Capital gains tax is a tax on income received from the sale of an asset—such as a business, real estate, your home, stocks, bonds, coin collections, and jewelry. Capital gains tax is paid on the financial gain between the amount you paid for (or invested to build) the asset, and the amount for which it is sold.

The rate (percentage) paid as capital gains tax has traditionally been lower than the rate (percentage) paid on income tax. And the Internal Revenue Service (IRS) has traditionally taxed long term gains differently than short term gains—with the distinction based on how long the taxpayer owned or held the asset.

In Vermont, capital gains tax is levied on the profit made from the sale of an asset, such as real estate, stocks, or personal property. The tax rate applied to capital gains can be lower than the regular income tax rate. For federal tax purposes, the IRS distinguishes between short-term and long-term capital gains. Short-term capital gains, for assets held for one year or less, are taxed at ordinary income tax rates, while long-term capital gains, for assets held for more than one year, are taxed at reduced rates, which can vary depending on the taxpayer's income bracket. Vermont also follows this distinction, but it includes state-specific regulations and rates. The state conforms to federal definitions of capital gains but applies its own tax rates. Vermont residents must report capital gains as part of their state income tax return, and they may be eligible for certain state-level exemptions or deductions, such as the exclusion of a portion of capital gains from taxation. It is important for individuals to consult with an attorney or tax specialist to understand the specific implications of capital gains tax on their financial situation in Vermont.