
Vermont gift taxNoneNoneNoneNone

Vermont's gift tax went out decades ago. Subchapter 002 of 32 V.S.A. chapter 190 is headed GIFT TAX and prints one line under it: "§§ 7411-7418. Repealed. 1979, No. 140 (Adj. Sess.), § 2." A lifetime gift can still reach the Vermont estate tax through the back door, because 32 V.S.A. § 7402(14)(C) adds taxable gifts made within two years of death back into the Vermont taxable estate.

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The Vermont Estate Tax Is Not A Cliff Tax

Start with the sentence that costs Vermont families the most sleep. 32 V.S.A. § 7442a is headed "Imposition of a Vermont estate tax and rate of tax", and subsection (b) sets out a two-row table:

  • Vermont taxable estate under $5,000,000.00: None
  • Vermont taxable estate of $5,000,000.00 or more: 16 percent of the excess over $5,000,000.00

Read the second row again. The tax attaches to the excess. A Vermont taxable estate of $6,000,000 is measured against the $1,000,000 that sits above the line, which produces $160,000 before any situs adjustment, not the $960,000 that a whole-estate reading would produce. Plenty of national explainer sites describe Vermont as charging 16 percent on the entire estate once it crosses the line. The statute says otherwise in its own table.

Subsection (b) then finishes the calculation with a fraction that can never exceed one. The numerator is the Vermont gross estate plus Vermont-situs gifts under § 7402(14)(C). The denominator is the federal gross estate plus those same gifts measured nationally. An estate whose property sits mostly in New Hampshire or Florida pays Vermont only its Vermont slice.

Three more details decide the number:

  • The measure is the Vermont taxable estate, not the gross estate. 32 V.S.A. § 7402(14) defines it as the federal taxable estate under 26 U.S.C. § 2051, computed without regard to whether the estate owes federal tax at all, then increased by the state death tax deduction under 26 U.S.C. § 2058, the foreign death tax deduction under 26 U.S.C. § 2053(d), and taxable gifts made within two years of death. Debts, funeral costs, administration expenses, charitable gifts and the marital deduction come off before you reach it.
  • The values are the federal values. Section 7442a(c) says all values shall be as finally determined for federal estate tax purposes. An appraisal fight with the Internal Revenue Service moves the Vermont number too.
  • The $5,000,000 step does not move with inflation. The figure entered the statute through 2019, No. 71, § 6. That act's own effective-date section puts it in force on January 1, 2021 and applies it to estates of decedents with a date of death on or after that date, so the line is fixed by when the person died and not by when the estate is administered. Nothing in chapter 190 indexes the figure, and every year of asset growth pulls more Vermont estates toward it.

Chapter 190 never borrows the federal exclusion. Section 7402(14) starts from the federal taxable estate under 26 U.S.C. § 2051, which is the gross estate after deductions and before the unified credit that carries the federal $15,000,000 figure. A change in the federal exclusion moves the federal bill and leaves Vermont's $5,000,000 step exactly where it sits. Section 7402(8) pins the reference tighter still, defining the laws of the United States as the Internal Revenue Code of 1986 as amended through December 31, 2024.

Do not assume the federal portability election has a Vermont twin. Section 7442a applies its $5,000,000 step to each decedent's own Vermont taxable estate, and nothing in the section carries an unused amount across to a surviving spouse the way 26 U.S.C. § 2010(c)(2) does federally. A couple planning around the Vermont line should put that question to the Department of Taxes or a Vermont tax attorney rather than assume the federal answer travels.

The Filing Line Sits Below The Taxing Line

An estate can owe zero Vermont tax and still owe Vermont a return. 32 V.S.A. § 7444(a) requires the executor to submit a Vermont estate tax return when the decedent held an interest in property with a situs in Vermont and one or both of these apply:

  1. A federal estate tax return is required under 26 U.S.C. § 6018.
  2. The sum of the federal gross estate and federal adjusted taxable gifts made within two years of death exceeds a dollar threshold.

Watch that second test closely, because the printed statute and the tax forms do not read the same. Section 7444(a)(2) still prints a flat $2,750,000.00. The Vermont Department of Taxes states the same test as three date bands in its Form EST-191 instructions, revised 10/25: $2,750,000 for deaths from January 1, 2011 through December 31, 2019, $4,250,000 for deaths during 2020, and $5,000,000 for deaths on or after January 1, 2021. The exclusion table at Line 5 of the return carries the same three dollar figures.

Do not treat the printed $2,750,000 as today's filing line, and do not treat the Department's bands as a substitute for asking. Call the Estate Tax Division at 802-828-6820 with the date of death in hand before you decide no return is due.

Note also what the filing test measures. It counts the federal gross estate, the value before deductions. The taxing test in § 7442a counts the Vermont taxable estate, the value after them. A mortgaged Vermont farmhouse can push an estate over the filing line while leaving it well under the taxing line.

32 V.S.A. § 7445 adds the paperwork rule. The executor files with the Commissioner a duplicate of every federal estate tax return the estate is required to make, and where no federal return is required, a pro forma federal estate tax return goes in instead for a decedent whose estate carries a Vermont estate tax liability. The EST-191 instructions ask for that pro forma Form 706 whenever no return is due federally or no tax is due federally, with all related exhibits and appraisals attached.

Nine Months, And An Extension That Does Not Cover Payment

32 V.S.A. § 7446 is short and it governs the calendar: the § 7444 return "shall be filed within nine months of the death of the decedent," and before that period expires the executor may apply for a six-month extension. Form EST-195 is the application.

32 V.S.A. § 7447 then closes the door that most families expect to be open. The tax is due and payable at the time the return is required to be filed under § 7446, "without extension." The Form EST-191 instructions repeat it in plain words: an extension of time to file the return does not extend the time to pay, and the tax estimated to be due must be paid with the extension request.

There is one relief valve, and it runs through the Commissioner rather than the calendar. 32 V.S.A. § 7448(a) lets the Commissioner extend payment for up to five years from the § 7447 date where paying on time would cause undue hardship to the estate, and subsection (b) says no interest is charged on a hardship extension granted under (a). Any other extension of payment carries interest at the rate the Commissioner sets under 32 V.S.A. § 3108.

Put both clocks beside the rest of the estate calendar in the Vermont probate deadlines guide, because the nine-month tax date runs alongside the four-month creditor window and neither one waits for the other. To estimate the Vermont estate tax on a specific set of numbers, use the calculator: the state head term belongs to that route, and this guide stays with the federal return and how the two interact.

The Federal Return Most Vermont Estates Never File

The Internal Revenue Service sets the federal exclusion at $15,000,000 for a person dying during 2026, up from $13,990,000 for a 2025 death. Only value above the exclusion is taxed, and the rate schedule at 26 U.S.C. § 2001(c) climbs to 40 percent.

Form 706 and its deadline. The federal estate tax return falls due nine months after the date of death under 26 U.S.C. § 6075(a), the same interval Vermont uses. Form 4768 buys an automatic six-month extension of time to file and no extra time to pay, so interest runs on anything settled after the nine-month mark.

Portability. 26 U.S.C. § 2010(c)(2) lets a surviving spouse add the deceased spousal unused exclusion amount to their own, which can shelter up to $30,000,000 across a married couple in 2026. Claiming it means filing a Form 706 for the first spouse even when no federal tax is owed.

Lifetime gifts. The federal gift and estate taxes share one lifetime exclusion, so large gifts drain it. For 2026 the annual gift exclusion stays at $19,000 per recipient, and a married couple can double that. Direct payments to a medical provider or a school for someone else, gifts to a spouse, and gifts to charity sit outside the gift tax.

What counts toward the federal gross estate reaches wider than the assets someone owned outright:

  • Real estate, bank accounts, brokerage holdings and cash
  • Retirement accounts such as IRAs and 401(k) plans
  • Life insurance the person owned or controlled
  • Business and farm interests and partnership shares
  • Their share of jointly owned property
  • Trust assets they kept the power to control
  • Some gifts made within three years of death

No Vermont Inheritance Tax, And Two Chapters That Look Alive

An inheritance tax charges the person who receives the money. Vermont does not levy one. A child, sibling, niece, nephew or friend who inherits from a Vermont estate owes Vermont nothing on the inheritance itself.

Two chapters of Title 32 make people think otherwise, and both are dead:

Here is the trap. Both chapters still sit in the Title 32 chapter list under their original names with no repeal marker beside them, so a writer skimming that list sees a live-looking Vermont inheritance tax chapter and cites it. Open the chapter itself, where the repeal is printed, before believing any page that says Vermont taxes inheritances. Chapter 190 is the only live estate and gift tax chapter Vermont has.

Two cross-border situations still deserve a look. If you inherit from someone who lived in a state that does levy an inheritance tax, that state can tax you in Vermont. And if a Vermont resident owned real estate in a state with its own estate tax, that state can reach the property inside its borders.

The Probate Division Reports The Estate, And Holds The Discharge

Vermont wires the tax into the probate file at both ends.

At the start, 32 V.S.A. § 7449 requires the Probate Division to send the Commissioner, at the time it grants letters of administration, the decedent's name, the date of death, and the name and address of the administrator or executor. Nobody has to remember to do that. The court does it.

At the end, 32 V.S.A. § 7454(a) makes the amount of estate taxes part of the final decree of distribution and bars the Probate Division from finally discharging the fiduciary or releasing the bond until the taxes are paid and the Commissioner's receipt is filed with the court. Subsection (b) blocks allowance of a final account unless the judge finds that income taxes under chapter 151 have been paid. Form E-2A, the Vermont Estate Tax Information and Application for Tax Clearances, is how an executor gets that clearance moving. The rest of the closing sequence sits in the Vermont executor duties guide.

If The Tax Goes Unpaid, It Follows The Property

32 V.S.A. § 7452 makes a spouse, transferee, trustee, surviving tenant or beneficiary who received property included in the federal gross estate personally liable for unpaid estate tax, up to the date-of-death value of what they received. Distributing early and paying the tax later is a personal risk for whoever holds the assets.

32 V.S.A. § 7497 turns unpaid chapter 190 liability into a state lien on all property of the estate once the Commissioner notifies or assesses. Against a later mortgagee, pledgee, purchaser or judgment creditor, the lien counts once the Commissioner files notice of it and the sum due with the clerk of the town or city where the property sits, or with the county clerk where the property lies in an unorganized town, gore or grant. Vermont keeps land records at the town clerk rather than any county office, so a title search for an inherited Vermont house runs through that town's records. For a motor vehicle the lien also needs a notation on the certificate of title.

Debts and taxes compete for the same money, and the order matters. The Vermont creditor claims guide covers where tax sits against the other claims on an estate.

Farms And Generation-Skipping Transfers

32 V.S.A. § 7443 reduces the § 7442a tax for an estate that qualifies for installment payment under 26 U.S.C. § 6166 where the closely held business is the business of farming in Vermont. The reduction is the percentage that the value of the closely held farm business, as determined federally, bears to the federal adjusted gross estate. A working Vermont farm is the one asset class the chapter treats gently, and the relief runs off the federal § 6166 qualification, so the federal analysis comes first.

32 V.S.A. § 7460 imposes a separate Vermont tax on generation-skipping transfers, set at the credit for state death taxes allowed under 26 U.S.C. § 2604 as that section stood on January 1, 2001, with the Vermont return due on or before the last day set for the federal one. Trusts built to skip a generation should be priced with a tax adviser rather than from a rate table.

What This Means For Most Vermont Families

Most Vermont estates clear neither line. The tax questions that actually decide money for them are the ones that follow the assets after death.

  • The gain on a sale. Selling inherited property for more than its basis produces a federal capital gain, and the basis rule heirs actually use resets that basis to the date-of-death value. Vermont helps here by accident: the inventory an executor files already records fair market value as of the date of death.
  • Retirement withdrawals. Money pulled from an inherited IRA or 401(k) is ordinary income on the beneficiary's federal return. The Internal Revenue Service sets a ten-year window for most beneficiaries who are not the surviving spouse, and Publication 590-B carries the exceptions.
  • The probate itself. Court fees, publication and the calendar cost more than tax does for a typical Vermont estate. Start with the Vermont probate guide for the sequence, and with keeping assets out of probate if the planning is still ahead of you.

When To Bring In A Professional

Talk to a Vermont tax adviser or an estate planning attorney when:

  • The Vermont taxable estate is anywhere near $5,000,000, or lifetime gifts within two years of death could push it there
  • The estate holds a farm, a closely held business, or real estate in more than one state
  • A married couple wants to keep the first spouse's unused federal exclusion
  • A Form 706 or Form EST-191 is due, or you are deciding whether to file one for portability
  • The estate cannot pay by the nine-month date and a hardship extension under § 7448 is in play

Frequently Asked Questions

Does Vermont have an estate tax?

Yes. 32 V.S.A. § 7441 names it the Vermont estate tax, and 32 V.S.A. § 7442a imposes it on the transfer of the estates of decedents. The rate table in § 7442a(b) reads "Under $5,000,000.00, None" and "$5,000,000.00 or more, 16 percent of the excess over $5,000,000.00." That result is then multiplied by a fraction, never greater than one, that compares Vermont-situs property with the whole federal gross estate. The $5,000,000 step carries no inflation adjustment.

Is the Vermont estate tax charged on the whole estate once it passes $5,000,000?

No. 32 V.S.A. § 7442a(b) charges 16 percent of the excess over $5,000,000.00, so a Vermont taxable estate of $6,000,000 is measured against the $1,000,000 above the line, not against the full $6,000,000. National explainer pages often describe this as a cliff tax that hits the entire estate. Read the rate table itself before you accept that. The situs fraction in the same subsection can then reduce the figure further.

Does Vermont have an inheritance tax?

No. A person who receives money or property from a Vermont estate owes Vermont nothing on the receipt. 32 V.S.A. chapter 181, Inheritance Taxes, is printed as "§§ 6501-6952. Repealed." and 32 V.S.A. chapter 183, Additional Estate Tax, is printed as "§§ 7001-7005. Repealed." Both chapters still appear in the Title 32 chapter list under their original names with no repeal marker beside them, which is how stale pages keep citing a Vermont inheritance tax that no longer exists.

Who has to file a Vermont estate tax return?

32 V.S.A. § 7444(a) puts the return on the executor when the decedent held property with a Vermont situs and either a federal Form 706 is required under 26 U.S.C. § 6018, or the federal gross estate plus adjusted taxable gifts made within two years of death passes a dollar test. The printed subsection still carries $2,750,000.00. The Department of Taxes reads that same test in three date bands in its Form EST-191 instructions, and the band for a death on or after January 1, 2021 is $5,000,000. Confirm the current figure with the Department before you skip a return.

When is the Vermont estate tax return due, and does an extension delay payment?

32 V.S.A. § 7446 sets nine months from the date of death and lets an executor apply for a six-month extension before the filing period runs out, on Form EST-195. Payment does not move. 32 V.S.A. § 7447 makes the tax due when the return is required to be filed under § 7446, "without extension", and the Form EST-191 instructions say the tax estimated to be due must be paid with the extension request. 32 V.S.A. § 7448(a) is the separate hardship route, up to five years.

How large does an estate have to be before federal estate tax applies?

The Internal Revenue Service puts the federal exclusion at $15,000,000 for a person dying during 2026, up from $13,990,000 for 2025. Only value above the exclusion is taxed, and the rate schedule at 26 U.S.C. § 2001(c) tops out at 40 percent. Form 706 falls due nine months after the death under 26 U.S.C. § 6075(a), and Form 4768 buys six more months to file without buying more time to pay.

This page is general information about Vermont estates. Check anything affecting your own situation with the Vermont Department of Taxes, the Probate Division for your county, or a licensed Vermont attorney or tax adviser.

Sources:

It is not legal advice.

Information current as of August 4, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in Vermont can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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