Vermont 529 tax credit in 2026
A flat tenth of each deposit, counted for every child and every spouse, and a repayment rule that reaches further than federal law does.
Vermont tax saved on this contribution
$1,000
10.0 % of what you put in comes back on your 2026 return.
| Credit on your state return | $1,000 |
| Your state marginal rate | 6.60 % |
| Cap that applies this year | $10,000 |
| Back per $1,000 contributed | $100 |
Vermont: Nonrefundable credit of 10% of the first $2,500 contributed per taxpayer per beneficiary per year (each spouse on a joint return, so 10% of the first $5,000 per beneficiary on a joint return) to a VT529/VHEIP account provided directly by VSAC; contribution portion of rollovers in from another state's plan qualifies. Read on 2026-10-19. No federal deduction exists for 529 contributions.
| Taxable income | Marginal rate | Tax saved |
|---|---|---|
| $50,000 | 3.35 % | $1,000 |
| $100,000 | 6.60 % | $1,000 |
| $200,000 | 7.60 % | $1,000 |
| $400,000 | 8.75 % | $1,000 |
Worked out by Radif Partners · How we calculate · Vermont rule read on October 19, 2026, brackets of tax year 2025 · not tax advice
Vermont gives a nonrefundable credit of 10 % of the first $2,500 each taxpayer contributes to VT529 for each beneficiary in a year. On a joint return both spouses count, so the credit reaches $500 per child on $5,000 of deposits, against $250 for a single filer. Income does not change the rate: a Burlington couple at $130,000 who put $10,000 into two children's accounts receive $1,000, while the same deposit for one child earns $500. Only VT529 accounts provided directly by the Vermont Student Assistance Corporation (VSAC) qualify, though the contribution part of a rollover in from another state's plan counts. The other side of the bargain is the repayment: Vermont takes back 10 % of any withdrawal not used for approved college costs, apprenticeships or student loans, up to the credits received, which catches K-12 tuition, Roth IRA rollovers and moves to another state's plan.
| Benefit for contributions | Credit |
|---|---|
| Cap | $2,500 single, $5,000 joint per child, per taxpayer |
| Credit rate | 10 % |
| Largest credit | $250 single, $500 joint |
| Another state’s plan counts | No, in-state plan only |
| State plans (official names, no recommendation) | VT529 (Vermont Higher Education Investment Plan, VHEIP) |
| Account balance limit | $550,000 |
| K-12 withdrawals qualified for state tax | No |
| 529 to Roth IRA rollover qualified | No |
| Student loan payments qualified | Yes |
| Add-back on a rollover to another state’s plan | Yes |
Ten cents per dollar, and a ceiling that multiplies
The credit in 32 V.S.A. 5825a is a fixed 10 % of the deposit. A single parent at $45,000 who sets aside $100 a month earns $120; a household at ten times that income earns the same on the same money. What changes the result is how the $2,500 limit is counted. The Department of Taxes reads it per taxpayer and per beneficiary, so each spouse on a joint return has a separate $2,500 for each child. A couple with three children in VT529 can earn a credit on up to $15,000, or $1,500, in one year.
Vermont credit for your number of children
Vermont tax saved on this contribution
$1,000
| Credit on your state return | $1,000 |
| Your state marginal rate | 6.60 % |
| Cap that applies this year | $10,000 |
| Back per $1,000 contributed | $100 |
The credit cannot exceed the Vermont tax owed, and neither the statute nor Schedule IN-119 provides a way to use the unused part in a later year. A household with little Vermont tax in a given year loses the excess.
Rates and the minimum tax
The 2026 rate schedule had not been published when we read the Department's pages, so the calculator uses the 2025 schedules; the 2026 withholding tables keep the same four rates. The 2025 instructions also set a minimum tax, a share of adjusted gross income (AGI), for higher-income returns. Neither point changes the credit itself, only how much Vermont tax is available to absorb it.
VSAC accounts only
The credit is tied to the plan provided directly by VSAC. A Vermont family who saves through another state's plan receives no credit, and the gap over sixteen years of saving is shown by the out-of-state plan comparison. Moving money the other way works in Vermont's favor: the Department of Taxes says the contribution portion of a rollover in from another state's plan is eligible.
VT529 against an out-of-state plan
Lost by leaving the Vermont plan
$8,000
| Yearly saving, home plan | $500 |
| Yearly saving, other plan | $0 |
| Gap over the years | $8,000 |
The repayment rule
Vermont does not add a deduction back to income; it asks for 10 % of the distribution itself, capped at the total credits received for that account. The statute lists the uses that escape it: approved postsecondary institutions, registered apprenticeships, qualified student loan repayment, death and disability. Everything outside that list triggers the repayment, including three uses the 2025 federal law treats as qualified. An $8,000 private school bill paid from VT529 costs $800 back to Vermont. A rollover to the beneficiary's Roth IRA and a transfer to another state's 529 are treated the same way, as is a change of beneficiary to a different account.
One exit is free: a rollover to an ABLE account for the same beneficiary is not penalized. The Department's FAQ and VT529's FAQ, both read in October 2026, still list K-12 costs among the uses that require repayment, and we found no Vermont guidance on credential programs. Vermont starts from federal income, so we found no separate state tax on the earnings of a K-12 or Roth withdrawal; the repayment is the cost. VT529 accounts stop accepting money at $550,000 per beneficiary.