Vermont Payroll Tax Guide (2026)
Vermont’s Child Care Contribution is the figure most employers miss: a flat 0.44% on all Vermont wages with no ceiling at all, owed by the employer, of which no more than a quarter, 0.11%, may be passed to the employee.[4]
Vermont payroll at a glance
Vermont has three state payroll taxes: graduated income tax withholding taken from employee pay, employer funded unemployment contributions on a 15,400 dollar base, and a Child Care Contribution the employer owes on every dollar of wages.[4]
What changed for Vermont payroll in 2026
Six items moved for Vermont employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.
2026 Vermont payroll tax calculator
Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.
Employer pays
Withheld from the employee
State income tax withholding is not included above: it depends on the employee’s Form W-4VT, Employee’s Withholding Allowance Certificate and filing status, so it cannot be estimated from gross pay alone.
Payroll tax rates & the nexus question
Vermont runs four state payroll taxes. The table below is the whole state layer for 2026.[4]
The state payroll taxes
| Tax | Paid by | 2026 rate | Wage base |
|---|---|---|---|
| UI | Employer | 0.40%–5.40%; 1.00% new | $15,400 |
| Child Care Contribution | Employer | 0.44% | All wages |
| Child Care Contribution employee share, optional | Employee | 0.11% | none |
| Income tax withholding | Employee | 3.35%–8.75% | No limit |
Vermont runs five tax rate schedules, each with 21 rate classes, and a statutory formula picks the schedule. The rates in force run from 0.4% at class 0 to 5.4% at class 20, which matches Schedule 1, the most favorable of the five. The Department of Labor states that beginning 1 July 2026 the new employer rate for most employers is one percent. The other schedules top out at 5.9, 6.5, 7.7 and 8.4% respectively.[4]
Who has to register
An entity becomes liable once it employs one or more persons during some part of a day in each of at least 20 different weeks in the current or prior year, or pays at least $1,500 in gross wages during any calendar quarter regardless of headcount. Domestic service is covered at $1,000 or more of gross wages in any calendar quarter. Agricultural work is covered at $20,000 or more of gross wages in any calendar quarter, or ten or more agricultural workers during 20 or more different weeks. Religious, charitable and educational organizations exempt under Section 501(c)(3), state entities, political subdivisions, successors to covered businesses and businesses resuming operations after less than three years of inactivity are also covered.[4] Income tax withholding is administered separately by Vermont Department of Taxes, so most employers end up with two state account numbers, not one.
Multistate and remote employees
When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.
- 1. Localisation of service→
- 2. Base of operations→
- 3. Place of direction & control→
- 4. Employee’s residence
One remote employee is usually enough. A single person working from home in Vermont generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.
Confused by Vermont’s payroll withholding & filing rules?
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Ask a Payroll SpecialistRegistration & return filing
Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.[4]
How to register
- Cross the wage threshold→
- e-Services for employers at labor.ui.vermont.gov→
- Receive account number→
- File & deposit online
An entity becomes liable once it employs one or more persons during some part of a day in each of at least 20 different weeks in the current or prior year, or pays at least $1,500 in gross wages during any calendar quarter regardless of headcount. Domestic service is covered at $1,000 or more of gross wages in any calendar quarter. Agricultural work is covered at $20,000 or more of gross wages in any calendar quarter, or ten or more agricultural workers during 20 or more different weeks. Religious, charitable and educational organizations exempt under Section 501(c)(3), state entities, political subdivisions, successors to covered businesses and businesses resuming operations after less than three years of inactivity are also covered.[4]
Deposit schedule
Payment frequency mirrors the employer’s federal schedule. Semi-weekly filers remit tax withheld on Wednesday through Friday by the following Wednesday and tax withheld on other pay dates by the following Friday. Monthly filers remit by the 25th of the following month. Quarterly filers pay when they file Form WHT-436. An employer that remitted more than $100,000 of withholding in the prior calendar year must file electronically.[1]
Returns, reports & due dates
| Form | What it is | Due |
|---|---|---|
| Quarterly C-101 Wage and Contribution Report | Quarterly unemployment return | April 30, July 31, October 31, January 31 |
| Form WHT-436, Quarterly Withholding Reconciliation, is filed every quarter by all… | Income tax withholding returns | Payment frequency mirrors the employer’s federal schedule. Semi- |
| Annual reconciliation | Year-end withholding reconciliation | January 31 |
| Form 941 | Federal quarterly return | Last day of the month after quarter end |
| Form 940 | Federal unemployment, annual | January 31 |
| New hire report | Report of newly hired employees | Within 20 days of start date |
Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.[4]
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Subject wages vs. exempt payments
Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.[4]
Subject wages
- Salaries, hourly pay, overtime and piece rates
- Commissions, bonuses and incentive pay
- Most cash tips reported by the employee
- Vacation, holiday and paid sick leave when taken as wages
- Severance and payments in lieu of notice
- The cash value of meals and lodging provided as compensation
- Employer contributions to a non-qualified deferred compensation plan
- Wages subject to the employee-paid contributions listed above
Not subject
- Reimbursements of genuine business expenses under an accountable plan
- Employer contributions to a qualified retirement plan
- Employer-paid premiums for accident and health insurance
- Most third-party sick pay after the sixth calendar month
- Payments to a genuine independent contractor
- Workers compensation benefits
The wage base is per employer, per year, not per job. If you hire someone in August who already earned $15,400 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.
Glossary of key terms
- Taxable wage base
- The slice of each employee’s annual pay that unemployment tax is calculated on. In Vermont that is $15,400 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
- Child Care Contribution employee share, optional
- An employee-funded contribution withheld from pay at 0.11%. It is the employee’s money, so it is withheld rather than paid by the employer, but the employer is responsible for remitting it.
- Experience rating
- The method Vermont Department of Labor uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
- New employer rate
- The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
- Form W-4VT, Employee’s Withholding Allowance Certificate
- The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Vermont Department of Taxes.
- Reserve account
- The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
- Successor employer
- A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
- Localisation of service
- The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
- FUTA credit reduction
- A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
- Supplemental wages
- Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Vermont payroll tax, layer by layer
Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.
Layer 1: Federal
| Tax | Rate | 2026 base |
|---|---|---|
| Social Security | 6.2% each side | $184,500 |
| Medicare | 1.45% each side | No limit |
| Additional Medicare | 0.9% employee only | Over $200,000 |
| FUTA, standard | 0.6% net | $7,000 |
| Federal income tax | Per Form W-4 | No limit |
Vermont has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[12]
Layer 2: State
| Tax | Rate | 2026 base |
|---|---|---|
| UI, new employer | 1.00% | $15,400 |
| UI, experienced | 0.40%–5.40% | $15,400 |
| Child Care Contribution | 0.44% | All wages |
| Child Care Contribution employee share, optional, employee | 0.11% | No limit |
| Income tax, standard | 3.35%–8.75% | No limit |
Layer 3, county & city: no payroll tax, but a wage floor
No county or city in Vermont levies its own payroll or income tax withheld by employers. The local layer shows up as minimum wage, not as tax.[8]
The state minimum wage is $14.42 an hour, effective 2026-01-01. The tipped cash wage is $7.21. No local ordinance sets a higher floor. Vermont has a single statewide rate and no town or city sets its own. Under 21 V.S.A. section 384 an employer in a hotel, motel, tourist place or restaurant may not employ a service or tipped employee at a basic wage rate less than one half the minimum wage, which is $7.21 against the 14.42 dollar rate. Under 21 V.S.A. section 384 the minimum wage is increased each 1 January by five percent or the percentage increase in the Consumer Price Index for urban consumers, whichever is smaller, and it can never be decreased. A further increase is therefore due on 1 January 2027 at a figure not yet published.[8]
Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA standard salary level, and only if the duties test is also met. Paying a salary is not by itself enough.[10]
Vermont payroll FAQs
It is a 0.44% payroll tax that employers are required to pay on all employee wages earned in Vermont, and collection began on 1 July 2024. The employer is the party liable. An employer may choose to deduct and withhold a maximum of 25% of the required contribution, which works out to 0.11%, from employee wages, but that is an election rather than an automatic split.
No. Unlike unemployment tax and Social Security, the contribution applies to all wages with no ceiling. It reaches payments included in the definition of wages in 26 USC 3401, which broadly means wages subject to federal income tax withholding. Employers remit it in the same manner and frequency as Vermont income tax withholding and report it quarterly on Form WHT-436.
$14.42 an hour, according to the United States Department of Labor listing updated 1 July 2026. A service or tipped employee in a hotel, motel, tourist place or restaurant must receive a basic wage of at least one half the minimum wage, which is $7.21, with tips making up the rest. Under 21 V.S.A. section 384 the rate is readjusted every 1 January by the smaller of five percent or the CPI-U increase and can never fall.
The state tax is payable on the first $15,400 in wages paid to each employee during a calendar year. Rates in force run from 0.4% to 5.4% across the 21 rate classes, so a fully taxed employee costs between $61.60 and $831.60 a year. Beginning 1 July 2026 the new employer rate for most employers is one percent, which is $154 for a fully taxed employee.
All withholding taxpayers file Form WHT-436, the Quarterly Withholding Reconciliation, which also carries the Child Care Contribution. Payment frequency follows your federal schedule: semi-weekly, monthly by the 25th of the following month, or quarterly with the return. Form WHT-434, the Annual Withholding Reconciliation, is due the last day of January and transmits W-2 and 1099 forms. An employer that remitted more than $100,000 in the prior calendar year must file electronically.
Liability attaches once you employ one or more persons during some part of a day in each of at least 20 different weeks in the current or prior year, or pay at least $1,500 in gross wages in any calendar quarter. Domestic service triggers coverage at $1,000 of gross wages in a quarter, and agricultural work at $20,000 in a quarter or ten workers in 20 different weeks. Registration and quarterly reporting both run through the e-Services portal at labor.ui.vermont.gov.
$15,400 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.
$14.42 an hour. No local ordinance sets a higher rate. The tipped cash wage is $7.21.
April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.
Sources & methodology
- Vermont Department of Taxes – Withholding
- Vermont Department of Taxes – Child Care Contribution
- Vermont General Assembly – 32 V.S.A. section 5822, Tax on Income of Individuals, Estates and Trusts
- Vermont Department of Labor – Unemployment Tax Rates
- Vermont Department of Labor – Quarterly Reporting and Taxable Wage Information
- Vermont Department of Labor – Employer Responsibility for Unemployment Coverage
- Vermont Department of Labor – Unemployment Insurance for Employers
- Vermont General Assembly – 21 V.S.A. section 384, Employment; Wages
- United States Department of Labor, Wage and Hour Division – State Minimum Wage Laws
- United States Department of Labor, Wage and Hour Division – Salary Levels for the Executive, Administrative and Professional Exemption
- United States Department of Labor, Employment and Training Administration – Significant Provisions of State Unemployment Insurance Laws, January 2026
- Internal Revenue Service – Topic no. 759, Form 940 and Federal Unemployment Tax
- United States Department of Labor, Employment and Training Administration – FUTA Credit Reductions
- United States Department of Labor, Wage and Hour Division – Minimum Wages for Tipped Employees
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