Vermont State Tax Credits
More ways to save your hard-earned money from the tax man!
Vermont has some great State Tax Credits for you...
Thank you so much for checking our resource out here for your state and congratulations for taking a proactive step to paying less in taxes. For your state, we have identified the tax credits that are currently being offered to help you pay less in state taxes.
We hope this resource is helpful to you, and if there is something you feel we have missed, please let us know!
It would be completely arrogant of us to think that we know all things and if we missed something we want to know so we can vet that and help you and our other friends in the entrepreneurial community pay less in taxes! And if you found this helpful, you should check out our DIY resources inside of our Tax Savings Communities (found at www.MakeTaxesFair.com/Our-Communities).
We're also ready to help you if you want to skip the line of the DIY process and get help directly from us. To learn more about how we help our clients check out www.MakeTaxesFair.com/Get-My-Roadmap
Vermont Investment Tax Credit for Renewable Energy Equipment
Overview:
This tax credit supports Vermont-based businesses that install renewable energy systems by piggybacking on the federal Business Energy Investment Tax Credit (ITC). It incentivizes commercial clean energy adoption through a state credit aligned with federal eligibility.
Who It’s For:
Vermont business owners who install qualifying renewable energy systems—such as solar, wind, or geothermal—on commercial or industrial property and are eligible for the federal ITC.
Four Key Highlights:
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Stackable with the Federal ITC
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Vermont offers a 24% credit of the Vermont-allocated portion of your federal Business Energy ITC—making your federal credit go even further.
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Applies to Commercial Systems Only
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Residential properties aren’t eligible. This incentive is designed for business installations only.
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Step-Down Schedule After 2032
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Full 7.2% state-level credit through December 31, 2032; drops to 6.24% in 2033 and 5.28% in 2034, in line with the federal phaseout.
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Simple Process Linked to Federal Filing
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Once you qualify for and claim the federal credit (via IRS Form 3468), the Vermont credit calculation is straightforward and included with your state business return.
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Vermont Housing Tax Credit (2025 Cycle)
Overview:
The Vermont Housing Tax Credit program provides competitive federal and state tax incentives to developers and property owners to support the creation and preservation of affordable rental housing. It aligns with federal LIHTC guidelines and is overseen by the Vermont Housing Finance Agency (VHFA).
Who It’s For:
For-profit or nonprofit developers and property owners seeking to build, renovate, or preserve rental housing for lower-income Vermonters (≤60% of AMI).
Four Key Highlights:
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Multiple Credit Types with Distinct Deadlines
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Apply for Ceiling (9%), Bond (4%), State Rental, or Homeownership Credits—each with specific due dates and award timelines.
(Example: 9% credit pre-app due Nov. 15, 2024; full app due Jan. 31, 2025.)
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Long-Term Affordability Requirement
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Projects must maintain affordability for at least 15 years, ensuring stability for low-income renters.
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Competitive Allocation Based on Impact
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Awards are based on project merit, need, and alignment with the 2024–2025 Qualified Allocation Plan (QAP).
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Use the Common Application Process
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All applicants must submit the Common App and relevant materials via VHFA, streamlining submissions across credit types.
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Vermont Downtown and Village Center Tax Credits
Overview:
This program provides state and federal tax credits to incentivize the rehabilitation of historic and income-producing buildings in designated Downtowns, Village Centers, and Neighborhood Development Areas. It supports preservation, revitalization, and economic development.
Who It’s For:
Property owners and lessees (including nonprofits) with buildings in qualifying zones undertaking rehabilitation or code-compliance projects.
Four Key Highlights:
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Multiple Credit Types for Building Rehabilitation
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State tax credits: Up to 50% for code and flood improvements, 10% for general historic rehab, and 25% for façade improvements.
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Federal tax credits: 20% for certified historic structures undergoing substantial rehabilitation.
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Location-Specific Eligibility
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Projects must be located within a Designated Downtown, Village Center, or Neighborhood Development Area to qualify.
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Credit Stacking and Sale Options
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State and federal credits can be combined, but not all can be used on the same expense.
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State credits are transferable (can be sold), while federal credits are typically syndicated.
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Defined Timeframes and Recapture Rules
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State projects must be completed within 3 years.
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Federal credits require the building remain income-producing for 5 years, or face a sliding-scale recapture penalty.
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Vermont Investment Capital Tax Credit
Overview:
This tax credit encouraged early investments into Vermont-based businesses to support economic expansion. Although only contributions made on or before January 1, 2020, qualify, eligible taxpayers may still carry forward unused credits.
Who It’s For:
Taxpayers who made qualifying capitalization contributions to Vermont businesses before 2020 and want to claim remaining credit carryforwards.
Four Key Highlights:
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Credit Value:
Up to 4% of the initial contribution, capped at 50% of your tax liability per year, with a total limit of 20% over four years. -
Contribution Deadline:
Only capitalization made before January 1, 2020 qualifies—no new contributions are eligible under the program. -
Carryforward Allowed:
Any unused credit can be carried forward for four years, ensuring flexibility for multi-year tax planning. -
Non-Transferable Credit:
The credit cannot be sold or transferred, except in rare cases of involuntary interest transfers (e.g., estate settlement).