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Vermont vs Federal Estate Tax: Why You Might Still Owe

The federal exemption is roughly $15 million. Vermont's is a flat $5 million — a gap of about $10 million that federal safety simply doesn't cover.

32 V.S.A. §7442a

By the FigureMyTax Editorial Team · Reviewed 2026 · How we calculate

Quick answer: yes — an estate can owe zero federal estate tax and still owe a genuine Vermont tax bill, because the state exemption sits at a third of the federal line. Run your own numbers in the Vermont estate tax calculator.

Two exemptions, a $10 million gap

The federal estate tax exemption sits at roughly $15,000,000 per individual for 2026. Vermont's own exemption is a flat $5,000,000 — a gap of about $10,000,000 that federal law simply doesn't reach, but Vermont taxes at a flat 16% regardless.

Vermont's number is fixed; the federal one moves

Confirmed current: 32 V.S.A. §7442a(b) sets Vermont's exemption at a flat $5,000,000 with no inflation-indexing language anywhere in the section, while the federal exemption is indexed for inflation and has climbed steadily — from $5.49 million before the 2017 Tax Cuts and Jobs Act to roughly $15,000,000 today. That means the gap between the two numbers has actually widened over time rather than closing.

Flat vs progressive, once you're over the line

The federal system is genuinely progressive, with rates climbing from 18% up to 40% as an estate grows. Vermont, by contrast, applies one flat 16% to the entire excess over $5,000,000, whether the estate is $5.1 million or $50 million — simpler to calculate, but with no lower starting rate for smaller excess amounts.

Facing probate in Vermont?

A local probate attorney can review your estate — many offer a free consultation.

Talk to a Vermont attorney

See the full threshold and rate breakdown for exactly how the flat structure works, including the recent 2026 filing-threshold change.

State vs federal — frequently asked questions

How much lower is Vermont's exemption than the federal exemption?

Vermont's exemption is a flat $5,000,000, compared to a federal exemption of roughly $15,000,000 — a gap of about $10 million that federal law simply doesn't reach.

Can an estate owe Vermont tax but zero federal tax?

Yes, routinely. Any estate between $5,000,000 and $15,000,000 owes no federal estate tax at all, but faces a flat 16% Vermont bill on the amount above $5,000,000.

Does Vermont's exemption ever rise to match the federal number?

Not automatically — Vermont's $5,000,000 exemption is fixed by statute and only changes if the Legislature passes new law, unlike the federal exemption, which is indexed for inflation every year.

Why is Vermont's rate structure actually simpler than the federal one at this level?

The federal system is progressive, with rates climbing from 18% up to 40% as the estate grows. Vermont applies one flat 16% to the entire excess over its exemption, regardless of how far above $5,000,000 the estate sits.

Keep going

Vermont Estate Tax CalculatorYour estimate, based on your answers Vermont Estate Tax: Threshold & RateHow the flat 16% actually applies Vermont Estate Tax PortabilityWhy there isn't any, and the marital deduction instead Vermont Executor Fee CalculatorWhat the executor gets paid

This page provides general guidance only and is not legal or tax advice. Based on 32 V.S.A. §7442a and IRS estate and gift tax guidance for 2026. Confirm current figures with the Vermont Department of Taxes, the IRS, or a licensed attorney before acting.