Does Vermont tax military retirement pay?
Partly taxed
Partly. Vermont lets retirees below its income thresholds exclude the first $10,000 of military retirement income. You can take only one of its retirement exemptions.
In the state's own words
Copied word for word from the official document linked below each quote:
“Vermont allows retirees to exclude the first $10,000 of income from military retirement.”
“Retirees are eligible for this exemption if their income falls below the thresholds for the Social Security exemption.”
Other retirement income in Vermont
Yes, generally. Vermont's retirement breaks are specific: up to $10,000 of federal Civil Service Retirement System income for filers under its income limits, similar exclusions for certain other systems, and an exemption for military retirement income. The Vermont pension page has the details, and the Vermont Social Security page covers Social Security. Partly. Vermont exempts Social Security in full at lower incomes and phases the exemption out as income rises. For single filers in 2025, it is full up to $55,000 of adjusted gross income and gone at $65,000.
Before you file or move
This page is about state income tax only. Your federal return has its own rules for military retired pay, and VA disability compensation is a separate benefit from retired pay. State rules change, and the details (age, years, which kinds of pay qualify, survivor benefits) matter. Check with the Vermont Department of Taxes before you file or move.
Other states in the same group
Check our work
The answer above comes from this document. Follow the link and compare.
- Seniors and RetireesVermont Department of Taxes. Read on November 13, 2026.