Vermont’s exclusion and its minimum tax
Vermont taxes gains through four brackets from 3.35% to 8.75%, with a capital gains exclusion that has two forms: a flat exclusion of up to $5,000, or 40% of adjusted net capital gain on assets held more than three years, capped at $350,000 and at 40% of federal taxable income. Stocks and bonds traded on an exchange do not qualify for the 40% version.
High-income sellers also face a floor: when federal AGI is above $150,000, Vermont tax cannot be less than 3% of AGI after a narrow exclusion, and the capital gains exclusion does not reduce that AGI. Real estate held a short time can also owe Vermont’s separate land gains tax. The 2026 tables are labeled preliminary by the Department.
Vermont preliminary bands and AGI minimum tax
Vermont’s agency explicitly labels the 2026 IN-114 annual income-tax schedules preliminary. This estimate follows their published four-status anchors and 3.35%, 6.6%, 7.6% and 8.75% rates. The married-separate chart has a small printed boundary rounding dip; the calculator preserves the actual published anchors rather than silently smoothing a preliminary table.
Prepare the approved Vermont capital-gain exclusion independently. The flat exclusion can be up to $5,000; the percentage alternative requires eligible assets held more than three years. Both are limited by 40% of federal taxable income and the $350,000 cap. Qualified dividends and specified special-rate gains are excluded from the adjusted gain measure, while asset-class restrictions further limit the percentage alternative.
When unreduced federal AGI is strictly above $150,000, the annual tax before ordinary credits is at least 3% of the applicable AGI base after the U.S.-obligation interest exclusion. A capital-gain deduction does not remove this federal-AGI trigger. Enter approved state taxable income, federal AGI, the independently approved minimum base and usable credits for both scenarios. Land-gains tax, allocation, unsupported assessments and final return tables require entered final liabilities.
Vermont preparation checklist
- Preliminary schedule status, unreduced federal AGI and separate minimum-tax base
- Capital exclusion limits and asset eligibility
- Minimum base after U.S.-obligation interest