Bartenders & Servers in Vermont: taxes and retirement for 2026
For bartenders, servers, baristas and other workers paid largely in tips 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 bartenders & servers
- 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.
- Minimum wage (2026)
- $14.42 an hour; tipped cash wage $7.21 an hour. $14.42 since January 1, 2026, for employers with 2 or more employees, adjusted every year by a set formula. The basic wage for service or tipped employees is $7.21: hotel, motel, tourist place or restaurant workers who regularly receive more than $120 a month in tips. The employer must make up any shortfall to $14.42.
- 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
No tax on tips (2025 to 2028)
Eligible workers in occupations that customarily receive tips can deduct up to $25,000 of qualified tips a year from federal taxable income, whether or not they itemize. The deduction shrinks for modified AGI over $150,000 ($300,000 joint). It is income tax only: Social Security and Medicare still apply to tips.
Tips must be reported
Employees must report cash tips of $20 or more in a month to their employer by the 10th of the next month. Tips you did not report go on Form 4137. Only reported tips count toward the deduction.
Overtime deduction
W-2 workers who are owed overtime under federal law can also deduct the overtime premium, up to $12,500 a year ($25,000 joint), with the same income phase-out.
Roth IRA
Without a workplace plan, a Roth IRA lets you save up to $7,500 in 2026 ($8,600 at 50 or older) and withdraw qualified money tax-free in retirement, subject to income limits.
A worked example
| Tips deduction | $15,000 |
|---|---|
| Federal income tax without the deduction | $3,220 |
| Federal income tax with it | $1,420 |
| Federal income tax saved | $1,800 |
Single filer, standard deduction, 2026 brackets. Payroll taxes on tips are unchanged. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.
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Questions
Do bartenders & servers 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 bartenders & servers?
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.
What is the tipped minimum wage in Vermont in 2026?
Vermont's 2026 minimum wage is $14.42 an hour. Employers may pay tipped workers a cash wage of $7.21 an hour as long as tips bring them to the full minimum. $14.42 since January 1, 2026, for employers with 2 or more employees, adjusted every year by a set formula. The basic wage for service or tipped employees is $7.21: hotel, motel, tourist place or restaurant workers who regularly receive more than $120 a month in tips. The employer must make up any shortfall to $14.42.
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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.