Overview of Vermont Taxes
Vermont has a progressive state income tax system with five brackets. The state’s top income tax rate of 8.75% is one of the highest in the nation. No Vermont cities have local income taxes.
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Vermont Paycheck Calculator
Vermont Paycheck Quick Facts
- Vermont income tax rate: 0% - 8.75%
- Median household income: $81,211 (U.S. Census Bureau)
- Number of cities with local income taxes: 0
How Your Vermont Paycheck Works
It can be a challenge to predict the size of your paycheck because money is deducted for FICA, federal and state income taxes, as well as other withholdings. But when you start a new job, you'll have to fill out a W-4 form. Your Vermont employer uses the information you provide on this form - with regard to your marital status and any additional dollar withholdings you take - to determine how much to deduct from your paychecks for federal and state taxes. You'll need to submit a new form during the year if you want to make changes regarding your status or dependents.
The IRS made notable changes to the Form W-4 in recent years. The new version completely removes allowances, using a five-step process asking filers to fill out personal information, list dependents and indicate any additional income instead.
A portion of your income will also go toward paying Social Security and Medicare taxes. Collectively these are known as FICA taxes, and may be referred to as such on your pay stub. For each of these taxes, a percentage of your income is withheld for the sake of sustaining these programs. Your employer will match these percentages, meaning that in the end you will have only been responsible for half of your FICA taxes.
In the case of Social Security, you and your employer will each contribute 6.2% of your income for a total of 12.4%. Medicare comprises a smaller percentage, at just 1.45% each, for a total of 2.9%. Any income you have above $200,000 (single filers), $250,000 (joint filers) or $125,000 (married people filing separately) is also subject to a 0.9% Medicare surtax. Your employer doesn’t match this extra rate.
Paying 50% of your FICA taxes is standard, but self-employed workers have to pay these taxes in their entirety since they do not have a separate employer to match their contributions. The good news is that they’re able to deduct the employer portion of their contribution.
Other deductions that could dip into your take-home pay include contributions to retirement accounts and health savings plans sponsored by your employer. The good news is that although you'll be dipping into your paycheck now to build up your 401(k) and save for retirement, the money is taken out of your paycheck before taxes are applied. So by contributing to one of these tax-advantaged accounts, you are actually reducing your taxable income. That will help lower the amount you have to pay now in taxes.
Vermont’s tax rates are among the highest in the country. There are five tax brackets that vary based on income level and filing status. The state’s top tax rate is 8.75%. It applies to single filers, married couples filing separately and heads of household making more than $245,700 and joint filers making more than $305,788 in taxable income.
If you're a single filer with $3,700 or below in annual taxable income, you won't pay any state income taxes in Vermont. The lowest bracket for those who are married filing jointly is $11,138.
Vermont has no cities that levy a local income tax. This means that whether you live in Burlington, Rutland or anywhere in between, you won’t have an additional local withholding.
If you're planning on relocating to Vermont or thinking about a move within the state and you're looking to purchase a home, our Vermont mortgage guide is a great place to start learning.
A financial advisor can help you understand how taxes fit into your overall financial goals. Finding a financial advisor doesn't have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How You Can Affect Your Vermont Paycheck
You can’t escape your income taxes, but you can take steps to change how much of your income taxes you pay each paycheck. One of the simplest ways to do this is by adjusting your withholdings when you file your W-4. If you want even more control over your tax withholding, you can also specify a dollar amount for your employer to withhold.
For example, if you want your employer to withhold an additional $20 from each paycheck, you can write $20 on the appropriate line of your W-4. While that might mean smaller paychecks now, this practice could save you money come tax time.
Besides manually switching up your withholdings, you can also impact your paycheck by lowering your overall taxable income. You can do this by contributing to pre-tax retirement accounts, like a 401(k), or to a Health Savings Account (HSA) or Flexible Spending Account (FSA). This means smaller paychecks, but because the contributions go in pre-tax, you wind up keeping more of your money.
