Home values in Vermont have sharply increased, especially in Burlington, Montpelier, and Stowe. Currently, 35.6% of homeowners exceed the federal capital gains tax exclusion, which could lead to significant tax liabilities when selling homes. Under federal law, homeowners can exclude a limited profit from sales, which hasn't changed since 1997. In Vermont, the average gain above this limit is significant, with a state tax on capital gains amplifying the financial impact. Vermont ranks high among Northeast states for homeowners affected by these outdated rules.
According to the National Association of REALTORS®, 35.6% of Vermont homeowners exceed the federal capital gains tax exclusion, leading to a possible 'hidden home equity tax' upon selling.
Under current federal law, homeowners can exclude up to $250,000 in profit from the sale of a primary residence, a limit that hasn't changed in nearly three decades despite home prices surging over 260% nationwide.
In Vermont, homeowners exceeding the $250,000 limit have an average appreciation of $143,908, while those surpassing the $500,000 threshold face average gains of $192,692.
Vermont taxes capital gains as regular income with rates reaching up to 8.75%, compounding the financial burden on home sellers who have built equity.
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