Vermont’s property tax system is supposed to protect low-income homeowners from unaffordable tax burdens. But recent cases in Windham suggest that some Vermonters are being billed far beyond their legal tax cap, raising concerns about whether this is an isolated incident or a statewide failure.

Under 32 V.S.A. § 6066, Vermont homeowners earning $47,000 or less should never pay more than 5% of their income in property taxes on their house and up to 2 acres. That’s the law. Yet some Windham residents received tax bills as high as 16% of their income—more than three times the statutory limit.

This isn’t just a minor miscalculation. It’s an error that could be forcing people to overpay by thousands of dollars, or worse, risk foreclosure if they can’t cover an illegitimate bill. The question now is: Did this only happen in Windham, or are other Vermont towns sending out similarly inflated tax bills?

How We Learned About This Issue

This issue first came to our attention through an email sent to the Governor, Tax Commissioner Shouldice, and Vermont Legislators by concerned citizens from Windham. In their message, they raised concerns about overbilling due to a misapplication of Vermont’s income sensitivity program, which is meant to protect lower-income homeowners from excessive property taxes.

Vermont’s Income Sensitivity Cap: What It Actually Covers

Vermont’s income sensitivity program is designed to prevent property taxes from becoming a crushing burden for lower-income homeowners. If a homeowner earns $47,000 or less, their total property tax bill should not exceed 5% of their income—split as 3% municipal taxes and 2% education taxes.

However, this cap only applies to the primary residence and up to 2 acres. Any additional land is taxed at full value. This is where some homeowners—especially those in rural areas—may still see higher tax bills despite qualifying for the cap.

For example:

• A homeowner earning $35,000/year with a house and 10 acres
• Their house + 2 acres qualify for the 5% income cap ($1,750 max tax)
• Their remaining 8 acres are taxed at full municipal & education rates

This distinction is important because some taxpayers may assume their entire property is capped, when in reality, only part of it qualifies.

What Happened in Windham?

Windham’s recent property reappraisal led to steep increases in home valuations. Normally, the income cap should have protected qualifying homeowners from any unaffordable tax spike. But that’s not what happened.

Instead, several Windham residents—who met both the income and property requirements—received tax bills up to four times what they should have been charged. One taxpayer, who earned less than $15,000/year, should have been capped at 4.5% of their income (about $675 in total taxes). Instead, they were billed at 16% of their income—more than $2,300.

The town’s Board of Abatement had to manually correct these errors. That raises an alarming question:
➡️ Why didn’t the state’s income sensitivity cap apply automatically, as it should have?

If Windham residents were overbilled, how many other towns may have made the same mistake?

Homeowners Can Challenge Overbilled Property Taxes

If a tax bill exceeds the statutory cap, homeowners have the right to dispute the overage and should not be forced to pay beyond the legal limit.

• Towns must ensure that income sensitivity adjustments are properly applied.
• Homeowners should review their tax bill and verify whether they were charged more than 5% of their income.
• If an error occurred, they should immediately request an abatement or appeal.

However, some homeowners may still overpay if their mortgage escrow accounts were charged based on the inflated tax bill. If a mortgage lender escrowed the wrong amount, homeowners should demand a recalculation and refund.

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How the Overheated Housing Market Made This Worse

This problem didn’t happen in a vacuum. Vermont’s overheated housing market is part of the reason for these massive reappraisal spikes.

Over the past few years, out-of-state buyers have been purchasing homes at significantly inflated prices—sometimes without ever setting foot on the property. This has driven up property valuations in towns like Windham, forcing longtime residents into higher tax brackets through no fault of their own.

The income sensitivity cap should have prevented this from harming lower-income Vermonters. But if the system fails to apply the cap correctly, the very people it was designed to protect are left footing the bill for a market distortion they had nothing to do with.

Is This Happening in Other Vermont Towns?

If Windham saw this issue, there’s a real chance other towns have also misapplied tax bills.

• Did other Boards of Abatement have to intervene?
• Did some towns collect the overbilled taxes without realizing the error?
• How many Vermonters have already overpaid without knowing they were overbilled?

These questions need answers—and fast.

Final Thought: Hold Towns & the State Accountable

The Windham tax overbilling case isn’t just about one town—it’s about whether Vermont is properly enforcing the property tax protections already on the books.

If Vermont’s income sensitivity system isn’t being applied correctly, how many other Vermonters have been forced to pay taxes they never legally owed?

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Dave Soulia | FYIVT

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