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What to know about Vermont's Property Transfer Tax

Posted by: Will White on October 5, 2017 - 10:01am

One closing cost that is required by the State of Vermont is the Vermont Property Transfer Tax. It is applied any time the deed of a Vermont property is transferred to a new owner, yet is hardly mentioned on any of the websites that breakdown Vermont closing costs. Here are a couple things you should know about the Vermont Property Transfer Tax.

The homebuyer pays the tax

When a home purchase closes, the home buyer is required to pay, among other closing costs, the Vermont Property Transfer Tax. The buyer is taxed is at a rate of 0.5% of the first $100,000 of the home’s value and 1.45% of the remaining portion of the value. 

Example A: Property Transfer Tax due for a typical $200,000 home

 

   $500    (First $100,000 of value times 0.5%)

 

   1,450     (Remaining $100,000 of value times 1.45%)

Tax due

$1,950

 

A VHFA-funded loan may reduce the liability

As the Vermont Department of Taxes explains, some transactions may be exempt from the Property Transfer Tax. If you use a VHFA mortgage program to buy your home, you may be able to save up to $825 in property transfer taxes. Participating lenders across the state can provide more information about this.

With VHFA’s mortgage programs, the first $110,000 of the home’s value is exempt from the property transfer tax, and the rate of property transfer tax for the value between $110,000 and $200,000 is 1.25% rather than 1.45%.  Even if the home’s value exceeds $200,000, the reduced tax rates still apply to the value below $200,000.

Example B: Property Transfer Tax due for a typical $200,000 home using a VHFA mortgage

 

$0             (First $110,000 of value times 0%)

 

$1,125      (Remaining $90,000 of value times 1.25%)

Tax due

$1,125

Savings

   $825    ($1,950 due in Example A minus $1,125)

 

Take a look at the programs VHFA offers for information then then find a participating lender near you. Only a VHFA participating lender can pre-qualify you and accept your mortgage application. 

For further information, discuss your situation with your lender and closing attorney.  VHFA is not responsible for determining the amount of tax due or collecting the property transfer tax. 

 

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