December 3, 2020
Vermont updates guidance on income tax for teleworkers and employees relocated in connection with COVID-19
The Vermont Department of Taxes issued updated guidance concerning the income tax rules that apply to employees who work remotely or who are temporarily relocated to the state due to COVID-19. The revised guidelines make it clear that Vermont nonresident income tax does not apply unless the employee is performing services within the state. (See EY Tax Alert 2020-1577, 6-16-2020.)
The Department provides the following frequently asked questions to explain Vermont's income tax withholding requirements under various scenarios.
I have been residing in Vermont for most of 2020, due to the pandemic, but I generally live and work in another state. Am I required to pay income tax on the money that I've earned while I've been in Vermont even though it was paid by my out-of-state employer?
Yes. If you were in Vermont for more than two weeks, income earned while in Vermont is subject to Vermont income tax.
I live in (am domiciled in) another state but I work in Vermont. Do I have to pay income taxes to the State of Vermont?
Nonresident Vermont income tax applies only to income earned within the state. Income earned within the state includes wages earned while in Vermont, income from a business located in Vermont, or income from the rental of real estate or other property in Vermont.
During "normal" times, I live in (am domiciled in) New Hampshire and drive to Vermont every day for work. Since the beginning of the COVID-19 emergency, I am working at my Vermont job remotely from my home in New Hampshire. Do I still need to pay Vermont income tax?
Prior to the pandemic, you were required to pay Vermont income tax as a nonresident on the income earned in Vermont. Presently, however, given your New Hampshire domicile and your remote worker status, the income you earn while at home is not Vermont income (even though your employer is still located in Vermont) and is not subject to Vermont income tax.
I usually reside in New York where I work for a New York employer. However, during the COVID-19 emergency, I have resided at my second home in Vermont. Do I have to pay Vermont income tax on the income that I've earned while living at my second home in Vermont?
Yes, if you are living at your second home in Vermont for more than two weeks the income earned while you are in Vermont is income subject to Vermont income tax.
What if I reside in Vermont at my second home, in a rental, or with family or friends for an extended period?
If you stay in Vermont for more than 183 days, you are a statutory resident of Vermont and must file taxes as a Vermont resident. Statutory residents of Vermont are taxed on all income wherever earned, and Vermont provides a credit for taxes paid to other states.
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