Vermont tips calculator: left out of conformity
Vermont updated its tax law to the 2025 federal changes with Act 164 of 2026 — and deliberately left the tips deduction out, so it “will not flow through to Vermont.”
Why it stays out
The Department of Taxes explains that the tips deduction is subtracted from federal taxable income rather than included in AGI, the Vermont starting point, so it does not reach Vermont. Act 164 retroactively updated conformity for 2025 but did not add a Vermont subtraction.
Vermont figures
| Cash wage / minimum | $7.21 / $14.42 |
|---|---|
| In force | July 1, 2026 – December 31, 2026 |
| Next change | after December 31, 2026 — not yet published |
| Tipped threshold | More than $120 a month in tips |
| Tips on the 2025 return | tips stay taxable in this state. The deduction for qualified tip income “will not flow through to Vermont because it is not included in AGI.” Source: Vermont Department of Taxes |
| Tips on the 2026 return | tips stay taxable in this state. Act 164 of 2026 updated conformity but left the tips deduction out. Source: Vermont Department of Taxes |
Service and tipped employees
Vermont’s service-employee wage is half the minimum — $7.21 against $14.42 in 2026 — for workers receiving more than $120 a month in tips. Retail and service businesses with annual gross income under $500,000 are not covered by the state minimum wage law. The 2027 rate had not been published when we verified.
A Burlington server
The $17,000 federal deduction saves $1,910; Vermont taxes the tips. Thirty hours at $7.21 plus $140 of tips leaves $76 owed against $433.
Check a Vermont workweek
Where these figures come from
- Vermont Department of Taxes · Vermont Department of Labor
- H.R. 1 Reconciliation Bill (OBBBA) Conformity (2026)
- Minimum Wages for Tipped Employees (table by state) (2026-07-01)
Federal rules: how the deduction works. Nearby: New York, New Hampshire, Massachusetts.
Figures verified against primary sources on