Saving for college through a 529 plan can cut your Vermont tax bill — but Vermont’s benefit works differently from most states. Instead of a deduction, Vermont gives a 10% income-tax credit on contributions to the Vermont Higher Education Investment Plan (VHEIP). This calculator computes that credit, applies the per-beneficiary cap, and respects the nonrefundable limit against the tax you actually owe.
How it works
The Vermont credit follows a simple formula with a per-beneficiary cap:
- Eligible base — the first $2,500 of contributions per beneficiary for a single filer, or $5,000 combined for a married couple filing jointly.
- Credit — 10% of that eligible base, so up to $250 per beneficiary (single) or $500 per beneficiary (joint).
- Nonrefundable — the credit cannot exceed your Vermont tax owed; excess may carry forward.
Credit = min(contribution, base) × number of beneficiaries × 10%, then limited to your
Vermont tax owed.
Example and notes
A single parent contributing $3,000 for one child earns the credit only on the first $2,500, for a $250 credit. A married couple contributing $5,000 for the same child can claim up to $500. Contributing for two children doubles the available cap, since the limit is per beneficiary.
Because this is a credit, not a deduction, it reduces your tax dollar-for-dollar — generally more valuable than a deduction. But it applies only to VHEIP, Vermont’s own plan, not to out-of-state 529s. This is an estimate; confirm current rules at tax.vermont.gov and vheip.org before filing.