Consultants in Vermont: taxes and retirement for 2026
For independent consultants and fractional executives billing clients directly in Vermont. Vermont has a graduated state income tax for 2026: 3.35% to 8.75%. Here are the 2026 rules, a worked example and the official sources.
Vermont rules for consultants
- State income tax (2026)
- Vermont has a graduated state income tax for 2026: 3.35% to 8.75%. Rates are percentages: 3.35%, 6.6%, 7.6% and 8.75% (32 V.S.A. 5822, https://legislature.vermont.gov/statutes/section/32/151/05822). Brackets are adjusted for inflation each year, and Vermont had not published 2026 rate schedules as of October 7, 2026. For 2025, the 8.75% rate started at $249,700 of taxable income for single filers. If AGI exceeds $150,000, tax is the greater of the rate-schedule amount or 3% of AGI (less U.S. obligation interest).
- State estimated tax
- Pay through withholding or estimates at least the lesser of 100% of last year's Vermont tax or 90% of this year's, or you face penalties and interest if you owe more than $500 when you file. Same dates as federal: April 15, June 15 and September 15, 2026, and January 15, 2027. Form IN-114.
- Vermont business entity minimum tax
- Partnerships, multi-member LLCs and S corporations active in Vermont file Form BI-471 and pay a $250 minimum annual entity tax. A single-member LLC that is disregarded federally and reports on Schedule C does not file BI-471. A one-owner business that elects S corporation status would owe the $250.
- ABC test for unemployment insurance (21 V.S.A. 1301(6)(B))
- Paid work is presumed to be employment unless the business proves three things: the worker is free from control, the work is outside the business's usual course or places of business, and the worker is customarily engaged in an independently established trade or business.
- State retirement program
- VT Saves is live. It is built around W-2 employers and does not cover 1099 contractors through the employer mandate.
Federal rules for 2026
Solo 401(k) up to $72,000
A one-person consultancy can contribute a $24,500 employee deferral plus an employer share of about 20% of net self-employment earnings, up to $72,000 in 2026, plus an $8,000 catch-up at 50 or older ($11,250 at ages 60 to 63).
The S-corp trade-off
Electing S-corp status can cut payroll tax, but the salary you pay yourself also sets your Solo 401(k) room. Run both sides before you elect.
Quarterly estimated taxes
No one withholds tax from self-employment income, so you generally pay estimates four times a year if you expect to owe $1,000 or more. For 2026 income the federal dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Paying 100% of last year's tax (110% if your AGI was over $150,000) in four equal installments avoids the underpayment penalty.
Self-employment tax
On top of income tax, self-employed people pay 15.3% on 92.35% of net profit: 12.4% Social Security up to the 2026 wage base of $184,500, plus 2.9% Medicare with no cap. Half of it is deductible.
A worked example
| Self-employment tax (sole proprietor) | $21,194 |
|---|---|
| Solo 401(k) maximum | $52,381 |
| SEP IRA maximum | $27,881 |
| Payroll tax saved as an S-corp on a $75,000 salary | $9,719 |
| Solo 401(k) maximum as that S-corp | $43,250 |
Federal figures only, before state and local taxes. Simplified: excludes the QBI deduction and the 0.9% Additional Medicare Tax. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.
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Questions
Do consultants in Vermont pay state income tax?
Vermont has a graduated state income tax for 2026: 3.35% to 8.75%. Rates are percentages: 3.35%, 6.6%, 7.6% and 8.75% (32 V.S.A. 5822, https://legislature.vermont.gov/statutes/section/32/151/05822). Brackets are adjusted for inflation each year, and Vermont had not published 2026 rate schedules as of October 7, 2026. For 2025, the 8.75% rate started at $249,700 of taxable income for single filers. If AGI exceeds $150,000, tax is the greater of the rate-schedule amount or 3% of AGI (less U.S. obligation interest).
When are Vermont estimated tax payments due for 2026?
Pay through withholding or estimates at least the lesser of 100% of last year's Vermont tax or 90% of this year's, or you face penalties and interest if you owe more than $500 when you file. Same dates as federal: April 15, June 15 and September 15, 2026, and January 15, 2027. The state form is IN-114.
Are there other Vermont taxes for self-employed consultants?
Vermont business entity minimum tax: Partnerships, multi-member LLCs and S corporations active in Vermont file Form BI-471 and pay a $250 minimum annual entity tax. A single-member LLC that is disregarded federally and reports on Schedule C does not file BI-471. A one-owner business that elects S corporation status would owe the $250.
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Sources
- tax.vermont.gov/sites/tax/files/documents/TaxRateSched-2025.pdf
- tax.vermont.gov/sites/tax/files/documents/IN-114-2026.pdf
- labor.vermont.gov/sites/labor/files/documents/Min%20Wage%20Poster%202026.pdf
- tax.vermont.gov/sites/tax/files/documents/BI-471-Instr-2025.pdf
- legislature.vermont.gov/statutes/section/21/017/01301
State and local facts researched from official sources and independently re-checked; last verified October 2026, next scheduled review 2027-01-02. Educational information for 2026, not tax, legal or investment advice. Rules change; check the official sources listed and a tax professional for your situation. Gigaverse AI, Inc. is a financial technology company, not a bank, and not itself a registered investment adviser or broker-dealer.