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What You Need to Know (presented by the Vermont Association of Realtors®)
On Monday, June 17, the Vermont Legislature overrode six out of seven bills that Governor Scott vetoed. As a result, these bills become law. VAR will provide a detailed overview of the policy impacts of H.687, the Act 250 bill, and H.889, the Yield bill. However, we want to make you aware of the financial implications of H.687 and H.889 and their impact on real estate.
This bill saw many changes in the last week of the legislative session. While this bill will create more incentives for housing through changes to Act 250, it also included changes to the Property Transfer Tax that go into effect on August 1, 2024.
On the positive side, buyers of residential homestead properties will benefit from an increased initial transfer tax threshold, rising from $100,000 to $200,000. For those using VHFA, Vermont Housing Conservation Board, or US Department of Rural Development financing, the first $250,000 will be exempt from transfer tax. Additionally, these purchasers are exempt from the clean water surcharge for the increased thresholds. Beyond these thresholds, the transfer tax rate of 1.25% will apply to the remaining purchase price. The bill also raises the Clean Water Surcharge from 0.2% to 0.22% on the value above the new thresholds.
The alarming change to the property transfer tax affects the sale of residential, non-homestead properties (second homes). The legislature has increased the property transfer tax on these properties from 1.25% to 3.4%, plus the clean water surcharge, resulting in a total transfer tax of 3.62%. This tax applies to the entire purchase price of these properties and takes effect on August 1, 2024. If you have second homes under contract, closing before August 1 will save your purchasers 2.17% on the entire purchase price.
This bill sets property tax rates for school funding. For Fiscal Year 2025, starting July 1, 2024, the average property tax increase will be 13.8%. Additionally, the bill impacts real estate with two new or expanded taxes. First, it increases the room tax for short-term rental properties from 9% to 12%. Second, it extends the 6% sales tax to "prewritten software," regardless of how it is paid for, delivered, or accessed, affecting MLS, forms, and online software services. Vermont Realtors® must understand and communicate these new taxes' impacts to clients, customers, and all Vermont taxpayers.
Peter Tucker
VAR Advocacy & Public Policy Director
(802) 229-0513 peter@vermontrealtors.com
