Getting a Vermont state income tax refund feels like finding money you forgot about—except it’s actually your own money coming back to you. Here’s the thing: most people treat their tax refund like a surprise bonus, but the truth is, if you’re getting a big refund every year, you’re essentially giving Vermont an interest-free loan. That said, understanding how your Vermont state income tax refund works is crucial to making smart decisions about your withholding and overall tax situation.
If you live and work in Vermont, or if you earned Vermont income, you’re subject to state income tax. And if too much was withheld from your paycheck throughout the year, you’ll get a Vermont state income tax refund when you file your return. The question isn’t just “will I get a refund?” but rather “am I set up to maximize my take-home pay while minimizing surprises at tax time?”
Let’s break down everything you need to know about Vermont state income tax refunds, how to claim them, and how to adjust your withholding so you’re not overpaying in the first place.
How Vermont State Income Tax Refunds Work
Vermont has a progressive income tax system, which means the more you earn, the higher your tax rate. The state income tax ranges from 3.55% to 8.75%, depending on your income bracket. When you work in Vermont, your employer withholds state income tax from each paycheck based on the W-4 form you filled out.
Think of your tax withholding like a subscription service—you’re paying throughout the year in installments. At the end of the year, when you file your Vermont state income tax return (Form VT-100), the state calculates exactly how much you should have paid. If you overpaid through withholding, you get a Vermont state income tax refund. If you underpaid, you owe the difference.
Here’s what happens behind the scenes: Vermont uses your W-4 information, your filing status, the number of dependents you claim, and any other adjustments you’ve made to calculate withholding. The problem? A lot of people don’t update their W-4 when their life changes—new job, marriage, kids, side gigs. That’s when overpayment happens, and that’s when you end up with a fat refund that could have been in your pocket all along.
Pro Tip: The average Vermont taxpayer who gets a refund receives around $500-$800. That’s money you could have used throughout the year for emergencies, savings, or paying down debt. Don’t treat it like a windfall—treat it like a wake-up call to adjust your withholding.
The Vermont Department of Taxes processes refunds year-round, but timing matters. If you file early (January or February), you’ll typically see your Vermont state income tax refund within 4-6 weeks. File later in the season, and you might wait longer as the department processes thousands of returns.
How to Check Your Vermont State Income Tax Refund Status
Waiting for your refund can feel like watching paint dry. Vermont makes it easier with a few simple tools.
Online Refund Status Check: Visit the Vermont Department of Taxes website and use their “Where’s My Refund?” tool. You’ll need your Social Security number, filing status, and the exact refund amount from your return. This is the fastest way to get real-time updates on your Vermont state income tax refund.
Phone Line: Call the Vermont Department of Taxes at 802-828-2865. Have your Social Security number, filing status, and refund amount ready. The wait times can be long during peak season (March-May), so call early in the day or try mid-week.
By Mail: If you filed a paper return, refunds take longer—usually 8-12 weeks. You can still check online or call for status updates.
Warning: If you haven’t received your Vermont state income tax refund within the expected timeframe, don’t panic immediately. However, if it’s been more than 12 weeks since you filed electronically or 16 weeks for paper returns, contact the Vermont Department of Taxes. There might be an issue with your return that needs correction.
One common reason for delays: if you claimed dependents or credits that the state needs to verify, processing takes longer. If you received the Trump Child Tax Credit or other dependent-based credits, your return might be flagged for review.
How to Claim Your Vermont State Income Tax Refund
You don’t “claim” a refund in the traditional sense—if you’re owed one, you get it automatically when you file your return. But here’s what you need to do to make sure you actually receive it.
- File Your Return Accurately: Use Form VT-100 (Vermont Individual Income Tax Return). You can file online through approved e-file providers, by mail, or through tax software like TurboTax or H&R Block. E-filing is faster and more accurate.
- Report All Income: This includes W-2 wages, self-employment income, investment income, and any other Vermont-source income. Missing income is a red flag that delays refunds.
- Claim All Eligible Credits: Vermont offers credits for property tax, earned income, education, and more. Missing credits means you might overpay and get a larger refund than necessary—but it also means you left money on the table during the year.
- Choose Your Refund Method: You can receive your Vermont state income tax refund via direct deposit (fastest, usually 4-6 weeks) or by check (6-8 weeks). Direct deposit is always the safer option—no lost mail, no delays.
- Double-Check Before Submitting: Verify your Social Security number, name, filing status, and refund amount. One typo can delay everything.
If you’re self-employed or have significant side income, you might need to file estimated tax payments throughout the year instead of waiting for a refund. This is where Smart Paycheck Solutions strategies come in handy—managing your tax liability proactively rather than reactively.
5 Proven Ways to Maximize Your Vermont State Income Tax Refund
Let’s be clear: the goal isn’t actually to maximize your refund. The goal is to maximize your take-home pay and minimize surprises. But if you’re going to get a Vermont state income tax refund anyway, here’s how to make sure you’re not leaving money on the table.
1. Claim Every Credit You Qualify For
Vermont offers several credits that directly reduce your tax liability. If you don’t claim them, you overpay and get a larger refund—but you also could have had that money in your pocket all year.
- Earned Income Tax Credit (EITC): If you earn under a certain threshold (varies by filing status and dependents), you might qualify. This is huge—it can be worth $1,000-$3,500+.
- Property Tax Credit: Homeowners and renters can claim this if their property taxes exceed a certain percentage of income.
- Education Credits: American Opportunity Credit, Lifetime Learning Credit—if you paid for education, you might qualify.
- Child and Dependent Care Credit: If you paid for childcare so you could work, this is available.
Missing even one credit means your Vermont state income tax refund is smaller than it should be. Use the IRS’s interactive tax assistant to check what you qualify for.
2. Optimize Your Deductions
Vermont allows you to take either the standard deduction or itemize. Most people take the standard deduction (it’s simpler), but if you own a home, paid significant state and local taxes, or made charitable donations, itemizing might save you money.
- Standard deduction for 2024: $14,600 (single) / $29,200 (married filing jointly)
- If your itemized deductions exceed this, itemize instead.
3. Report All Income (Including Side Gigs)
This seems obvious, but many people forget to report income from freelance work, gig economy jobs, or side hustles. Vermont’s Department of Taxes cross-references 1099 forms and W-2s. If you don’t report income they know about, your return gets flagged and your Vermont state income tax refund gets delayed or reduced.
If you have self-employment income, consider making quarterly estimated tax payments. This prevents a huge tax bill at filing time and might actually result in a smaller refund (which is the goal—keeping money in your pocket throughout the year).
4. Leverage Creditable Withholding Tax
If you paid estimated taxes or had taxes withheld on income that Vermont didn’t tax at the source, you can claim creditable withholding tax on your return. This is common for investors or people with out-of-state income.
5. Update Your W-4 Annually
This is the most important one. Your W-4 determines how much tax is withheld from each paycheck. If your life changed—new job, marriage, kids, second income—your withholding might be off. Updating your W-4 ensures you’re not overpaying throughout the year, which means a smaller (or zero) Vermont state income tax refund. That’s actually a win because you had the money all along.
Pro Tip: Use the IRS W-4 calculator to determine the right withholding. It takes 10 minutes and can save you hundreds of dollars.
Adjusting Your Withholding to Avoid Overpaying
Here’s the real talk: if you’re getting a big Vermont state income tax refund every year, your withholding is wrong. You’re essentially letting Vermont hold your money for free.
Your W-4 form has several parts:
- Step 1: Personal information (name, SSN, address)
- Step 2: Filing status (single, married, head of household)
- Step 3: Claim dependents (each dependent reduces withholding)
- Step 4: Other income (side gigs, investment income, spouse’s income)
- Step 5: Deductions and credits (optional adjustments)
- Step 6: Extra withholding (if you want to pay more)
Most people fill out Step 1-3 and ignore the rest. That’s where the problem starts. If you have multiple jobs, a working spouse, or significant side income, Steps 4-5 are critical.
Example: You’re married, both working, with two kids. Your employer withholds based on you being married with two dependents. But your spouse’s employer is also withholding based on the same info. Result? You’re both overpaying, and you get a huge Vermont state income tax refund. Solution: one of you should adjust your W-4 to claim fewer dependents or request extra withholding from the other spouse’s paycheck.
Vermont requires state-specific withholding information, similar to federal. Make sure you’re filling out the Vermont-specific portion of your W-4 (or the Vermont Withholding Allowance Certificate if your employer uses the old form).
Common Mistakes That Cost You Money
I’ve seen these mistakes over and over. Learn from others so you don’t repeat them.
Mistake #1: Not Updating Your W-4 After Life Changes
You got married, had a kid, or got a second job. Your old W-4 is now completely wrong. Update it immediately. The IRS recommends updating whenever your life changes significantly.
Mistake #2: Claiming Too Many Dependents
Each dependent reduces your withholding. If you claim your kids but they actually live with your ex-spouse, or if you claim a dependent you don’t legally qualify for, you’re underpaying. The IRS will catch this, and you’ll owe back taxes plus penalties. Plus, your Vermont state income tax refund might be seized to cover the federal debt.
Mistake #3: Forgetting About Vermont Income If You Moved
You moved out of Vermont mid-year but still had Vermont income. You need to file a part-year resident return. Many people forget this, miss the deadline, and face penalties.
Mistake #4: Not Reporting Passive Income
Rental income, investment income, or income from a business you don’t actively work in—it all needs to be reported on your Vermont return. Missing this income is a major red flag for audits.
Mistake #5: Ignoring the Tax Topic 152 – Refund Information
The IRS publishes detailed guidance on refund-related issues under Tax Topic 152. If you’re confused about your refund, this is the official source. Reading it takes 15 minutes and can answer 90% of your questions.
Mistake #6: Filing Without Checking for Offsetting Debts
If you owe back taxes, child support, or student loans, the government can seize your Vermont state income tax refund to pay them. Check your debt status before filing. If you owe, work with the Vermont Department of Taxes to set up a payment plan—you might be able to keep your refund.
Warning: The IRS and Vermont Department of Taxes share information. If you owe federal taxes, Vermont might offset your state refund. If you owe Vermont taxes, the feds might offset your federal refund. These offsets happen automatically, so you need to be proactive if you know you owe.
Frequently Asked Questions
How long does it take to receive a Vermont state income tax refund?
– If you e-file and choose direct deposit, expect 4-6 weeks. If you file by mail or choose a check, expect 6-8 weeks. Processing times are slower during peak season (March-May). Check the Vermont Department of Taxes website for current processing times.
Can I get my Vermont state income tax refund faster?
– E-file and choose direct deposit. That’s the fastest method. Avoid paper filing and checks if you want your money quickly. Some tax software offers rapid refund options, but they charge a fee—usually $15-$50. Whether it’s worth it depends on how badly you need the money now versus later.
What if I filed my Vermont return incorrectly?
– You can file an amended return using Form VT-100-X. You have three years to amend a return. If you overpaid (and are owed a larger refund), file the amended return ASAP. If you underpaid, the state will contact you with a bill.
Can Vermont offset my refund for other debts?
– Yes. If you owe back taxes, child support, student loans, or other debts, Vermont can seize your state income tax refund. The same applies to federal debts—the IRS can offset your state refund if you owe federal taxes. This is called “refund offset” or “tax offset.”
What’s the difference between a Vermont state income tax refund and a federal refund?
– They’re separate. You file both a federal return (Form 1040) and a Vermont return (Form VT-100). You might get a federal refund, a Vermont refund, both, or neither. They’re calculated independently based on your income, withholding, and credits for each jurisdiction.
Do I need to report my Vermont state income tax refund as income next year?
– No. A refund is your own money coming back to you. It’s not income. However, if you deducted Vermont state income taxes on last year’s federal return (as part of itemized deductions), you might owe federal tax on the refund under the “tax benefit rule.” This is rare and only applies if itemizing. Talk to a tax professional if you’re unsure.
Can I have my Vermont state income tax refund applied to next year’s taxes?
– Yes. When you file your return, you can request that your refund be applied to your 2025 estimated tax liability instead of receiving it. This is useful if you know you’ll owe taxes next year. However, most people just take the refund and manage their withholding going forward.
What if Vermont lost my return?
– This is rare, but it happens. If you filed by mail and it’s been more than 16 weeks without a response, contact the Vermont Department of Taxes. If you e-filed, you should have a confirmation number. Keep it. If the state can’t find your return, you’ll need to file again and provide proof of the original filing (like your e-file confirmation or certified mail receipt).
How do I know if I’m eligible for the Earned Income Tax Credit on my Vermont return?
– The EITC is based on income, filing status, and number of dependents. Use the IRS EITC eligibility tool to check. If you qualify federally, you almost certainly qualify for Vermont’s version. The credit is worth significant money—up to $3,733 for tax year 2024.
Can I claim a Vermont state income tax refund if I’m not a resident?
– If you earned Vermont income but don’t live in Vermont, you need to file a Vermont non-resident return. You’ll only owe tax on Vermont-source income. If you overpaid, you get a refund just like residents. File using Form VT-100 (non-resident version).
What’s the best way to avoid getting a large Vermont state income tax refund?
– Adjust your W-4 so that your withholding matches your actual tax liability. Use the IRS W-4 calculator and update your form whenever your life changes. If you have self-employment income, make quarterly estimated payments. The goal is zero refund—money in your pocket all year, not a lump sum in April.
Should I use a tax professional to file my Vermont return?
– If your return is simple (W-2 wages, standard deduction, no credits), you can probably do it yourself with tax software. If you have self-employment income, rental property, significant investments, or multiple income sources, a tax professional is worth the cost. They might find credits or deductions you missed, more than paying for themselves. Look for a CPA or Enrolled Agent (EA) in Vermont.
Getting a Vermont state income tax refund is great, but the real win is understanding your tax situation well enough to manage it proactively. File accurately, update your W-4 when your life changes, and claim every credit you qualify for. That’s the formula for tax success in Vermont.
