Military retirement pay in Vermont
Varies
Does Vermont Tax Military Retirement Pay?
Short answer: Partly. Starting in tax year 2025 (Act 71), Vermont fully exempts military retirement and survivor benefit income when federal AGI is $125,000 or less. The exemption phases out between $125,000 and $175,000, and none is allowed at $175,000 or above. In the phase-out range, the exempt share is ($175,000 minus AGI) divided by $50,000. The same rules apply to military survivor benefits. S.17, a 2026 bill for a full exemption, had not been enacted when we checked. Other retirement income: Private pensions and 401(k)/IRA withdrawals are taxed with no general retirement exclusion.
Military retired pay is taxable federally; VA disability compensation isn't taxed federally or by any state.
Records to keep: Keep your state return, W-2s and 1099s (1099-R, SSA-1099), and any state credit worksheets. Check your state revenue department's current-year instructions before you file.
Military retirement pay in Vermont
Varies
Individuals / Personal Taxes
Partly. Starting in tax year 2025 (Act 71), Vermont fully exempts military retirement and survivor benefit income when federal AGI is $125,000 or less. The exemption phases out between $125,000 and $175,000, and none is allowed at $175,000 or above. In the phase-out range, the exempt share is ($175,000 minus AGI) divided by $50,000. The same rules apply to military survivor benefits. S.17, a 2026 bill for a full exemption, had not been enacted when we checked. Other retirement income: Private pensions and 401(k)/IRA withdrawals are taxed with no general retirement exclusion.
Business justification
Partly. Starting in tax year 2025 (Act 71), Vermont fully exempts military retirement and survivor benefit income when federal AGI is $125,000 or less. The exemption phases out between $125,000 and $175,000, and none is allowed at $175,000 or above. In the phase-out range, the exempt share is ($175,000 minus AGI) divided by $50,000. The same rules apply to military survivor benefits. S.17, a 2026 bill for a full exemption, had not been enacted when we checked. Other retirement income: Private pensions and 401(k)/IRA withdrawals are taxed with no general retirement exclusion. Military retired pay is taxable federally; VA disability compensation isn't taxed federally or by any state.
Category
- Personal Tax Deductions