Vermont Land Gains Tax: What Okemo Land Investors Need

Buying or selling a parcel near Okemo and hearing about Vermont’s Land Gains Tax? This state tax can change your net sheet and the way you structure a deal, especially if the land was recently subdivided. You want clear, local guidance so you can plan ahead, avoid surprises, and close with confidence. This straightforward guide explains how the tax works, when it applies in Ludlow, how withholding is handled, key exemptions, and the steps your closing team should follow. Let’s dive in.

What is Vermont’s Land Gains Tax?

Vermont’s Land Gains Tax is a state tax aimed at discouraging short-term land speculation. It applies to certain gains from the sale or exchange of land as defined by state law. You can review the full statute in Title 32, Chapter 236 of the Vermont Statutes for definitions, rates, and procedures (Title 32, Chapter 236).

In simple terms, the tax targets gains when a seller purchased and then subdivided land within a six-year window before selling. Whether a parcel counts as “land” for this tax depends on the seller’s subdivision activity and timing under the statute’s definition (definition of “land,” §10002).

When the tax applies in Ludlow

Six-year holding and subdivision test

The core trigger is land that the transferor both purchased and subdivided within the six years prior to sale. If the seller has held the land for six years or more, Land Gains Tax is generally not due and withholding is not required (holding and withholding, §10007).

Sales with homes and acreage

If a dwelling is part of the sale, the tax applies only to the land portion, not the building. There is a principal-residence exclusion for parcels up to five acres, and up to 10 acres if local zoning requires a larger residential lot size (principal-residence, §10002). In Ludlow, minimum lot sizes vary by district, including areas near the resort. Confirm the parcel’s zoning and any minimum lot size in the Town’s Zoning & Flood Hazard Regulations (Ludlow Zoning & Flood Hazard Regulations).

Mixed sales with buildings

When a sale includes both land and improvements, the price must be allocated between land and structures based on fair market value. The Land Gains Tax applies only to the land portion. Your appraiser or closing team can help document a reasonable allocation consistent with the statute (Title 32, Chapter 236).

How the tax is calculated

The tax is computed on the seller’s taxable gain from the land. The basic formula is amount realized attributable to the land minus the seller’s basis in that land, with adjustments described in the statute. The rate is a single flat percentage applied to the whole gain, determined by the holding period and how large the gain is relative to basis. The statutory rate table appears in 32 V.S.A. §10003 within the chapter above.

Installment sales are allowed under the regulations, including an election in some cases to report the full gain in the year of sale with an additional charge. The regulations explain how to handle installment reporting and related withholding (Land Gains Tax regulations).

Withholding at closing

Standard 10 percent buyer withholding

If the land was held by the seller for less than six years, the buyer must typically withhold 10 percent of the consideration attributable to the land and remit it to the State when payment is made. The seller is ultimately liable for the tax, and the buyer’s withholding acts as an advance collection. The seller must file the Land Gains Tax return within 30 days of the sale when withholding is required (withholding and deadline, §10007).

Filing, forms, and timelines

Vermont uses myVTax for Land Gains Tax filings. Common items include the LGT-177 Withholding Return, LGT-178 Land Gains Tax Return, and supporting schedules. Closing attorneys typically coordinate these filings and remittances through myVTax (myVTax help and forms).

Reducing or eliminating withholding

The Commissioner of Taxes can issue a certificate that reduces or eliminates withholding when collection will not be jeopardized. Examples include sales at a loss, expected negligible liability, some principal-residence situations, certain exchanges, and good-standing Vermont sellers. Apply before closing, and buyers may rely on a valid certificate to avoid withholding (withholding statute, 32 V.S.A. §5847).

Exemptions and special cases

• Principal residence parcels within statutory acreage limits, with potential expansion to 10 acres where local zoning requires larger lots (§10002).
• Transfers to qualifying affordable-housing charities or certain 501(c)(3) organizations, subject to conditions.
• Transfers by gift, death, correction, certain foreclosures, or to the U.S. government, as described in the regulations (Land Gains Tax regulations).
• Federal nonrecognition, including 1031 exchanges, does not automatically eliminate Land Gains Tax. Special rules apply in Vermont. Coordinate early with your tax advisor.

Okemo-area due diligence tips

• Verify whether the parcel was purchased and subdivided by the current seller within the last six years. Check deeds, plats, and Planning Commission approvals under the definition in state law.
• Confirm the zoning district and minimum residential lot size. This affects whether the principal-residence acreage exclusion is 5 acres or up to 10 in Ludlow (Ludlow Zoning & Flood Hazard Regulations).
• Research access, frontage, and easements. Mountain parcels can involve complex histories and prior decisions, so do not assume access is straightforward (Vermont Supreme Court case example).
• Gather the seller’s basis documentation for the land portion, including purchase price, closing statements, and qualifying capital costs.
• Coordinate early with local counsel and your closing team to plan allocations, withholding, and any certificate applications.
• Use local resources for maps, zoning, and records. The Mount Ascutney Regional Commission hosts links to Ludlow’s documents and contacts (Town and Village of Ludlow resources).

Step-by-step closing checklist

• Before you make an offer

  • Confirm subdivision history and holding period under the statute.
  • Determine how the price will be allocated between land and improvements.
  • Check the zoning district and minimum lot size for principal-residence acreage considerations.

• At contract to pre-closing

  • Decide who will handle the 10 percent withholding and myVTax remittance.
  • If facts suggest low or no tax, apply early for a Commissioner’s Certificate.
  • Consider simultaneous filing at closing so the exact tax is paid and withholding can be adjusted per the regulations.

• At closing

  • Buyer withholds 10 percent of the consideration attributable to the land if required and remits it to the State.
  • Ensure all LGT forms are prepared in myVTax and signed by the right parties.

• Post-closing

  • Seller files the Land Gains Tax return within 30 days if withholding was required.
  • If withholding exceeded the final tax, the seller requests a refund through the LGT return.

Common pitfalls to avoid

• Assuming a home sale is automatically exempt. Confirm acreage, zoning minimums, and principal-residence usage timing.
• Overlooking the six-year test tied to the seller’s subdivision activity. Public records research is essential.
• Missing buyer withholding. Failure to withhold and remit when required can create buyer liability.
• Waiting too long to apply for a Commissioner’s Certificate. Processing takes time and must be completed before closing.

Local insight: zoning near Okemo

Ludlow’s zoning maps include districts tailored to resort areas, including the Mountain Recreation and Jackson Gore districts. Minimum lot size, frontage, and density rules vary by district, which can affect the scope of the principal-residence acreage exclusion. Always verify the current district standards and the parcel’s location in the latest regulations (Ludlow Zoning & Flood Hazard Regulations).

Next steps

If you are exploring a land acquisition or sale near Okemo, getting in front of Land Gains Tax is one of the smartest moves you can make. Our team pairs decades of Okemo Valley insight with organized, high-touch transaction support so you can move from offer to closing with clarity. For local guidance on land, homes, condos, and acreage around the resort, connect with Mary W Davis Realtor® & Associates.

FAQs

What is Vermont’s Land Gains Tax and who pays it?

• It is a state tax on gains from sales of certain subdivided land held less than six years, and the seller ultimately pays while the buyer often withholds 10 percent at closing.

When does the buyer have to withhold 10 percent in Vermont?

• When the seller held qualifying land for less than six years, the buyer must usually withhold 10 percent of the consideration attributable to the land and remit it at payment.

How does the principal-residence acreage exemption work in Ludlow?

• Up to 5 acres are eligible, and up to 10 acres if local zoning requires a larger lot for residential use; verify the zoning district and minimum lot size for the parcel.

Does selling a house and land mean no Land Gains Tax?

• Not automatically; the tax applies only to the land portion and exemptions depend on acreage, zoning, and principal-residence rules, so confirm the details early.

Can withholding be reduced or eliminated before closing?

• Yes, by obtaining a Commissioner’s Certificate when the State determines collection is not at risk, such as a sale at a loss or other qualifying situations.