Now that we are in the midst of the campaign, we're hearing a lot about what did and did not happen with changes to Vermont tax law in the final days of the last legislative session. Most of the changes were contained in the Miscellaneous Tax bill and here's a summary of what really happened. I know, I was there.
Capital gains
Starting January 1, 2011, taxpayers can choose to exempt either (a) the first $5,000 of federal adjusted net capital gain, or (b) 40% of capital gain from assets held more than three years. These assets include business real estate, farm real estate, farm business equipment, other farm capital assets and standing timber. This 40% option cannot be applied to the taxpayer's residence or second home (or third, fourth, etc. home), non-farm business equipment, nor any financial instrument that's traded like stocks, bonds, derivatives, commodities, futures etc.
Education Funding
*The property tax adjustment calculation for the income sensitivity program will not decrease tax on the value of a housesite in excess of $500,000. That means if your housesite property (your house and 2 acres) is worth more than half a million dollars, you won't get income sensitivity help paying property tax on the value over $500,000 regardless of your actual income.
*The $10 per-acre adjustment amount for up to 5 additional acres for taxpayers with household income under $90,000 has been deleted. This benefit was hardly ever used.
*The education property tax rates for fiscal year 2011 are the same as last year. Neither the homestead property tax nor the non-resident property tax are increasing. Rates are remaining $0.86 for homestead property and $1.35 for nonresidential property. If your local tax rate is higher than that, it's because of local spending decisions and/or the Common Level of Appraisal.
*The homestead declaration you filed in 2010 will remain in effect until some kind of change affects the homestead eligibility. No more annual filing for the homestead declaration.
Estate Tax
For years the Vermont Estate Tax exclusion amount was the same as the federal amount. That changed in 2009 when the Vermont legislature retroactively changed the exclusion amount. Starting in 2011, the Vermont exclusion amount is increased from $2.0 million to $2.75 million. So that means the first $2.75 million of an estate will be exempt from taxation. Right now there is no federal estate tax at all for someone who dies in 2010 and the feds are saying they won't make any change until after the election. Starting in 2011 the federal exclusion will be $1 million unless Congress votes to change it.
Tobacco Taxes
This change defines a cigar and amends the amount of roll-your-own tobacco that constitutes a cigarette for tax purposes. The tax on snuff and smokeless tobacco are equalized with the tax on cigarettes. Cigar tax is:
If wholesale price is between $1.09 and $9.99, tax is $2.00;
If wholesale price is greater than $10.00, tax is $4.00 and is the wholesale price is $1.08 or less, tax is 92% of wholesale price.
Hydroelectric Facilities
This change freezes the grand list values of hydroelectric facilities for 2 years at no less than the April 1, 2009 value. This change has a huge impact on the Grand List for communities with a hydroelectric dam: Milton, Vergennes, Fairfax and others.
Election season is always pretty wild. Keep a cool head. Contact me if you want more info
cbranagan@leg.state.vt.us Rep. Carolyn Branagan
Franklin-1, Fairfax/Georgia
Vermont House of Representatives
