What is the Vermont property transfer tax rate?
The general rate is 1.25% of the value of the property transferred, or $1.00 if that is greater, under 32 V.S.A. § 9602. A separate clean water surcharge of 0.22% applies to the same value under 32 V.S.A. § 9602a. An investor buying a tenanted apartment building pays both, for 1.47% in total.
Value means the full actual consideration, including any existing liens or mortgages that stay on the property, under 32 V.S.A. § 9601(6). If a buyer assumes your loan, the assumed balance counts toward the taxable value just like cash.
Vermont has three other rates, and it helps to know why they don’t apply to a five-plus unit building. A buyer’s principal residence pays 0.5% on the first $200,000 and 1.25% above that, with no surcharge on the first $200,000. Certain assisted first-time purchases pay nothing on the first $250,000. And residential property that is fit for year-round use, won’t be the buyer’s principal residence and won’t be rented under a landlord certificate pays 3.4%.
Why apartment buildings avoid the 3.4% rate
The 3.4% rate in § 9602(4) is aimed at second homes. It applies only when the buyer will not be required to file a landlord certificate under 32 V.S.A. § 6069. Section 6069 requires the owner of each rental property to file a certificate of rent with the Department of Taxes by January 31 each year, so a building with tenants falls outside the 3.4% rate and pays 1.25% plus the surcharge.
The statute closes the obvious workaround. Under § 9602(5), if a landlord certificate is filed without a bona fide landlord-tenant relationship, the Commissioner assesses the 3.4% rate anyway, and can look at whether the tenant is related, whether rent is at market and whether the buying entity has a business purpose beyond avoiding the tax. For a real apartment building with arm’s-length leases this is not a concern, but a rent roll and leases in the closing file make the position easy to support.
Who pays the transfer tax in Vermont?
The buyer, unless the parties agree otherwise. 32 V.S.A. § 9604 makes the tax “the liability of the transferee of the title, unless fixed otherwise by agreement of the parties.” Unlike many states that leave it to custom, Vermont puts the default in the statute and then lets the contract change it.
At 1.47%, the amount is large enough that apartment buyers price it in. A $73,500 tax on a $5,000,000 building is real money in a buyer’s equity stack, so expect it to come up in offers. Sellers who agree to pay part of it are usually trading that concession for price, timing or terms.
How and when the tax is filed
A property transfer tax return, Form PTT-172, must be delivered to the town clerk when the deed is recorded, under 32 V.S.A. § 9606. Most closings file it electronically through the Department of Taxes’ myVTax system, and the department says the tax is due within 30 days of closing. The town clerk charges a fee for receiving the return.
Transfers of a controlling interest without a deed are reported directly to the Commissioner within 30 days, on Form PTT-182 through myVTax.
- Transfer tax: 1.25% of value, owed by the buyer unless the contract says otherwise.
- Clean water surcharge: 0.22% of value, collected with the tax.
- Return: Form PTT-172 at recording; Form PTT-182 for controlling-interest transfers.
- Nonresident seller: buyer withholds 2.5% of the price unless an exception applies.
Controlling-interest transfers: selling the LLC is taxed too
Vermont taxes more than deeds. Section 9602 reaches “a transfer or acquisition of a controlling interest in any person with title to property in this State.” A controlling interest is 50% or more of the voting power of a corporation, or 50% or more of the capital, profits or beneficial interest in an LLC, partnership or trust, under § 9601(12). Purchases by people acting in concert are added together.
When a controlling interest changes hands, the taxable value is the fair market value of the Vermont property, apportioned by the percentage of the entity transferred. If a buyer acquires 60% of the LLC that owns a $5,000,000 building, the taxable value is $3,000,000 and the tax and surcharge come to $44,100.
So in Vermont, selling the membership interests instead of the deed does not avoid transfer tax. It can change the amount when less than 100% is sold, and it changes the filing, but the tax is designed to follow the economics.
Exemptions that matter to investors
32 V.S.A. § 9603 lists the exempt transfers. The ones that come up in apartment ownership are below. Several carry a condition that the Commissioner does not find tax avoidance to be a major purpose.
- Mere change of identity or form of ownership with no change in beneficial ownership (§ 9603(6)), such as deeding a building to an LLC owned in the same proportions.
- Transfers to a newly formed LLC, partnership or corporation in a nonrecognition transaction (§ 9603(24), (15) and (11)).
- Distributions to members or partners on a complete dissolution with no gain recognized (§ 9603(25) and (16)).
- Transfers between the obligor and the primary obligee in a foreclosure or deed in lieu (§ 9603(18)).
- Transfers between spouses, parent and child, or grandparent and grandchild without consideration, and related trust transfers (§ 9603(5)).
- Controlling-interest transfers that would be exempt if done by deed between the same parties (§ 9603(26)).
What is not exempt
There is no exemption for 1031 exchanges. The buyer of your relinquished building owes the 1.47%, and you owe it as the buyer of Vermont replacement property. Gifts to anyone outside the listed family relationships are taxed on fair market value, and transfers by will are within the definition of a transfer unless an exemption applies.
Vermont also has a land gains tax, but it rarely touches apartment buildings. It applies to gains on land bought and subdivided within the prior six years, and buildings are excluded from the definition of land under 32 V.S.A. § 10002.
Withholding when the seller is not a Vermont resident
If you live outside Vermont, the buyer must withhold 2.5% of the price and send it to the Department of Taxes within 30 days, under 32 V.S.A. § 5847. On a $2,000,000 sale that is $50,000 held back from your proceeds. It is a prepayment toward your Vermont income tax on the gain, not an extra tax, and nonresident partnerships and corporations are covered too.
You can avoid or reduce it. The Commissioner can issue a certificate stating that no tax is due, that the liability is satisfied or secured, or that a reduced amount may be withheld. Apply early, because the buyer is personally liable for any amount it fails to withhold.
Worked example: transfer tax on a Vermont apartment building
A 20-unit building in Burlington sells for $2,000,000 to an investor who will keep the tenants. The tax is $2,000,000 × 1.25% = $25,000, and the clean water surcharge is $2,000,000 × 0.22% = $4,400, for $29,400. If the same buyer were wrongly charged the second-home rate, the tax alone would be $68,000, which is why the landlord certificate matters.
At $5,000,000 the tax is $62,500 and the surcharge $11,000, for $73,500. A sale of 60% of the LLC that owns the $5,000,000 building is taxed on $3,000,000: $37,500 plus $6,600, or $44,100.
| Transaction | Taxable value | Tax at 1.25% | Surcharge at 0.22% | Total |
|---|---|---|---|---|
| $2,000,000 deed sale | $2,000,000 | $25,000 | $4,400 | $29,400 |
| $5,000,000 deed sale | $5,000,000 | $62,500 | $11,000 | $73,500 |
| 60% of an LLC owning a $5,000,000 building | $3,000,000 | $37,500 | $6,600 | $44,100 |
Vermont compared with neighboring states
Vermont’s 1.47% is close to New Hampshire’s combined 1.5%, where buyer and seller each pay 0.75%. New York, outside New York City, charges a much lower 0.4%.
| State | Rate on an investor apartment sale | Tax on $2,000,000 |
|---|---|---|
| Vermont | 1.25% plus 0.22% surcharge (buyer by default) | $29,400 |
| New Hampshire | $0.75 per $100 from each of buyer and seller (1.5% combined) | $30,000 |
| New York, outside NYC | $2 per $500 (0.4%) | $8,000 |
How the transfer tax fits into your total selling costs
The transfer tax usually lands on the buyer, but your own tax bill on the sale is bigger. Federal capital gains tax and depreciation recapture apply, and Vermont taxes the gain under its income tax, which is why nonresident sellers face the 2.5% withholding.
A 1031 exchange can defer the federal gain and recapture if you identify replacement property within 45 days and close within 180. Seller financing can spread the gain over the years you receive principal. Either one can matter more to your net proceeds than who writes the transfer tax check.
Selling your Vermont apartment building to Skyline
Skyline Capital Investments buys apartment buildings with five or more units across Vermont, from Burlington and Winooski to Rutland and Brattleboro, as a direct buyer. We can offer seller-carry terms and work inside your 1031 deadlines.
Send the address and unit count through the form on this page, or call (469) 660-2977. We typically respond within 48 hours.
