Vermont Estate Tax Nonresident Guide
Last updated: 16 Oct 2025
Vermont Estate Tax — Nonresident Guide
For estates domiciled outside Vermont that own Vermont real estate or tangible property. Learn who must file, what counts as Vermont-situs property, how apportionment works, deadlines, and what to prepare.
Do you need to file as a nonresident?
What counts as Vermont-situs property?
| Asset type | VT-situs for nonresidents? | Notes |
|---|---|---|
| Real property located in Vermont | Yes | Land, homes, condos, timber tracts. |
| Tangible personal property normally kept in VT | Yes | Boats, vehicles, equipment, artwork located in VT. |
| Qualified artwork on loan to VT §501(c)(3) | No | Special exception; treated as outside Vermont. |
| Intangibles (stock, bonds, bank accounts) | Generally No | Typically follow domicile, not custodian location. |
| LLC/partnership interests | Generally No | Usually intangible; look-through not typical (fact-specific). |
Apportionment formula (how Vermont limits nonresident tax)
Compute a tentative Vermont estate tax as if the entire taxable estate were subject to Vermont rules (exemption + rate). Then apportion:
Vermont tax = Tentative VT tax × ( VT-situs property + VT-situs gifts (2 yrs) ) ÷ ( Federal gross estate + those gifts )
Only the Vermont share is taxed. Deductions and marital/charitable planning still affect the tentative tax because Vermont starts from a federal-style base.
Try the Vermont estate tax calculator and use the apportionment fields for nonresidents.
Quick examples
Example 1 — Condo in Stowe
Federal gross estate $6.2M; VT-situs condo $1.2M; no gifts. After deductions, assume the federal-style base exceeds the $5.0M exemption by $1.1M. Tentative VT tax ≈ 16% × $1.1M = $176k. Apportionment fraction = $1.2M ÷ $6.2M ≈ 19.35%. Estimated VT tax ≈ $176k × 19.35% ≈ $34k.
Example 2 — Tangibles at VT vacation home
Federal gross estate $8.0M; VT furniture/boat $150k; no gifts. Tentative VT tax on $3.0M over exemption = 16% × $3.0M = $480k. Apportionment fraction = $150k ÷ $8.0M = 1.875%. Estimated VT tax ≈ $480k × 1.875% ≈ $9k.
Deadlines, extensions & payment
| Item | When due | Notes |
|---|---|---|
| VT estate tax return | 9 months after date of death | Include federal return (or pro-forma) and any VT add-backs. |
| Extension to file | Up to 6 additional months | Extends filing only; tax is due at 9 months. |
| Payment | 9 months after date of death | Online or by check per VT instructions; interest/penalties after due date. |
Addresses, e-payment options, and forms: see Forms & Deadlines.
Real estate transfers, closings & liens
Before closing
- Confirm whether a VT estate tax return is required and whether payment will be due.
- Coordinate with title/closing agent on estate documents and authority to convey.
- Gather appraisals for Vermont real property and tangibles.
After death
- Title companies often request evidence that state estate tax obligations are addressed (filed/not required; taxes paid if due).
- Keep copies of filed returns, payment receipts, and correspondence with the VT Department of Taxes.
Coordination with home-state probate
Most nonresident estates handle Vermont property via ancillary probate or by deed from the domiciliary personal representative. Align the Vermont return with valuations used in the home-state proceeding.
Nonresident filing checklist
Documents
- Letters of appointment; certified death certificate.
- Asset inventory with fair market values (DOD or alternate date).
- List of Vermont-situs assets (real/tangible) with proof of location.
- Gift records (2-year lookback), noting any Vermont-situs gifts.
- Federal Form 706 (or pro-forma) with schedules.
Computations
- Build the tentative VT estate tax from the federal-style base.
- Prepare the apportionment fraction (VT-situs ÷ federal gross estate).
- Confirm marital/charitable deductions and any QTIP elections.
- Arrange payment by month 9 (even if filing is extended).
Common pitfalls
- Ignoring 2-year gift add-backs for Vermont-situs gifts.
- Misclassifying tangibles kept in Vermont as non-situs.
- Forgetting apportionment—paying tentative tax without multiplying by the Vermont fraction.
- Mismatched values between domiciliary probate and the Vermont filing.
FAQs — Nonresident estates
Do intangibles (stocks, brokerage accounts) count for Vermont?
Generally no for nonresidents. Intangibles usually follow domicile. Vermont-situs property includes real estate and tangibles located in Vermont.
How do I estimate Vermont tax quickly?
Use the Vermont Estate Tax Calculator and enter your VT-situs share to approximate apportionment.
What if the estate is under $5M overall?
If the federal-style base is ≤ $5,000,000, tentative VT tax may be $0, so apportionment yields $0. Still confirm if Vermont requires a filing based on triggers.
Which deadline applies for nonresidents?
Nine months from date of death to pay; up to six additional months to file. See the Forms & Deadlines page.
Do I need ancillary probate in Vermont?
Often, yes, to transfer Vermont real property. Coordinate with the title/closing agent and local counsel to meet court and tax requirements.
Practical Vermont Estate-Tax Planning — How Growth Can Push You Over the $5M Line
Client snapshot (today): Vermont resident. Owns a home and two stock positions.
Home: FMV $3.0M, basis $2.0M. Stock #1: FMV $10.0M, basis $10.0M (no built-in gain). Stock #2: FMV $2.0M, basis $1.0M (built-in gain $1.0M).
Strategy A (optimized): Gift the “no-gain” asset; keep the gain assets for a step-up
- Now: Gift Stock #1 (the $10.0M, no built-in gain position) into an irrevocable trust. No income tax on the gift. The recipient/trust takes a carryover basis of $10.0M. Vermont has no gift tax, but beware the 2-year gift addback: taxable gifts within 2 years of death are added back into the VT estate. Plan early.
- Keep & bequeath: the home ($3.0M FMV; $2.0M basis) and Stock #2 ($2.0M FMV; $1.0M basis). At death, heirs receive a step-up in basis to FMV (IRC §1014). If they sell soon after, capital gains are near zero (sale costs aside).
- Vermont estate-tax target: After the gift, what remains ≈ $5.0M (home $3.0M + stock #2 $2.0M) → typically $0 VT estate tax so long as value at death stays ≤ $5.0M.
- Property Transfer Tax (PTT): VT’s PTT applies to real-estate transfers. By not transferring the home during life, you avoid PTT and keep the step-up. Gifting the home to a trust may trigger PTT (unless a specific deed/recipient exemption applies) and forfeits the step-up.
What if values grow?
Projection assuming the home grows at 3% p.a. and Stock #2 at 5% p.a.. We show the combined in-estate value (home + Stock #2), the excess over Vermont’s $5M exemption, and the corresponding VT estate tax at 16% on that excess.
| Year | Home @3% | Stock #2 @5% | Estate Total | Over $5M | VT Estate Tax (16%) |
|---|---|---|---|---|---|
| 0 | $3,000,000 | $2,000,000 | $5,000,000 | $0 | $0 |
| 1 | $3,090,000 | $2,100,000 | $5,190,000 | $190,000 | $30,400 |
| 2 | $3,182,700 | $2,205,000 | $5,387,700 | $387,700 | $62,032 |
| 3 | $3,278,181 | $2,315,250 | $5,593,431 | $593,431 | $94,949 |
| 4 | $3,376,526 | $2,431,013 | $5,807,539 | $807,539 | $129,206 |
| 5 | $3,477,822 | $2,552,564 | $6,030,386 | $1,030,386 | $164,862 |
| 6 | $3,582,157 | $2,680,192 | $6,262,349 | $1,262,349 | $201,976 |
| 7 | $3,689,622 | $2,814,201 | $6,503,823 | $1,503,823 | $240,612 |
| 8 | $3,800,311 | $2,954,911 | $6,755,222 | $1,755,222 | $280,836 |
| 9 | $3,914,321 | $3,102,656 | $7,016,977 | $2,016,977 | $322,716 |
| 10 | $4,031,749 | $3,257,789 | $7,289,538 | $2,289,538 | $366,326 |
Planning note: If this projection pushes the remaining estate over $5M in future years, consider additional lifetime gifting (mind the 2-year addback), charitable split-interest planning, or other redesign. The goal stays simple: let step-up assets (with built-in gains) pass at death, and move no-gain/low-gain assets out of the estate during life to stay under Vermont’s line.
Strategy B (do nothing now)
All assets remain until death. Everyone receives a step-up, but the estate is ~$15.0M on these facts, generating Vermont estate tax of roughly 16% × ($15M − $5M) = $1.60M (plus potential federal estate tax depending on the federal exclusion at the time). Result: higher transfer-tax leakage versus Strategy A.
Cross-Border Example — Vermont & Germany (Why planning matters)
Assumptions (fixed):
Decedent domiciled in Vermont (U.S. resident). One child heir (no spouse/charity deductions; no debts). Assets at death (FMV / basis): Vermont real estate $10.0M / $5.0M; Germany real estate $10.0M / $5.0M (U.S. basis only; Germany uses historical cost — see Part B). Gross estate: $20.0M. Year of death: 2025. Currency shown in USD (Germany assesses in EUR at ECB rate).
A) At death — Estate / Inheritance taxes
- U.S. Federal estate tax. Taxable estate ≈ $20.0M − $13.99M = $6.01M; tentative federal tax ≈ 40% → ~$2.40M, pre-relief. Reliefs:
- Foreign Death Tax Credit (IRC §2014): credit for German inheritance tax on the German asset, capped at tentative U.S. tax × (German asset / global estate) → $2.40M × (10/20) ≈ $1.20M.
- State death tax deduction (IRC §2058): deductible VT estate tax reduces federal tax (form handles circularity). Near the top bracket, federal falls by ≈ 40% of the VT tax.
- Vermont estate tax. Exemption $5.0M; rate 16% above exemption → (20.0 − 5.0) × 16% = $2.40M. No credit for foreign death taxes; VT has its own base rules.
- Back to U.S. federal after VT. §2058 deduction effect ≈ $0.96M reduction. German death-tax credit limited to ~$1.20M. Federal result: ~$2.40M − $0.96M − $1.20M ≈ $0.24M.
- Germany — Inheritance tax (ErbStG) on the German real estate only. Limited tax liability (non-resident decedent). Child’s allowance €400,000 prorated under §16(2) by 10M/20M → €200,000. Illustrative base ≈ $10.0M − $0.2M = $9.8M; Class I rate at this band ≈ 23% → ~$2.254M German inheritance tax. Feeds the U.S. §2014 credit (capped at ~$1.20M). No impact on Vermont.
At-death totals: Germany inheritance ≈ $2.254M • U.S. federal (net) ≈ $0.24M • Vermont ≈ $2.40M → Total U.S. transfer taxes ≈ $2.64M (VT + federal), plus Germany ≈ $2.254M.
B) After death — Basis and sales a year later
- U.S. basis rule (IRC §1014): step-up — both properties’ U.S. income-tax basis becomes FMV at death = $10.0M each.
- Germany basis rule: no step-up. The heir steps into the decedent’s shoes: the historical cost basis and the holding period carry over.
- Illustrative sales 12 months later:
- Sale prices: Vermont $10.8M → U.S. gain $0.8M (from $10.0M step-up). Germany $10.5M.
- Variant A (Germany taxable, ≤ 10-year holding period under §23 EStG): German historical basis (example) $6.3M → German gain $4.2M → ~25% effective tax ≈ $1.05M. U.S. side: VT sale $0.8M × 23.8% ≈ $190.4k; DE sale U.S. gain $0.5M × 23.8% ≈ $119.0k, fully offset by FTC (credit capped at the U.S. tax on that foreign gain). Vermont taxes both gains at ordinary rates; no foreign tax credit.
- Variant B (Germany tax-free, > 10-year rule met): Germany: $0 income tax. U.S. federal: $190.4k (VT sale) + $119.0k (DE post-death gain) ≈ $309.4k total. Vermont again taxes both gains (ordinary rates; no foreign credit).
This block is an educational illustration and not legal or tax advice. Rules change, and outcomes depend on your full facts (statutes in force at death/transfer, filing status, other assets/debts, deductions, appraisals, currency rules, documentation for credits, etc.).
Our U.S. CPAs and our German Wirtschaftsprüfer can advise you on your specific situation.