Vermont

In Vermont, when real estate is sold by a nonresident, the buyer is required to withhold 2.5% of the sales price and remit it to the Vermont Department of Taxes. Here are the key points of Vermont's real estate tax withholding rules:

1. Withholding Requirement: The buyer must withhold 2.5% of the sales price if the seller is a nonresident. This amount is submitted to the Vermont Department of Taxes using Form RW-171 within 30 days of the transfer.
2. Exemptions: Nonresident sellers can request an exemption from withholding if they are performing a 1031 exchange. This requires obtaining a Withholding Certificate and presenting it to the buyer before closing. Additionally, the Vermont Land Gains tax exempts exchanges of Vermont land for Vermont land.
3. Filing for Buyers: Buyers must file Form RW-171 with the payment to the Vermont Department of Taxes. This form is not filed with the town clerk.
4. Filing for Sellers: Sellers should indicate the Vermont Real Estate Withholding amount as a credit on their Vermont Income Tax Return (Form IN-111). They must also include a copy of the federal income tax return and any federal schedule documenting the income or loss from the Vermont sale.
5. Installment Sales: Sellers can elect to report the entire gain in the year of sale and pay 6% of the entire capital gain, or the withholding will be applied as a credit against the seller’s tax liability in each year that an installment is received.
6. Ownership Situations: If there are multiple buyers, each is required to withhold, but if one buyer withholds and remits the required tax, the obligation of all buyers is met.
7. Definition of Nonresident: A nonresident is defined as an individual domiciled outside Vermont at the time of closing, or an entity with controlling interest held by nonresidents.
8. Commissioner’s Certificate: Sellers may request a Commissioner’s Certificate to reduce or exempt themselves from withholding. Even with a certificate, a Vermont Income Tax Return must be filed, and any tax liability in excess of withholding must be paid.

For more detailed information, you can visit the Vermont Department of Taxes website.