New Vermont Payroll Tax to Fund Childcare Program Effective July 1, 2024

At A Glance

• Effective July 1, 2024, Vermont employers will be required to make contributions for a new state payroll tax for the Child Care Financial Assistance Program.
• Employers are required to pay 0.44% of an employee’s wages earned in Vermont.
• Employers may choose to deduct and withhold a maximum of 25% of the required 0.44% from employees’ wages.

Introduction 

Under House Bill 217, a new Vermont payroll tax provides funding for the Child Care Financial Assistance Program which subsidizes childcare costs for families based on income.

Vermont employers will be required to make contributions to fund the new child care program beginning July 1, 2024.

• The contribution rate is set at 0.44% of an employee’s wages earned in Vermont. All wages subject to Vermont income tax withholding are also subject to the 0.44% Child Care Contribution.
• Employers may deduct up to 25% of the required contribution from employee wages. If an employer deducts and withholds a portion of the Child Care Contribution from an employee, the employer should report this withheld portion on the employee’s W-2 in Box 14.
• Beginning July 1, 2024, employers will remit payment to the Vermont Department of Taxes in the same manner and frequency as they remit the Vermont income tax withholding. 
• Employers will report the contribution payments quarterly using the Quarterly Withholding Reconciliation form (Form WHT-436). Additional lines are currently being added to the form to support this contribution.
• The first Quarterly Withholding Reconciliation will be for the third quarter of 2024 (July-September), due on October 25, 2024.

For more information on Vermont's wage and payroll tax laws, check out our Vermont Wage and Payroll Tax Facts page.

Next Steps

Paylocity is closely monitoring these changes and awaiting additional agency publications that support employer reporting.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.