Vermont Real Estate Prebate Season- Explained

Today (another Bee-u-t-ful day in Vermont), I went to a class called ‘Vermont property tax prebate/rebate’, presented by a local attorney.  Don’t you just

Let the fun begin!

love the topics this time of year…taxes, taxes, taxes!  This tax issue has to do with all the Vermonters who have lived in a ‘homestead’ for all of 2009 and whose net household income is less than $97,000.  I’m sorry I can’t define the ‘net household’ part for you, but that’s why tax season is so much fun.  We all get to do a whole lot of esoteric figuring and then wait to  hear back from the tax department to see what we got wrong.

First of all, let’s get the terminology straight.  The prebate is formally known as a property tax adjustment.  It came from act 60 in the early part of the 2000’s.  What it attempts to do is redistribute education tax money we all send to the state so that children, no matter what town they live in (property rich vs. property poor), have better access to an equal education.  Now, I don’t know the numbers, but based on the $97,000 threshold and the fact that the average household income in Vermont is way less, many Vermonters get some prebate factored into their tax bill (yea!).  It could be as low as almost nothing, up to $8,000!  Most people would not get the higher amount, but the reason I’m telling you all this is the effect this prebate has on the real estate transaction between 4/1 and July 1.  April 1 of each year, as Vermonters know by now, is the date we establish whether a home is a primary residence which is taxed at a lower rate than if a home is not considered a primary residence, and qualifies us for a possible prebate.  Prebates are received as equally divided credits on our tax bills throughout the year.

"Considering the tax shelter"

In Colchester, for instance, property taxes are due in August, November and March (March 15, to be exact).  If a transaction closes between March 15 and April 1, that’s easy because the seller has already received back all the prebate they are due.  The prebate doesn’t affect the transaction.  Any other time during the year, the prebate is a predetermined cost to negotiate between a seller and buyer.  EXCEPT, between 4/1 and 7/1, every year, the prebate can only be estimated by the seller since the state won’t have the exact number available until 7/1.  Many times, this isn’t a huge deal if the seller’s tax situation hasn’t changed much from the year before (a ball park figure can be helpful).  To be more accurate, it’s best if the seller completes a worksheet, available at the VT Dept. of Taxes website.  You’ll need to have your forms HS 122 and HS 144 completed to fill out the worksheet.  Confused yet?

Why does this matter to anyone anyway?  Well, since I’m a Buyers Agent, I definitely want to know if my buyer is going to have shell out some extra coin to factor into the transaction BEFORE closing (like, way before closing).  And, my buyer would rather not wait until halfway through the closing process to find out, either.  Remember, no surprises before or during a closing is a good thing.  I hope you’ve enjoyed this simplified explanation.  It’s time for another cup of joe.

This entry was posted on Thursday, March 18th, 2010 at 3:52 pm and is filed under Seasonal VT News, VT Real Estate Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.