Vermont taxes Social Security, but exempts it entirely for retirees whose income stays under a modest threshold. Below about $55,000 single or $65,000 joint in federal AGI, your benefits come out fully; above that, the exemption phases out. The Vermont retirement income tax also gives a small break to certain military and federal retirees, while taxing IRA and 401(k) withdrawals in full.
This guide explains the Social Security thresholds, the $10,000 CSRS and military exclusion, and how retirement-account income is treated, with a note on confirming the current figures.
In This Guide
- Vermont Retirement Income Tax at a Glance
- Vermont Retirement Income Tax: How It Works
- Social Security
- The $10,000 CSRS and Military Exclusion
- IRA, 401(k), and Other Retirement Accounts
- Confirm the Current Thresholds
- Frequently Asked Questions
- Next Steps
Vermont Retirement Income Tax at a Glance
Vermont's retirement breaks are income-tested and relatively modest. A full Social Security exemption applies below an AGI threshold, a small exclusion covers certain government and military pensions, and ordinary retirement-account income is taxable. The table below summarizes each type. The thresholds shown are approximate and adjust over time.
| Income type | Treatment | Income test |
|---|---|---|
| Social Security | Fully exempt below the threshold; phases out above | About $55,000 single / $65,000 joint AGI |
| CSRS and military retirement | Up to $10,000 exclusion | Income-tested to the same Social Security thresholds |
| Other pensions and annuities | Taxable unless covered by the exclusion above | n/a |
| IRA and 401(k) distributions | Taxable | n/a |
| Senior-specific exclusion | The income-tested rules above serve this role | See above |
Vermont's income tax is graduated from 3.35 percent to 8.75 percent. Retirement income that does not qualify for an exemption is taxed under that schedule.
Vermont Retirement Income Tax: How It Works
Vermont starts by treating Social Security and most retirement income as taxable, then layers on an income-tested exemption for Social Security and a small exclusion for certain pensions. The center of the system is the Social Security threshold: a full exemption applies for taxpayers with federal AGI up to about $55,000 (single) or about $65,000 (married filing jointly), with the exemption phasing out smoothly for income above those levels.
These thresholds are approximate and adjust over time, so the Vermont Department of Taxes publishes the current-year figures, and you should confirm them before relying on a specific number. The phase-out is gradual rather than a cliff, so income modestly above the threshold reduces the exemption rather than wiping it out all at once.
Social Security
Vermont fully exempts Social Security benefits for taxpayers with federal AGI up to about $55,000 single or about $65,000 joint. If you are under those approximate levels, none of your Social Security is taxed by Vermont.
Above the thresholds, the exemption phases out smoothly. A single filer somewhat above $55,000 keeps part of the exemption; as income rises further, the exempt share shrinks toward zero. Because the figures adjust and the phase-out is gradual, retirees near the line should run their actual numbers against the current Vermont thresholds rather than assuming.
The $10,000 CSRS and Military Exclusion
Vermont offers a separate exclusion of up to $10,000 for Civil Service Retirement System (CSRS) and military retirement income, income-tested to the same Social Security thresholds of about $55,000 single and about $65,000 joint. This is a targeted break for certain federal civil-service retirees and military retirees, not a general pension exemption.
One limit matters: a taxpayer can generally claim only one of these retirement exemptions, rather than stacking the Social Security exemption and the $10,000 exclusion without regard to the rules. The exclusion is modest at $10,000, but for a qualifying military or CSRS retiree under the income threshold it is a real reduction in Vermont taxable income.
IRA, 401(k), and Other Retirement Accounts
Vermont taxes IRA and 401(k) distributions in full. There is no separate exemption for traditional retirement-account withdrawals, so this income is taxed under Vermont's regular schedule regardless of age.
That makes Vermont relatively heavy on retirees who live mostly on IRA and 401(k) money, since neither the Social Security exemption nor the narrow CSRS-and-military exclusion reaches that income. It also means a large account withdrawal does double duty against you: it is taxable itself, and by raising your AGI it can push you past the Social Security threshold and shrink that exemption too.
Picture a single Vermont retiree with $22,000 in Social Security and AGI comfortably under the threshold, so the benefits are fully exempt. In one year they take a $40,000 IRA withdrawal to cover a care expense. That $40,000 is taxable on its own, and it also lifts the retiree's AGI above the roughly $55,000 single threshold, so part of the Social Security exemption phases out and some benefits become taxable too. The single withdrawal costs the retiree twice. Spreading the same withdrawal across two or more years, where the situation allows, can keep AGI under the line and preserve the Social Security break. The figures here are hypothetical and shown only to illustrate the mechanic; they are not a real case and not a prediction of your own outcome.
For how these accounts fit into paying for care, retirement accounts for care covers the withdrawal tradeoffs.
Confirm the Current Thresholds
The single most important caveat in this guide is that the Social Security thresholds, about $55,000 single and about $65,000 joint, are approximate and adjust over time. Vermont updates the figures, and the phase-out math runs off the exact current-year numbers. Before you decide whether you qualify or plan a withdrawal around the line, confirm the present thresholds directly with the Vermont Department of Taxes.
This is general information rather than personalized tax advice. Because Vermont's exemptions are income-tested and the CSRS-and-military rule interacts with the Social Security exemption, a tax professional or the current Vermont guidance is the right place to confirm your specific situation. If retirement income is part of how you will fund care, building a senior care funding plan is a useful next step.
Near the Vermont income threshold and unsure where you land? Chat with Brevy's care navigator to think it through.
Frequently Asked Questions
It depends on income. Vermont fully exempts Social Security for taxpayers with federal AGI up to about $55,000 single or about $65,000 joint, with the exemption phasing out above those approximate levels. Confirm the current figures with the Vermont Department of Taxes.
Yes. Vermont taxes traditional IRA and 401(k) distributions in full under its regular schedule. There is no separate exemption for retirement-account income.
Vermont offers an exclusion of up to $10,000 for military and CSRS retirement income, income-tested to the same Social Security thresholds. Amounts above the exclusion, or income over the thresholds, are taxable.
Because the figures adjust over time. The roughly $55,000 single and $65,000 joint thresholds are approximate, so you should confirm the current year's exact numbers with the Vermont Department of Taxes before relying on them.
Generally a taxpayer claims one of these retirement exemptions rather than stacking them freely. Check the current Vermont rules to see which applies best to your situation.
Next Steps
If you are retired in Vermont, start with the Social Security threshold and confirm the current figure before doing anything else.
- Confirm the current thresholds (about $55,000 single / $65,000 joint) with the Vermont Department of Taxes.
- Compare your federal AGI to those figures to see whether your Social Security is fully exempt.
- Check the $10,000 exclusion if you have CSRS or military retirement income.
- Plan for tax on IRA and 401(k) withdrawals, which Vermont taxes in full and which can also lift your AGI past the threshold.
If you are mapping how to pay for care, how to pay for senior care lays out the options.
Learn More
Find personalized help making sense of the Vermont retirement income tax at brevy.com.
The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.