Vermont Work Taxes for Non-Residents
Vermont has one of the highest state income tax rates in the country. It also has a 6% general sales tax that applies to purchases such as clothing, meals, and rooms. Employers must withhold Vermont income tax from employees for work performed both within and outside the state. Visit the Department of Taxes website for details on withholding rates.
If a non-resident earns income in Vermont, they will have to file a state tax return and pay taxes on the wage income. This is the same as if they earned the income in New York. However, the non-resident will not have to report interest income to the state of Vermont. Non-residents must also pay a minimum tax of $250. They can use their federal refund or credit to offset the Vermont tax. Non-residents must also claim any credits they are entitled to on their Vermont tax return.
When calculating Vermont taxable income, the non-resident must begin with their federal taxable income (found on Form 1040). From there, they should add any wages earned in Vermont. They should then subtract any interest income from United States debt obligations. Non-residents may need to enter a percentage in the Non-resident Percentage field on the Vermont withholding tax worksheet. This will determine how much Vermont withholding tax is withheld from their paycheck. They can find the worksheet and withholding rates on the Department of Taxes website.
Vermont Non-Resident Withholding and Filing Requirements
- Generally, No Withholding for Short-Term Work: Vermont allows an exemption from state income tax withholding for non-residents who work in the state for a short period. There’s no codified law currently, but the Department of Taxes says employers don’t need to withhold Vermont income tax until a non-resident works 30 days or more in a tax year within Vermont.
- Filing Thresholds: Even if no tax is withheld, you might still need to file a Vermont tax return. Non-residents must file if:
- You are required to file a federal income tax return, and
- You earned more than $1,000 in Vermont income, or
- You earned any amount of Vermont income from wages, salaries, tips, or commissions.
Does Vermont have a Non-resident Tax Return?
Employees who work in a state different from their home state must file a non-resident state income tax return for each state where they worked. In addition, they must maintain adequate records to support their tax withholding and filing obligations. DOT’s website contains income tax withholding tables, charts, and instructions for withholding from wages.
Non-resident business entities (and entities that elect to be taxed like C corporations for federal purposes) that operate in the state must pay Vermont corporate income taxes. These taxes are based on a set of marginal rates and minimums on net corporate income. The DOT’s website includes links to corporate tax forms, filing deadlines, and rates.
