Vermont Tax Preparer Requirements 2025-2026

Vermont tax preparer requirements are minimal on the licensing side: no state registration, no exam, no continuing education mandate. A federal PTIN is all the law requires. The substantive complexity lies in the Vermont income tax itself. Vermont carries a four-bracket graduated income tax with a top rate of 8.75% that applies at a relatively low income threshold, making it one of the higher-burden income tax states for middle- and upper-middle-income earners. The Vermont Department of Taxes starts the state return from federal adjusted gross income, then applies Vermont modifications. Understanding those modifications, the Social Security exemption thresholds, conformity positions, and Vermont-specific credits is what separates a competent Vermont preparer from one who simply transcribes the federal numbers. This guide covers the Vermont requirements for TY2025 returns filed in 2026.

Does Vermont Require a State Tax Preparer License?

Vermont has NO state-level licensing, registration, exam, or continuing education requirement for paid tax preparers. Vermont is not among the states that regulate non-credentialed preparers. Any individual who holds a valid federal PTIN may legally prepare Vermont resident tax returns for compensation. There is no Vermont state registration fee, no state exam, and no annual CE requirement imposed by Vermont law.

There is no Vermont state licensing body for tax preparers. Preparers operating in Vermont are governed entirely by IRS rules under Circular 230.

PTIN: The One Mandatory Requirement

A Preparer Tax Identification Number (PTIN) is required for every individual paid to prepare or assist in preparing any federal tax return or claim for refund. The PTIN requirement applies to all preparers regardless of credentials or return volume.

• Fee: $18.75 per year (non-refundable)
• ID.me identity verification is required as part of the application and renewal process
• Apply or renew online at IRS.gov; the process takes approximately 15 minutes once your ID.me account is established
• Renewal deadline: December 31 each year
• Each preparer may hold only one PTIN; it must appear on every return the preparer signs

EFIN: Required to E-File Returns

An Electronic Filing Identification Number (EFIN) is required to transmit returns electronically. The EFIN is issued by the IRS through IRS e-Services at no charge. A suitability check including a background review is required before issuance. Vermont participates in the IRS Fed/State e-file program, so the same federal EFIN covers both federal and Vermont state return transmission. There is no separate Vermont EFIN.

Preparers who prepare more than ten eligible returns per year are required to e-file all eligible returns under the IRS e-file mandate. The Vermont Department of Taxes follows the federal e-file mandate for Vermont returns filed through the Fed/State program.

AFSP: The Clearest Voluntary Credential in Vermont

Because Vermont has no state credential pathway for non-credentialed preparers, the IRS Annual Filing Season Program (AFSP) Record of Completion is the clearest qualification a Vermont preparer can advertise to prospective clients. Completing the AFSP earns limited representation rights before the IRS (before revenue agents, customer service representatives, and the Taxpayer Advocate Service for returns the preparer prepared and signed) and a listing in the IRS public directory of tax preparers at irs.gov.

Requirements to earn the AFSP Record of Completion each year:

• 18 hours of CE from an IRS-approved CE provider
• 6-hour Annual Federal Tax Refresher (AFTR) course with a mandatory knowledge test (passing score required)
• 10 hours of federal tax law topics
• 2 hours of ethics
• Current PTIN and consent to Circular 230, Subpart B obligations

Without the AFSP, a non-credentialed PTIN holder has no right to represent clients before the IRS beyond the return they prepared and signed. In a state with no other credential path, 18 hours of annual CE is a practical and valuable investment.

FTC Safeguards Rule: Written Information Security Plan (WISP)

Every paid tax preparer, including solo practitioners in Vermont, must maintain a Written Information Security Plan (WISP) under the Gramm-Leach-Bliley Act (15 U.S.C. 6801(b)). Required elements include a designated responsible individual, multi-factor authentication for all systems containing client data, a written risk assessment, and an incident response plan. FTC penalties can reach $46,517 per violation per day. A free WISP template is available in IRS Publication 5708.

Vermont Income Tax: Brackets, Modifications, and Conformity

Vermont levies a graduated individual income tax administered by the Vermont Department of Taxes. Vermont residents file both a federal Form 1040 and a Vermont Form IN-111. The Vermont return begins with federal adjusted gross income, then applies Vermont-specific additions and subtractions to arrive at Vermont taxable income.

Vermont Income Tax Rates: TY2024 Brackets

Vermont uses four tax brackets. The TY2025 brackets will reflect any adjustments published by the Vermont Department of Taxes; confirm current figures before filing TY2025 returns.

Vermont's top marginal rate of 8.75% is among the highest in the country and applies starting at $229,550 for single filers. The third bracket at 7.6% kicks in at $110,051 for single filers, which is well within the income range of many professionals, small business owners, and dual-income households. Vermont's rate structure makes accurate income calculation and proper application of deductions and credits materially important for a wide range of clients.

Federal Conformity and Vermont Modifications

Vermont largely conforms to the federal definition of taxable income as the starting point for computing Vermont tax, but applies Vermont-specific modifications on Schedule IN-112 (Vermont Tax Adjustments and Credits). Key modification categories include:

• Social Security income: Vermont provides a full exemption for Social Security benefits for taxpayers with federal AGI at or below the applicable threshold (approximately $65,000 for single filers and $85,000 for joint filers for recent tax years; confirm current thresholds with the Vermont Department of Taxes). Above those thresholds, Social Security benefits are included in Vermont taxable income to the same extent they are included in federal income. The exemption phases out as income rises above the threshold.
• Pension and retirement income: Vermont does not provide a blanket pension deduction like some states, but military retirement pay receives special treatment. Vermont does not tax military retirement pay received by qualifying Vermont resident veterans.
• Bonus depreciation: Vermont generally does not conform to the full federal bonus depreciation provisions under IRC Section 168(k). Vermont requires addbacks for excess federal bonus depreciation in a manner similar to other non-conforming states, with recovery deductions allowed in future years. Verify the current Vermont conformity position before filing any return with significant depreciation claims.
• Capital gains: Vermont taxes capital gains as ordinary income at Vermont's regular income tax rates. Vermont does not provide preferential capital gains rates matching the federal long-term capital gains rates. This is a significant difference for clients with investment account sales or real property transactions: a long-term capital gain taxed federally at 15% or 20% is taxed by Vermont at up to 8.75%.

Vermont Itemized Deductions

Vermont generally allows a deduction for the same itemized deductions as claimed on the federal Schedule A, subject to Vermont-specific modifications. Vermont does not have its own standard deduction that supplants the federal figures; instead, the return uses the federal standard deduction or federal itemized deduction amount as a starting point, then applies Vermont modifications.

Vermont also provides a personal income tax credit for Vermont sales tax paid on qualifying purchases. This credit (not a deduction) applies to the Vermont income tax and is claimed on Schedule IN-112. The credit is separate from the state income tax calculation itself and is a Vermont-specific benefit not mirrored federally.

Vermont Department of Taxes: Filing Obligations and Employer Responsibilities

The Vermont Department of Taxes administers all state tax programs, including individual income tax, corporate income tax, meals and rooms tax, sales and use tax, and employer withholding. The Department's website (tax.vermont.gov) is the primary reference for current forms, instructions, and published guidance.

Form IN-111: The Vermont Individual Return

Vermont residents file Form IN-111. Part-year residents and nonresidents with Vermont-source income file Form IN-111 with the nonresident/part-year resident schedules. The return begins with federal AGI from the federal Form 1040 and applies Vermont-specific modifications through Schedule IN-112.

Key forms commonly filed with Form IN-111:

• Schedule IN-112: Vermont Tax Adjustments and Credits (Social Security modification, capital gains, bonus depreciation addback, credits)
• Schedule IN-113: Income Adjustment Calculations (nonresident and part-year resident income allocation)
• Schedule IN-119: Vermont Tax Adjustments and Additions
• IN-151: Extension of time to file (Vermont's extension aligns with the federal extension)

Vermont State Withholding

Vermont employers withhold Vermont income tax from employee wages. Vermont-resident employees will have Vermont withholding in their W-2 Boxes 15-17 (state code "VT"). Preparers must confirm that the withholding is correctly credited on Form IN-111. Clients with significant non-wage income (business income, investment income, rental income, capital gains) may owe Vermont estimated tax payments on the same quarterly schedule as federal estimates.

Vermont also requires withholding on Vermont lottery winnings over certain thresholds and on certain real property sales by nonresidents (Vermont nonresident withholding on real estate sales), which is a notable compliance obligation for real estate transactions involving out-of-state sellers.

Vermont Sales Tax and Tax Preparation Services

Tax preparation services are NOT subject to Vermont sales tax. Vermont's 6% state sales tax (plus applicable local option taxes in some municipalities) applies to tangible personal property and certain enumerated services; professional services including tax preparation are generally exempt. Vermont preparers do not collect or remit Vermont sales tax on professional service fees.

Vermont also levies a 9% meals and rooms tax on taxable meals and lodging. Clients who operate restaurants or short-term rental properties in Vermont have M&R tax filing obligations separate from their income tax filing.

Vermont Employer Obligations

Vermont preparers who employ staff, and clients who have Vermont employees, face these state-level obligations:

• Vermont income tax withholding: Administered by the Vermont Department of Taxes. Employers file WHT-436 (quarterly withholding reconciliation) and WHT-434 (annual reconciliation with W-2s).
• Vermont unemployment insurance (UI): Administered by the Vermont Department of Labor. Vermont employers register and pay UI contributions on covered wages.
• Federal payroll obligations: FICA, FUTA, and federal income tax withholding apply as in all states.

Common Client Scenarios for Vermont Tax Preparers

Vermont's economy includes agriculture (dairy farming is the dominant sector), tourism and ski resorts, healthcare and education, technology, and a growing remote-work professional population. The following client situations appear most frequently in Vermont tax practices.

Retirees and Social Security Filers

Vermont's partial Social Security exemption is one of the most important modifications for Vermont preparer clients who are retired or approaching retirement. For clients with federal AGI at or below the threshold, Social Security is fully excluded from Vermont taxable income, producing a meaningful reduction in Vermont tax liability compared to a straightforward federal-to-state flow-through. Clients just above the threshold may benefit from income management strategies (Roth conversions timing, IRA distribution planning) to remain within the exemption. Preparers who can explain this clearly and plan around it provide real value to Vermont's large retiree client base.

Investment Income and Capital Gains

Vermont's treatment of capital gains as ordinary income (subject to rates up to 8.75%) is a significant and often surprising difference from the federal treatment for clients who have been focused only on their federal capital gains rate. A Vermont client who sells stock with a long-term gain taxed federally at 15% will pay Vermont income tax on that same gain at their marginal Vermont rate, which could be 7.6% or 8.75% depending on their income level. Clients with rental property sales, business asset sales, or significant brokerage account activity need this Vermont reality built into their planning.

Dairy and Agricultural Clients

Vermont's dairy industry is the backbone of its agricultural economy. Dairy farm operations are reported on Schedule F (Profit or Loss From Farming). Vermont agricultural clients share the same federal filing considerations as farm clients in other states: Schedule F income and expenses, Section 179 and bonus depreciation on equipment (subject to Vermont's conformity position on bonus depreciation), Schedule J income averaging for high-income years driven by commodity price swings, and Schedule SE on net farming income.

Vermont also has agricultural land use value appraisal (current use) for property tax purposes, which affects the property tax component of farm operating expenses deductible on Schedule F.

Remote Workers and Telecommuters

Vermont has attracted a growing population of remote workers employed by out-of-state companies, drawn by quality of life and lower housing costs relative to New York and Massachusetts. Remote workers who are Vermont residents but employed by New York or Massachusetts companies face potential multi-state filing situations. Vermont taxes Vermont residents on all income regardless of source. If the employer's state also taxes the income (as New York has historically done with its "convenience of the employer" rule for remote workers), the Vermont resident may have a multi-state filing obligation and must verify whether Vermont provides a resident credit for taxes paid to the other state.

Nonresident Real Estate Transactions

Vermont requires nonresident withholding on the sale of Vermont real property by nonresidents. When a nonresident sells Vermont real estate, the buyer or closing agent must withhold 2.5% of the sale price (or a computed amount based on estimated gain, if lower) and remit it to the Vermont Department of Taxes. Nonresidents must file a Vermont nonresident return to report the sale and reconcile the withholding against actual Vermont tax liability. Preparers who handle real estate transactions for Vermont nonresident sellers need to be familiar with the withholding obligation and the Form RW-171 process.

Frequently Asked Questions