Credits and breaks for Vermont families: the $1,000 child credit, EITC at 38%, child care at 72%

The Vermont return has no dependent deduction beyond the $5,300 personal exemption (2025 figure) for each child, and no itemizing, so the help for families is concentrated in four refundable credits on Schedule IN-112, Part II. The Vermont Child Tax Credit pays $1,000 for every child who was 6 or younger at the end of the year, in full at federal AGI of $125,000 or less, with no earnings requirement and no connection to the federal credit. The Vermont earned income credit is 38% of the federal EITC for a worker with a qualifying child. The child and dependent care credit is 72% of the federal Form 2441 credit. A $250 Veteran Tax Credit goes to low-income veterans. All four are refundable: they are paid even when there is no Vermont tax to offset, which for a family in the 3.35% bracket is usually the case. A family that owes $1,500 of Vermont tax and has $1,756 of these credits gets a check for the difference plus every dollar withheld.

Two things follow. First, a Vermont family with young children should file even when no return is required, because the credits only arrive on a return. Second, the credits are driven by federal AGI and by the federal return’s own credits, so getting the federal side right, the dependents, the EITC, the Form 2441, is most of the work. The Vermont lines are multiplications.

The Vermont Child Tax Credit

Schedule IN-112, Part II, lines 3 and 4. Count the children claimed as dependents who were age 6 or under on December 31, 2026, which for the 2026 return means children born in 2020 through 2026, and multiply by $1,000. The credit is $1,000 per child when federal AGI is $125,000 or less. Above that it falls by $20 for every $1,000 of AGI, so a family at $150,000 gets $500 per child, and at $174,001 it is zero. There is no earned income test, no minimum income, and no requirement that the child qualify for the federal child tax credit beyond being a dependent. A one-year-old born in December 2026 counts for the full $1,000.

The age cutoff is the thing to watch. Act 71 of 2025 raised it from 5 to 6, so a child who turned 6 during 2026 still qualifies; a child who turned 7 does not. A family with children aged 3 and 7 gets $1,000, not $2,000. Part-year residents prorate the credit, along with the other refundable credits, by the Vermont share of their income for the year (Schedule IN-113 line 14B over line 14A, carried to IN-112 Part II lines 14 through 17), not by the number of months in the state.

The earned income credit

Lines 5 through 7. Vermont’s EITC is 38% of the federal credit for a worker with one or more qualifying children, and 100% of the federal credit for a worker with none. The qualifying children are the ones on federal Schedule EIC, the federal credit is from Form 1040 line 27, and the Vermont line is the multiplication. Because it is pegged to the federal credit, the federal rules carry over: the earned income and AGI limits, the investment income limit, the age range for childless workers, the rule that a child can be claimed by only one parent. Whatever the IRS allows or disallows, Vermont follows. A family whose federal EITC is $3,000 gets $1,140 from Vermont; a childless worker whose federal credit is $600 gets another $600.

The child and dependent care credit

Lines 1 and 2. Take the federal credit from Form 2441, line 11, and multiply by 72%. The federal credit is nonrefundable, so a low-income family may get less of it than the formula suggests; the Vermont credit is refundable and is figured on the federal credit as computed on Form 2441, before the federal tax limit (verify). The federal law of July 2025 raised the top federal rate to 50% for the lowest incomes and raised the dependent care FSA limit to $7,500 for 2026; both flow through to Vermont, the first because the Vermont credit rides on the federal one and the second because an FSA reduces federal AGI. Expenses paid through an FSA cannot also go on Form 2441.

The Veteran Tax Credit

Lines 8 through 12. A Vermont resident or part-year resident with a discharge or separation record (a DD-214 or equivalent) gets a refundable $250, in full at federal AGI of $25,000 or less, reduced by $5 for every $100 of AGI above that, and gone at $30,000. Two veterans married to each other with combined AGI under $30,000 may each be eligible; the Department asks those couples to call.

Part-year residents prorate the refundable credits by the Vermont share of the year’s income, from Schedule IN-113. The Renter Credit requires Vermont domicile for the whole year.

College savings: the VT529 credit

Vermont gives a credit, not a deduction, for contributions to the Vermont Higher Education Investment Plan (VT529): 10% of the first $2,500 contributed per beneficiary, so $250 per child, or $500 per child on a joint return where both spouses contribute up to $2,500 each (verify). It is nonrefundable and claimed on Schedule IN-119. Contributions to another state’s 529 plan do not qualify. Grandparents who are Vermont residents and contribute to a grandchild’s VT529 account can take the credit on their own return. Because the federal return asks nothing about 529 deposits, this is the credit most often left off.

There is no Vermont deduction or credit for K-12 tuition, and no Vermont education credit beyond this one. The federal American Opportunity and Lifetime Learning credits have no Vermont counterpart, though a student loan interest subtraction exists: Schedule IN-112 line 16 lets a filer subtract student loan interest paid in the year beyond what was deducted federally, unless AGI is over $120,000 ($200,000 joint).

Head of household

Vermont uses the federal filing status, so a single parent who qualifies as head of household federally is head of household in Vermont. The status is worth more here than a flat-rate state would make it: the Vermont standard deduction for head of household was $11,450 for 2025 against $7,650 for single, and the head-of-household rate schedule holds the 3.35% bracket to $68,000 of taxable income on the preliminary 2026 schedule (verify) against $50,750 for a single filer. Which parent claims a child, and therefore the exemption, the Child Tax Credit and the EITC share, follows the federal rules: generally the parent the child lived with for more nights, and Form 8332 if the custodial parent releases the federal child tax credit to the other. The Vermont Child Tax Credit goes to whoever claims the child as a dependent on the Vermont return.

Renters and homeowners

Families who rent should not skip the Renter Credit, Form RCC-146. It needs Vermont domicile for the whole year, at least six months of rent paid, and household income under the county limit for the household size; for the 2025 claim a four-person household in Chittenden County qualified for the full credit up to $38,950 of income and a partial credit up to $84,370, with lower lines in other counties (2026 claim limits to come). The credit is based on 10% of HUD fair market rent for the county, not on the rent actually paid, and it can be claimed on myVTax without filing an income tax return. The landlord files a Landlord Certificate with the Department; you no longer need a copy to file, but the claim is not paid until it is on file. Due April 15, final October 15, no extension.

Families who own file the Homestead Declaration (Form HS-122) every year by April 15, and if household income is $115,400 or less for the 2026 claim (2027 ceiling to come) claim the Property Tax Credit of up to $8,000 on the same form with Schedule HI-144. Household income counts everyone in the home, including a parent living with you and, above a threshold, a dependent child’s wages (verify).

The Child Care Contribution

Since July 2024 Vermont has funded its child care subsidy with a 0.44% payroll tax, the Child Care Contribution. Employers pay it on wages and may withhold up to a quarter of it, 0.11%, from the employee (verify); the self-employed pay 0.11% of net self-employment income on IN-111 line 21. It is not a credit and not deductible, but it shows up on Vermont pay stubs and on the return, and parents ask about it.