Vermont’s Childcare Contribution Payroll Tax: What it Means to Employers and Employees

In 2023 Vermont enacted legislation to help working families pay for quality childcare with the stated objective of allowing for greater participation in the Vermont workforce.  As part of this legislation, a new payroll tax was created called the Child Care Contribution (CCC) which is to fund the Child Care Financial Assistance Program. 

To prepare yourself and your employees for this new tax, here are some key points we want to share with you.

For Employers:

  • The CCC will be calculated on all wages paid after July 1, 2024.
  • Employers will be required to pay a 0.44% payroll tax on all wages earned in Vermont.
  • There is no wage cap on this amount. If a wage is subject to Vermont withholding then it is also subject to the CCC.
  • Employers may choose to withhold up to 25% of the CCC (0.11%) from employee wages.
  • Employers are not required to withhold the same amount from each employee.
  • The CCC will be remitted on the same schedule as your current Vermont withholding deposit schedule.
  • The CCC will be reported on your quarterly Vermont withholding filings (form WHT-436).
  • Self-employed individuals will also have to pay the CCC on their self-employment income at a rate of 0.11%.
  • This tax will be calculated and remitted with the Self-employed annual Vermont income tax return.
  • For 2024 only the CCC will only apply to self-employed income earned after July 1, 2024. This calculation will default as being 50% of 2024 self-employment income earned unless the taxpayer represents a different percentage for self-employment income that was earned from July 1, 2024 through December 31, 2024.
  • Vermont has issued a Guidebook to assist Employers with navigating this new payroll tax which can be found here: The Vermont Child Care Contribution

For Employees:

  • Your employer may elect to withhold up to 0.11% of the CCC from your earned wages.
  • Employees do not have any filing requirements regarding the CCC.
  • If your employer chooses to withhold a portion of the CCC from your wages, you will begin seeing these deductions on your paycheck dates beginning on and after July 1, 2024.
  • Any amounts withheld from your wages will be reported on your W-2 tax form at year-end in Box 14.

As always, we are here to assist you in implementing these changes.  Please contact us and any member of our Convergent Accounting team can assist with your questions.

This post is shared by Davis & Hodgdon CPAs as a service to our clients, business associates and friends.  Recipients should not act on the information presented without seeking prior professional advice.  Additional guidance may be obtained by contacting us at 802-878-1963 (Williston) or 802.775.7132 (Rutland).

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