Vermont Homestead Declaration and Property Tax Credit

Quick Facts

• What it does: Vermont’s property tax credit program (formerly the “circuit breaker”) reduces school and municipal property tax bills for resident homeowners based on household income. Credits are applied directly to tax bills the following year.
• Why it matters: Vermont relies heavily on property taxes to fund education. The income-based credit ensures households are not overburdened relative to their ability to pay, protecting seniors and working families in high-tax towns.
• Key filings: Homeowners must submit both the Homestead Declaration (Form HS-122) and the Property Tax Credit Claim (Form HI-144) when filing their Vermont income tax return. Missing either form can forfeit the credit.
• Timing: File by April 15 to avoid penalties. If you extend your income tax filing to October 15, the property tax credit claim automatically extends, but interest accrues on any tax due.

Program Overview

Vermont’s property tax credit is an income-sensitized relief program that compares your property tax bill to a percentage of your household income. The credit is calculated annually using income data from two years prior (for example, tax year 2024 uses 2022 household income). Credits are issued in July and applied to the upcoming school and municipal tax bills by the town treasurer.

To access the credit, homeowners must:

1. File the Homestead Declaration (HS-122) to classify their property as a homestead for school tax purposes.
2. Complete the Property Tax Credit Claim (HI-144) with household income details.
3. Ensure household income documentation (Schedules HI-144 and HI-144-AN) is accurate and includes all members’ income, even if they are not Vermont income tax filers.

Eligibility Requirements

1. Residency: You must have been domiciled in Vermont and owned and occupied the home as your principal residence on April 1 of the tax year. If you move in midyear, you can claim the credit the following year once you meet the April 1 requirement.
2. Homestead status: You must file HS-122 each year to declare the property as a homestead. Failing to file results in the higher nonresidential education tax rate and disqualifies you from the credit.
3. Household income: Total household income (Line 17 of HI-144) must be $135,000 or less to receive the full income-sensitized credit. Households above $135,000 may receive a smaller “housesite value” credit if property value is below $400,000.
4. Ownership: The property must be owned by you individually, jointly with a spouse or civil union partner, or through certain trusts where you are the beneficiary. Co-ops and mobile homes on leased land qualify if you pay property tax or lot rent.
5. Timely filing: Submit HS-122 and HI-144 by the April deadline. Late filings incur penalties, and credits may be reduced if filed after October 15.

Benefit Calculation

• Education property tax credit: Compares the school property tax on your housesite (up to two acres) to a percentage of household income. The credit covers taxes exceeding 2% to 5% of income depending on income bracket.
• Municipal property tax credit: Applies similar income-sensitivity to the municipal tax portion, though caps differ. Combined credits can exceed $8,000 for households with low income and high taxes.
• Housesite value cap: Only the first $400,000 of housesite value qualifies for the income-based credit. Homes above this may still receive a smaller credit based on house-site education tax.
• Application to tax bill: Credits are sent directly to your town in July. Towns apply them to the upcoming tax installments. You receive a notice (Form LC-142) showing the credit amounts and revised tax due.

Application Process

1. Collect documentation: Gather property tax bills, SPAN (School Property Account Number), and household income information for everyone living in the home, including non-filers.
2. File HS-122: When preparing your Vermont income tax return, complete the homestead declaration section. If you do not file a Vermont return, submit HS-122 separately through myVTax or via paper by April 15.
3. Complete HI-144: Report household income, including wages, Social Security, pensions, rental income, alimony, child support, and certain nontaxable sources. Attach Schedule HI-144-AN if applicable.
4. Submit with VT income tax return: File electronically through myVTax or paper mail. If you extend your return, note that payment of any tax due is still required by April 15 to avoid interest.
5. Review confirmation: After filing, myVTax provides a confirmation. Keep copies of HS-122, HI-144, and supporting documents.
6. Monitor the credit: In July, check myVTax or your town tax bill for Form LC-142 showing the credit applied. If you sell the home before the credit is applied, coordinate with the buyer and town clerk regarding proration.

Documentation Checklist

• Vermont income tax return (Form IN-111) or alternative filing forms.
• HS-122 Homestead Declaration.
• HI-144 Property Tax Credit Claim and attachments.
• Household income documents (W-2s, 1099s, SSA-1099, pension statements, alimony records).
• Property tax bills with SPAN number.
• Mortgage and escrow statements (for verification if needed).
• Trust agreements or cooperative certificates if applicable.

Strategies to Maximize the Credit

Track household income carefully

Household income includes contributions from all residents, even adult children or roommates. Keep detailed records of support payments, gifts, and shared expenses to ensure accurate reporting. Misreporting can lead to penalties or reduced credits.

Coordinate with assessment appeals

If your assessed value seems high, file a grievance with your town by the statutory deadline (typically mid-June). A lower assessed value reduces taxes and ensures the credit calculation reflects an accurate tax bill.

Monitor homestead status when moving

If you buy or sell a home midyear, file Form HS-122W to withdraw a previous homestead declaration and HS-122 for the new property. Failure to update can trigger penalty taxes at the nonhomestead rate.

Use myVTax reminders

Create a myVTax account to set email reminders for homestead filing. The portal retains prior-year data, making annual filing faster and reducing errors.

Combine with other Vermont programs

Stack the property tax credit with the Household Income-Based Fuel Assistance Program, the Vermont Renters Rebate (if you rent part of the year), or weatherization services. Coordinating benefits can significantly lower housing costs.

Troubleshooting and Appeals

• Late filing penalty: Filing HS-122 after April 1 may result in a 3% penalty on education tax. If you have reasonable cause (illness, disaster), submit a written appeal to the Department of Taxes.
• Income verification requests: The Department may request additional documentation. Respond within 30 days. Provide bank statements, benefit letters, or affidavits to substantiate amounts.
• Credit not applied: If your town tax bill does not show the credit by August, contact the town treasurer and the Department of Taxes. Provide your confirmation number and copies of HS-122/HI-144.
• Change in household members: If someone moves in or out after April 1, update your household income documentation the next year. Keep leases or written statements documenting the change.
• Sale of property: If you sell after the credit is applied, prorate the benefit with the buyer at closing. Provide the LC-142 notice to your attorney or title company.

Example Scenarios

• Family in Burlington: The Nguyen family earns $60,000 and faces $9,500 in combined school and municipal taxes on their $280,000 home. Their credit reduces the tax bill by $3,800, lowering installments to manageable levels.
• Retiree in Rutland: Sarah, age 72, lives on $28,000 of Social Security and pension income. Her property tax is $6,200. The credit covers $4,900, leaving her with a $1,300 net bill.
• Co-op owner in Montpelier: Avery owns a co-op unit and pays property tax through monthly dues. By filing HS-122 and HI-144 with the co-op’s SPAN, Avery secures a $2,100 credit applied against the co-op’s tax assessment, reducing monthly carrying charges.

Resources

• Vermont Department of Taxes: tax.vermont.gov/property-owners/homestead-declaration/property-tax-credit for forms and FAQs.
• myVTax Portal: Submit filings, view credits, and print confirmation letters.
• Vermont Legal Aid: Assists homeowners with appeals and disputes over credit calculations.
• Community Action Agencies: Provide tax preparation assistance and income documentation help.
• Town Clerks/Treasurers: Offer guidance on SPAN numbers, tax billing schedules, and credit application timelines.

Frequently Asked Questions

Do I need to file HS-122 every year? Yes. Even if nothing changes, you must file annually to maintain homestead status and qualify for the credit.

What if I rent part of my home? You can still claim the credit if more than 50% of the property is your primary residence. Allocate income and expenses accordingly on HI-144.

Does the credit affect federal taxes? The credit reduces your property tax bill rather than providing cash, so it generally does not affect federal tax reporting. However, if you itemize deductions, report the reduced property tax amount.

Can non-filers participate? Yes. If you have no Vermont tax filing requirement, submit HS-122 and HI-144 separately with household income documentation. The Department will process the credit even without an IN-111 return.

What happens if I miss the October 15 extended deadline? Claims filed after October 15 are not accepted. You forfeit the credit for that year, so submit as early as possible to avoid issues.

By filing the homestead declaration, tracking household income meticulously, and coordinating with local officials, Vermont homeowners can significantly reduce property tax burdens and keep housing affordable in a state with high education funding demands.