Construction & Trades in Vermont: taxes and retirement for 2026
For construction workers, electricians, plumbers, HVAC techs, painters and handymen 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 construction & trades
- 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
W-2 or 1099 changes everything
On a W-2 your employer withholds tax and may offer a retirement plan. As a 1099 subcontractor you pay self-employment tax and quarterly estimates, but you can deduct tools, materials and job-site driving.
Tools and equipment
Tools, equipment, safety gear and work vehicles used for business are deductible; larger purchases can often be written off in the year you buy them.
Overtime deduction for W-2 workers
Non-exempt W-2 workers can deduct the overtime premium they are paid, up to $12,500 a year ($25,000 joint) from 2025 through 2028, subject to an income phase-out.
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.
A worked example
| Self-employment tax | $9,891 |
|---|---|
| Self-employment tax per quarter | $2,473 |
| SEP IRA maximum | $13,011 |
| Solo 401(k) maximum | $37,511 |
Federal figures only, before income tax and state or local taxes. Computed from 2026 IRS limits (Notice 2025-67, Rev. Proc. 2025-32) and the SSA wage base.
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Questions
Do construction & trades 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 construction & trades?
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 Vermont laws affect independent contractors and gig workers?
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.
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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.