Vermont income tax goes up to 8.75% at the top bracket. Calculate your combined federal + state effective tax rate for 2026. Formula shown, sources cited — no account required.
Vermont's income tax structure runs through five graduated brackets, with the top marginal rate of 8.75% applying to taxable income above roughly $204,000 for joint filers. For a household earning the state median of $82,730, the applicable bracket is typically around 6.6%, placing Vermont among the higher-taxed states for middle-income earners. That rate stacks on top of federal taxes, so the combined marginal rate for median earners in Vermont can approach 35% or higher depending on federal filing status. The state offers a modest standard deduction and allows conformity with the federal standard deduction for most taxpayers, which helps reduce taxable income. Capital gains face the ordinary income rate in Vermont, with no preferential treatment unlike the federal system. The cost-of-living premium of 113.5 means the tax burden hits purchasing power harder than the same rate would in a cheaper state. Use a tax bracket calculator to see your combined effective rate and determine which pre-tax retirement contributions offer the highest relief.
Vermont Tax Brackets Explained (2026)
Vermont has a state income tax with a top marginal rate of 8.75%. On top of federal rates (10%–37%), residents can face a combined marginal rate exceeding 40% at higher income levels. However, your effective rate is always lower than the marginal rate because only income above each threshold is taxed at that bracket's rate.
The median household in Vermont earns $82,730/year. At that income (single filer), the federal effective rate is approximately 12–14%, bringing total income tax (federal + state) to roughly 17–20%.
How Marginal vs. Effective Rate Works
The marginal rate is the rate on your last dollar of income — it does not apply to all income. The effective rate is your total tax divided by total income. For example, someone earning $100,000 in Vermont has a 22% federal marginal rate but an effective federal rate of roughly 15%, because the first $44,725 (2024) is taxed at 10% and 12%, not 22%.