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Vermont Taxes: What You Need to Know

In 2024, Vermont residents will navigate a structured tax system that includes federal, state, and local tax withholdings. Here’s an overview of the tax landscape:

Federal Tax Withholding

Vermont residents are subject to federal income tax withholding, which is based on a progressive tax system. This means that as income increases, the rate of tax also increases. The federal tax rates range from 10% to 37% for various income brackets. For example, the first $11,000 for single filers is taxed at 10%, while income over $578,125 is taxed at the highest rate of 37%. This structure is designed to ensure that higher earners contribute a larger share of their income in taxes .

• 10% on income up to $11,000
• 12% on income from $11,001 to $44,725
• 22% on income from $44,726 to $95,375
• 24% on income from $95,376 to $182,100
• 32% on income from $182,101 to $231,250
• 35% on income from $231,251 to $578,125
• 37% on income over $578,125

State Income Tax Withholding

Vermont implements its own progressive state income tax system, with rates ranging from 3.35% to 8.75%. The brackets are structured to ensure that lower-income earners pay a smaller percentage of their income, while higher-income individuals contribute more. Here’s a breakdown of the state tax rates for single filers in 2024:

1. Single or Head of Household Tax Withholding Table

2. Married Tax Withholding Table

These rates provide a fair distribution of the tax burden across different income levels, allowing the state to fund essential services and infrastructure .

Local Taxes

A notable advantage for Vermont residents is the absence of local income taxes. This simplifies the overall tax burden as residents only need to focus on federal and state taxes without additional local obligations. This can be particularly beneficial for individuals and families, making budgeting and financial planning more straightforward.

Sales Tax

Sales taxes in Vermont consist of a statewide base rate of 6% plus additional local sales taxes that can bring the total rate up significantly depending on the jurisdiction.

This structure allows Vermont residents to understand their tax obligations clearly, making it easier to plan for deductions and withholdings when preparing for tax season.

In 2024, Vermont residents will continue to contribute to federal programs through FICA taxes, which include Social Security and Medicare. These contributions are mandatory and structured as follows:

FICA Tax Contributions in Vermont

1. Social Security

The Social Security tax rate for 2024 remains at 6.2% on wages up to $168,600. This means that income earned up to this limit will be subject to this tax rate, helping to fund the Social Security program, which provides benefits to retirees, disabled individuals, and survivors of deceased workers. After reaching the income limit, no further Social Security taxes are withheld from an employee’s wages for the remainder of the year .

2. Medicare

The Medicare tax is assessed at a rate of 1.45% on all wages, which helps fund Medicare, the federal health insurance program primarily for individuals aged 65 and older. Additionally, there is an extra 0.9% Medicare tax for high-income earners, which applies to wages exceeding $200,000 for individuals and $250,000 for married couples filing jointly . This additional tax ensures that higher earners contribute more significantly to the Medicare system.

Employer Contributions

Employers are required to match these contributions, meaning they also pay 6.2% for Social Security and 1.45% for Medicare on behalf of their employees. This ensures that both employees and employers equally share the responsibility for funding these ess ential federal programs .

In 2024, residents of Vermont can benefit from several pre-tax deductions that help lower their taxable income. These deductions not only reduce tax liability but also promote financial wellness by encouraging savings for healthcare and retirement expenses. Here’s a detailed overview of the key pre-tax deductions available in Vermont:

Pre-Tax Deductions in Vermont

Benefits of Pre-Tax Deductions

These pre-tax deductions serve multiple purposes:

• Lower Taxable Income: By reducing the amount of income subject to taxation, residents can potentially move into a lower tax bracket or pay a lower overall tax amount.
• Enhanced Financial Wellness: Pre-tax deductions encourage saving for both health-related expenses and retirement, helping individuals to secure their financial future.

2024 Vermont Tax Table Example

Median Household Income in Vermont

As of 2023, the median household income in Vermont is approximately $81,211. This figure reflects the state’s economic landscape, which includes robust contributions from key sectors such as healthcare, education, and tourism. Understanding the median income helps residents assess their financial situation in relation to the broader economy.

Vermont Tax Brackets 2024

Vermont employs a progressive tax system to ensure that higher earners contribute a larger share of their income. The tax brackets for single filers in 2024 are as follows:

• Single or Head of Household Tax Withholding Table

For married couples filing jointly, the tax brackets are adjusted, allowing for higher income thresholds at each rate. This progressive structure aims to distribute the tax burden equitably among Vermont residents, ensuring that those with higher incomes contribute appropriately to state revenue.

Vermont Tax Brackets 2024 for Married Couples Filing Jointly

• Married Tax Withholding Table

Explanation of the Tax Structure

• Progressive Tax System: Vermont’s tax structure is designed to ensure that those with higher incomes pay a larger percentage of their income in taxes. This progressive system helps distribute the tax burden more equitably across different income levels.
• Higher Thresholds: The income levels for married couples filing jointly are higher than those for single filers, reflecting the additional income that may be earned within a household.
• State Revenue: These tax rates are crucial for generating state revenue, which funds public services such as education, healthcare, and infrastructure.