30 August 2018 Vermont legislation reduces personal income tax rates for 2018, revised withholding tables will not be issued Recently enacted legislation (HB 16, Act 11 of the 2018 special session) reduces Vermont's marginal income tax rates by 0.2% (with the exception of the second highest tax bracket) retroactively to January 1, 2018. However, according to the Vermont Department of Taxes, revised withholding tables are not expected to be released until 2019. (Email response to inquiry; Vermont income tax guide for tax practitioners.) In addition to the income tax rate reduction, the legislation, which went into effect on July 2, 2018, creates a Vermont personal exemption and standard deduction to replace Vermont's current reliance on federal definitions; increases the earned income tax credit; and creates a state tax credit equal to 5% of the first $20,000 in eligible charitable contributions for all filers (regardless of whether the taxpayer itemizes on their federal tax return). According to the Department, without these reforms, Vermont taxpayers would have seen a $30-million increase in their state income taxes and Vermont's nonprofit sector may have seen diminished giving, as fewer Vermonters are expected to itemize their taxes under the new federal rules. As we reported previously, the Department had announced that it would not be updating the state income tax withholding tables for 2018. Employers were instructed to continue to use the 2017 withholding tables and instructions for calendar year 2018 until further notice. (VTax Connect for tax practitioners, attorneys and legal professionals, February 7, 2018; EY Payroll NewsFlash, Vol. 19, #041, 2-12-2018.) Posted to the Department's website and contained within the 2017 withholding booklet is the following statement: "Please note: The Department will not be updating the Income Tax Withholding Tables, please continue to use the 2017 Income Tax Withholding Tables." Vermont is the only state that uses a percentage of federal income tax withholding as an alternative to the regular withholding method for computing state income tax withholding on supplemental wages. For 2017, the supplemental income tax withholding rate was 24% of federal income tax withholding. According to a Department representative, this rate will continue to apply for 2018 until and unless the Department issues further guidance. (Email response to inquiry, February 8, 2018.)
Document ID: 2018-1724 | |||||||||
