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I reside in CT and own a few small businesses in CT and NY. My income is K1 and W2, if that clarifies. I am going through all the advantages (convincing myself) of owning a second home in VT. We love VT as a weekend getaway. I am wondering about state income tax. CT is currently 6% in addition to federal. Is it possible to claim primary residence in VT and avoid CT state income tax? What is state income tax in VT, if any?
I know that if I register my cars in VT, I can avoid property tax which is substantial in the state of CT.
Anything else I am missing that might be helpful? We are really trying to swing this second home. Just want to look at it from all angles. Thanks for your time.
I reside in CT and own a few small businesses in CT and NY. My income is K1 and W2, if that clarifies. I am going through all the advantages (convincing myself) of owning a second home in VT. We love VT as a weekend getaway. I am wondering about state income tax. CT is currently 6% in addition to federal. Is it possible to claim primary residence in VT and avoid CT state income tax? What is state income tax in VT, if any?
I know that if I register my cars in VT, I can avoid property tax which is substantial in the state of CT.
Anything else I am missing that might be helpful? We are really trying to swing this second home. Just want to look at it from all angles. Thanks for your time.
It sounds as though you would have to sit down with a tax advisor with respect to the ins and outs of declaring VT residency while engaging in business in CT & NY.
I'm a 2nd homeowner with 1 vehicle registered in VT; everything else is registered in NY. Here in NY, we pay a sales tax when we register a vehicle. When I registered the one car in VT, I showed them proof that I had paid sales tax in NY and they did not tax me again when I registered in VT. The car was older with mileage in the 80K range, so that might have made a difference.
Vermont's is a 3% under $160,000 and 9% over that. Both the state and federal systems are rigged so that the middle class has a lower rate of deductible income than those on either side. I've heard that the state legislature just scrapped this...
I reside in CT and own a few small businesses in CT and NY. My income is K1 and W2, if that clarifies. I am going through all the advantages (convincing myself) of owning a second home in VT. We love VT as a weekend getaway. I am wondering about state income tax. CT is currently 6% in addition to federal. Is it possible to claim primary residence in VT and avoid CT state income tax? What is state income tax in VT, if any?
I know that if I register my cars in VT, I can avoid property tax which is substantial in the state of CT.
Anything else I am missing that might be helpful? We are really trying to swing this second home. Just want to look at it from all angles. Thanks for your time.
If you make "real" money, you're not going to declare Vermont as your primary residence. It's a low tax state if you have low income but things are far more graduated than Connecticut.
As a vacation home owner, you need to know several things:
#1: Vermont has an anti-development/anti-subdivision law where gains for real estate held short term are heavily taxed. In year 1, the state taxes 100%. They'll confiscate any gain. It declines 20% per year so after you've held the property for 5 years, there is no tax under this particular law. Primary residences are excluded but not vacation homes.
#2: Vermont taxes any gains from vacation homes as income, not capital gains. If you make, say, $200K in Connecticut and sell a vacation home at a $100K gain, Vermont will tax that gain in the tax bracket between $200K and $300K. 8.8% nonresident income tax. On the sale, the state has a mandatory tax withholding. Make sure you save any receipts for improvements you make to adjust the cost basis.
#3: The Vermont Act 68 state school property tax for vacation homes is the commercial rate. That's about 1.5% of the value of the property. That's on top of the muni tax for the rest of town services like roads, police, etc. You're Connecticut so high property taxes are likely no surprise but the tax on a vacation home will be up north of 2% of the value of the property. The percentage of the state school tax is based on what the state thinks the town appraises as a percent of market valuation. It's called CLA. In many towns, vacation home owners are assessed at higher percentages than residents. Wink wink, nudge, nudge. Here's this year's rates: Education Property Tax Rates | Department of Taxes
I've had green plates on one of my cars for 20+ years as a non-resident. It's one of the few states where it is legal. My insurance company insures everything I own so they know the car is garaged at multiple homes. I pay more than I'd pay with sole garaging in Vermont. You pay sales tax. There is no property tax on cars. If you've paid sales tax in another state, you only pay the difference if it's less than 6%. They don't tax the trade-in value so if you, for example, buy a new car with a $20K trade-in, you're not taxed on that $20K. You can renew registration on the web every two years. Vanity plates are $100-ish per year. You have to inspect the car yearly. They changed the inspection process last year so it's a bit more expensive. Everyone who has ever inspected me puts the car on the lift and checks things like ball joints and looks for broken springs/struts. It's a real inspection which is a good thing. They've found real problems on my cars a couple of times.
I've owned for 25 years. If I sit down and do the math, I'd be ahead renting. Don't expect a vacation home to be an investment. It's discretionary spending.
If you make "real" money, you're not going to declare Vermont as your primary residence. It's a low tax state if you have low income but things are far more graduated than Connecticut.
As a vacation home owner, you need to know several things:
#1: Vermont has an anti-development/anti-subdivision law where gains for real estate held short term are heavily taxed. In year 1, the state taxes 100%. They'll confiscate any gain. It declines 20% per year so after you've held the property for 5 years, there is no tax under this particular law. Primary residences are excluded but not vacation homes.
#2: Vermont taxes any gains from vacation homes as income, not capital gains. If you make, say, $200K in Connecticut and sell a vacation home at a $100K gain, Vermont will tax that gain in the tax bracket between $200K and $300K. 8.8% nonresident income tax. On the sale, the state has a mandatory tax withholding. Make sure you save any receipts for improvements you make to adjust the cost basis.
#3: The Vermont Act 68 state school property tax for vacation homes is the commercial rate. That's about 1.5% of the value of the property. That's on top of the muni tax for the rest of town services like roads, police, etc. You're Connecticut so high property taxes are likely no surprise but the tax on a vacation home will be up north of 2% of the value of the property. The percentage of the state school tax is based on what the state thinks the town appraises as a percent of market valuation. It's called CLA. In many towns, vacation home owners are assessed at higher percentages than residents. Wink wink, nudge, nudge. Here's this year's rates: Education Property Tax Rates | Department of Taxes
I've had green plates on one of my cars for 20+ years as a non-resident. It's one of the few states where it is legal. My insurance company insures everything I own so they know the car is garaged at multiple homes. I pay more than I'd pay with sole garaging in Vermont. You pay sales tax. There is no property tax on cars. If you've paid sales tax in another state, you only pay the difference if it's less than 6%. They don't tax the trade-in value so if you, for example, buy a new car with a $20K trade-in, you're not taxed on that $20K. You can renew registration on the web every two years. Vanity plates are $100-ish per year. You have to inspect the car yearly. They changed the inspection process last year so it's a bit more expensive. Everyone who has ever inspected me puts the car on the lift and checks things like ball joints and looks for broken springs/struts. It's a real inspection which is a good thing. They've found real problems on my cars a couple of times.
I've owned for 25 years. If I sit down and do the math, I'd be ahead renting. Don't expect a vacation home to be an investment. It's discretionary spending.
Hey Geoff,
I think you're right on. I should have just googled the VT state income tax before posting, but was looking for the total picture. It does not make sense to file as a VT resident for income tax. We are not looking for a flip or to make any money, just advantages of an address in two states. I think the only thing worth doing is registering a car or two with the "green plates". Love those regardless of any savings, or lack thereof. The rest comes out in the wash. We have rented seasonally for several years in VT and are almost ready to take the plunge. I recognize there will probably be no appreciation in property value. I'm hoping to minimize loss and/or recognize any benefits ahead of time.
I think you're right on. I should have just googled the VT state income tax before posting, but was looking for the total picture. It does not make sense to file as a VT resident for income tax. We are not looking for a flip or to make any money, just advantages of an address in two states. I think the only thing worth doing is registering a car or two with the "green plates". Love those regardless of any savings, or lack thereof. The rest comes out in the wash. We have rented seasonally for several years in VT and are almost ready to take the plunge. I recognize there will probably be no appreciation in property value. I'm hoping to minimize loss and/or recognize any benefits ahead of time.
I'm just making the point that if you own the property for a long time, you'll see gains just because inflation. When you sell, you'll be paying Vermont non-resident personal income tax on that gain as if it were a cash bonus on top of your Connecticut income. Figure 8.8% state tax. The Feds also changed tax law a few years ago so you can't declare your vacation home as your primary residence, live in it for a couple of years, and get the Federal income tax exemption when you sell it. You'll be paying capital gains tax on those inflation gains if you own it for a long time.
If you have rented, you already know about energy costs. Fuel oil is cheap at the moment but that is unlikely to last. There is a natural gas pipeline from Quebec that runs to Burlington and now to Middlebury. There is big opposition to extending it to Rutland and points south so heat means fuel oil or propane most places in the state.
I'd be careful with Connecticut residency and Vermont plates. The state has well documented financial problems. They want those tax dollars. You can't have a Vermont license since you can only have one license these days and you kind-a need to pay state income taxes in the state you're declaring residence. I own a vacation home and a boat in Massachusetts. They have a 1-800-I-PAY-TAX tip line. I'm only there on summer weekends so I'm legit but I'd have some explainin' to do if I actually lived there and got pulled over.
Vermont's is a 3% under $160,000 and 9% over that. Both the state and federal systems are rigged so that the middle class has a lower rate of deductible income than those on either side. I've heard that the state legislature just scrapped this...
Just scrapped what? My family's been thinking of moving to Vermont, but we're concerned about the property taxes. I'd like to hear what (if anything) is coming up in the legislature.
There are states that scrutinize very carefully any claims of out-of-state residency, especially for high income taxpayers. Don't count on getting away with "declaring" Vermont your home state unless you actually spend a majority of the year here. Yes, some states will actually make you prove that you slept in the state more than half the nights of the year, and sometimes it makes a difference of thousands of dollars. I wouldn't be surprised if Connecticut would do this.
Well, one who not only lived in Florida but did so in one McMansion he owned and intended to do so in another he commissioned was able to run for senator for Vermont nevertheless: Richard Tarrant. Maybe the press gave him a pass because his net worth was north of $4 billion. He ran and lost against Bernie Sanders.
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