Vermont Estate
Tax Calculator

Vermont imposes a state estate tax with an exemption of **$5 million**. The tax applies a flat 16% rate on the taxable estate above the exemption — one of the simplest rate structures among estate-tax states.

Vermont's exemption was raised from $2.75 million to $5 million effective January 2024, a significant legislative change that removed many estates from the tax.

The flat 16% rate makes Vermont's estate tax straightforward to calculate but relatively aggressive on a per-dollar basis compared to states with graduated rates that start lower. For estates that exceed the exemption, every additional dollar is taxed at 16%.

Vermont's **$5 million** exemption is less than half the federal $15 million exemption. Estates between these thresholds face Vermont estate tax but no federal liability.

Vermont does not offer portability of the state exemption, so married couples must plan proactively to use both exemptions.

The flat rate structure simplifies the comparison: for every dollar above $5 million, Vermont takes 16 cents. This predictability aids planning but also makes the tax significant for larger estates.

A $7 million estate faces $320,000 in Vermont estate tax alone.

Vermont's recent exemption increase from $2.75 million to $5 million has changed planning for formula-based trusts. Many trusts drafted when the exemption was lower should be reviewed to determine whether the credit shelter amount aligns with the new threshold.

Overfunding a bypass trust based on an outdated formula could create liquidity problems or unintended disinheritance.

Vermont does not impose an inheritance tax or a gift tax. The absence of a gift tax means lifetime gifts effectively reduce the Vermont taxable estate without a state-level clawback.

Evaluate systematic gifting programs for those whose estates are near the $5 million threshold. Agricultural estates are common in Vermont, and farmland valuations — particularly for operating farms with conservation easements — require specialized appraisal to determine estate tax exposure accurately.

Model Vermont's flat 16% estate tax rate using this estimator. Compare pre- and post-planning scenarios to see the impact of gifting or trust strategies — free for all jurisdictions.

Vermont residents with taxable estates face a two-layer system: the federal estate tax (exemption of $15 million in 2025, top rate of 40%) and the Vermont estate tax (exemption of $5 million). The gap between these exemptions creates a range where only the state tax applies.

An estate valued at $8 million, for example, may owe Vermont estate tax while owing nothing at the federal level.

The federal return (Form 706) allows a deduction for state estate taxes paid, which partially offsets the double-taxation effect but does not eliminate it. The state tax is deductible on the federal return as an estate administration expense or under the state death tax credit rules, depending on the estate's circumstances.

The net result is that combined effective rates in Vermont can exceed 45% on estates large enough to trigger both layers.

Planning for this interaction requires modeling both taxes simultaneously. Strategies that reduce the Vermont taxable estate — such as lifetime gifts, charitable bequests, and irrevocable trusts — may also reduce federal exposure, but the relative benefit depends on where the estate falls within each jurisdiction's rate brackets.

Use our Vermont estate tax calculator to model both layers side by side, and check the Vermont probate cost calculator to estimate administration expenses.

Federal law permits a surviving spouse to use the deceased spouse's unused exclusion (DSUE) — commonly called portability — by timely filing Form 706 for the first-to-die spouse. This allows married couples to shelter up to $30 million federally without trust-based planning.

However, most estate-tax states, including Vermont, do not offer portability of the state exemption.

This asymmetry makes bypass trusts (also called credit shelter trusts or B trusts) essential in Vermont. At the first spouse's death, funding a bypass trust up to the Vermont exemption amount preserves that exemption for state tax purposes.

Without the trust, the unlimited marital deduction passes everything to the surviving spouse tax-free at the first death — but the surviving spouse's estate then has only one Vermont exemption, effectively wasting the first spouse's.

The bypass trust should be sized carefully. Overfunding it beyond the Vermont exemption wastes the marital deduction benefit; underfunding it fails to capture the full state exemption.

For married couples with estates above $5 million but below $15 million, the bypass trust is the single most impactful planning tool available. Review your plan with the Vermont estate tax estimator, and use the executor fee calculator to account for administration costs in your projections.

The $5 million Vermont exemption establishes a lower threshold than the federal exemption, making proactive estate reduction strategies more urgent. Irrevocable trusts are the primary vehicle: irrevocable life insurance trusts (ILITs) remove life insurance proceeds from the taxable estate, spousal lifetime access trusts (SLATs) allow married couples to remove assets while retaining indirect access, and qualified personal residence trusts (QPRTs) transfer a home at a discounted gift tax value.

Annual exclusion gifting — currently $19,000 per recipient (2025) — reduces the taxable estate dollar-for-dollar without consuming the lifetime gift exemption. For Vermont residents near the $5 million threshold, a sustained gifting program over several years can bring the estate below the state exemption entirely.

Charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) offer additional reduction while generating income tax deductions.

GRATs (grantor retained annuity trusts) are particularly effective in low-interest-rate environments, transferring asset appreciation to beneficiaries with minimal or zero gift tax cost. For Vermont business owners, entity-level planning — family limited partnerships, LLCs with valuation discounts, and buy-sell agreements — can reduce the reportable value of closely held interests for both state and federal purposes.

Compare strategies using the Vermont estate tax calculator or find a Vermont estate planning attorney.