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Fiscal office: HR1 leaves some federal deductions below Vermont’s taxable line but boosts child care credit refundable amount
Summary
State fiscal staff explained that many new federal deductions in HR1 appear below federal AGI and therefore generally do not reduce Vermont taxable income, while the federal child and dependent care credit’s expansion may increase Vermont tax expenditures because Vermont couples to that federal credit.
At a joint Ways & Means and Senate Finance briefing, Patrick Thirkin of the fiscal office walked committee members through how several HR1 changes to individual tax rules interact with Vermont’s tax base.
Thirkin used federal Form 1040 and Schedule 1 to illustrate the concept of “above the line” (federal adjusted gross income) and “below the line” amounts. He said Vermont starts with federal AGI (line 11a on the Form 1040) and that many new HR1 deductions—tips, overtime pay, auto loan interest and the enhanced senior deduction—appear on…
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