The Vermont retirement income tax reaches Social Security, but exempts it in full when your federal adjusted gross income (AGI) is at or below the threshold for your filing status. That threshold is $55,000 if you file as single, head of household, married filing separately, or surviving spouse, and $70,000 for married or civil-union couples filing jointly.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e At or under your line your benefits are untaxed by Vermont; above it the exemption phases out, and it is gone at $65,000 or more for that first group and at $80,000 or more for joint filers. Vermont also excludes all federally taxable U.S. military retirement and survivor benefit income when federal AGI is $125,000 or less, excludes the first $10,000 of Civil Service and other non-Social-Security-covered government pension income, and taxes IRA and 401(k) withdrawals in full.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e
This guide walks through the threshold for each filing status and the phase-out, the military exclusion and the $10,000 government-pension exclusion, and how retirement-account income is treated.
In This Guide
- Vermont Retirement Income Tax at a Glance
- The Threshold for Your Filing Status
- Vermont Retirement Income Tax: How It Works
- Social Security
- The CSRS, Government Pension, and Military Exclusions
- 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. A full Social Security exemption applies at or below an AGI line that depends on your filing status, a $10,000 exclusion covers Civil Service and other government pensions whose earnings were not covered by Social Security, a far larger exclusion covers military retirement pay, and ordinary retirement-account income is taxable.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e The table below summarizes each type.
| Income type | Treatment | Income test |
|---|---|---|
| Social Security | Fully exempt at or below the threshold; phases out above | AGI threshold set by filing status (see below) |
| Military retirement and survivor benefits | Fully excluded | Federal AGI $125,000 or less; phases out to zero at $175,000 |
| CSRS and other non-Social-Security-covered government pensions | First $10,000 excluded | Same $55,000 / $70,000 AGI tests as Social Security |
| Other pensions and annuities | Taxable unless covered by an 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, running from 3.35 percent to a top rate of 8.75 percent.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e Retirement income that does not qualify for an exemption is taxed under that schedule.
The Threshold for Your Filing Status
Vermont does not use one income line. It groups filers who are single, head of household, married filing separately, or a surviving spouse under a $55,000 threshold, and puts married and civil-union couples filing jointly under a $70,000 one.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e Find your status in the table below, and that is the figure your federal AGI is measured against.
| Filing status | Fully exempt if your federal AGI is | Exemption is gone at |
|---|---|---|
| Single | $55,000 or less | $65,000 or higher |
| Head of household | $55,000 or less | $65,000 or higher |
| Married filing separately | $55,000 or less | $65,000 or higher |
| Surviving spouse | $55,000 or less | $65,000 or higher |
| Married filing jointly | $70,000 or less | $80,000 or higher |
| Civil-union joint filers | $70,000 or less | $80,000 or higher |
Note the direction, because it decides the borderline case. Vermont's full exemption reaches income at or below the figure, not merely under it, so a head-of-household filer at exactly $55,000 is still fully exempt, and so is one at $52,000.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e The same is true of a married-filing-separately filer at those amounts. Between the threshold and the point where the break disappears, the exemption phases out rather than cutting off, so income a little over the line reduces it instead of erasing it.
The joint line is worth pinning down, because one line of state guidance reads differently from the rest. 32 V.S.A. § 5830e sets the joint full-exemption ceiling at $70,000 of federal AGI, and the Department of Taxes exemption table and phase-out list agree with it: full exemption up to $70,000, a partial exemption from $70,001 to $79,999, and none at $80,000 or more.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e A single sentence of prose on that same Department page still says $65,000. The statute governs, so a couple at $67,000 of AGI is fully exempt.
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, a $10,000 exclusion for certain government pensions, and a far larger exclusion for military retirement pay. The center of the system is the Social Security threshold: a full exemption applies for taxpayers with federal AGI at or below $55,000 if they file as single, head of household, married filing separately, or surviving spouse, and at or below $70,000 for married and civil-union couples filing jointly, phasing out between $55,000 and $65,000 for the first group and between $70,000 and $80,000 for joint filers, and gone entirely at $65,000 or more and at $80,000 or more.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e
The phase-out is gradual rather than a cliff, so income modestly above your line reduces the exemption instead of wiping it out all at once. The Vermont Department of Taxes publishes the exemption rules and the current-year figures, and the underlying rule sits in 32 V.S.A. § 5830e, if you want to confirm your own treatment.
Social Security
Vermont fully exempts Social Security benefits for taxpayers with federal AGI at or below $55,000 if they file as single, head of household, married filing separately, or surviving spouse, and at or below $70,000 for married and civil-union couples filing jointly.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e If you are at or under the line for your status, none of your Social Security is taxed by Vermont. A widowed parent filing as head of household on $52,000 of AGI is in the same position as a single filer on $52,000: fully exempt.
Above the threshold, the exemption phases out smoothly. A single, head-of-household, married-filing-separately, or surviving-spouse filer between $55,000 and $65,000 keeps part of the exemption, and at $65,000 or more it is gone entirely; a joint filer between $70,000 and $80,000 keeps part of it, and at $80,000 or more it is gone.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e Retirees near the line should run their actual numbers rather than assuming.
The CSRS, Government Pension, and Military Exclusions
Vermont's military break is the largest of the three, and it is not a $10,000 cap. All federally taxable U.S. military retirement income and survivor benefit income is excluded when federal AGI is $125,000 or less, and the exclusion phases down to zero at $175,000.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e A Vermont military retiree at or under that line owes no Vermont income tax on that retirement pay at all.
The $10,000 figure belongs to a different break. Vermont excludes the first $10,000 of Civil Service Retirement System (CSRS) income, measured against the same federal AGI lines the Social Security exemption uses: $55,000 for single, head-of-household, married-filing-separately, and surviving-spouse filers, and $70,000 for joint filers.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e The same $10,000 treatment extends to other contributory government retirement systems whose earnings were not covered by Social Security, which is where a retired teacher or municipal employee on a non-Social-Security-covered pension may find it.
Which of these you can claim together has a rule of its own, and it favors military retirees. A taxpayer eligible for more than one of the Social Security, Civil Service, and other-contributory-system exclusions must elect only one of them. The military exclusion sits outside that limit: a taxpayer eligible for it may elect it regardless of whether they also elect one of the other three.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e So a military retiree drawing Social Security can take both.
IRA, 401(k), and Other Retirement Accounts
Vermont taxes IRA and 401(k) distributions in full.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e There is no separate exemption for traditional retirement-account withdrawals, so this income is taxed under Vermont's regular schedule regardless of age.
That leaves retirees who live mostly on IRA and 401(k) money with the least protection, since neither the Social Security exemption nor the government-pension and military exclusions reach 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 for your filing status and shrink that exemption too.
Picture a Vermont retiree filing as head of household 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 $55,000 threshold that applies to head-of-household filers, so part of the Social Security exemption phases out and some benefits become taxable too.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e 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
Vermont's Social Security exemption runs off exact income lines: a full exemption at or below $55,000 for single, head-of-household, married-filing-separately, and surviving-spouse filers, and at or below $70,000 for married and civil-union couples filing jointly, phasing out to nothing at $65,000 or more for the first group and at $80,000 or more for joint filers.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e One wrinkle affects couples: a single sentence on the Department of Taxes exemption page still puts the joint full-exemption ceiling at $65,000, while 32 V.S.A. § 5830e and that same page's own table and phase-out list all put it at $70,000.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e The statute governs.
This is general information rather than personalized tax advice. Because Vermont's exemptions are income-tested and the government-pension and military exclusions interact with the Social Security exemption, a tax professional or the current Vermont Department of Taxes 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
Does Vermont tax Social Security?
It depends on income and how you file. Vermont fully exempts Social Security for taxpayers with federal AGI at or below $55,000 if they file as single, head of household, married filing separately, or surviving spouse, and at or below $70,000 for married and civil-union couples filing jointly.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e Above your line the exemption is reduced, and it is gone at $65,000 or more for the first group and at $80,000 or more for joint filers.
What is the Vermont threshold if I file as head of household or married filing separately?
$55,000 of federal adjusted gross income, the same threshold Vermont applies to single and surviving-spouse filers.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e The line is inclusive, so a head-of-household filer at $52,000, or one at exactly $55,000, is fully exempt from Vermont tax on Social Security; the same holds for a married-filing-separately filer at those amounts. The exemption then phases out and is gone at $65,000 or higher. Only married and civil-union couples filing jointly use the higher joint threshold.
Does Vermont tax IRA and 401(k) distributions?
Yes. Vermont taxes traditional IRA and 401(k) distributions in full under its regular schedule.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e There is no separate exemption for retirement-account income.
Is military retirement income taxed in Vermont?
For most military retirees, no. Vermont excludes all federally taxable U.S. military retirement income and survivor benefit income when federal AGI is $125,000 or less, and the exclusion phases down to zero at $175,000.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e At $175,000 of AGI or more, that retirement pay is fully taxable by Vermont.
At what income does the Social Security exemption disappear?
For single, head-of-household, married-filing-separately, and surviving-spouse filers, the Vermont exemption phases out between $55,000 and $65,000 of federal AGI and is fully gone at $65,000 or higher. For married and civil-union couples filing jointly, it phases out between $70,000 and $80,000 and is gone at $80,000 or more.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e
Can I claim more than one Vermont retirement exclusion?
If one of them is the military exclusion, yes. A taxpayer eligible for the military retirement and survivor benefit exclusion may elect it regardless of whether they also elect the Social Security, Civil Service, or other-contributory-system exclusion.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e Those other three are the ones you must choose between: a taxpayer eligible for more than one of them elects only one.
Next Steps
If you are retired in Vermont, start with the Social Security threshold and confirm where your income lands before doing anything else.
- Find the threshold for your filing status: $55,000 if you file single, head of household, married filing separately, or surviving spouse; $70,000 if you file jointly as a married or civil-union couple.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e
- Compare your federal AGI to that line to see whether your Social Security is fully exempt, in phase-out, or fully taxable. Income at the line still counts as fully exempt.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e
- Check the military exclusion if you have U.S. military retirement or survivor benefit income, and the $10,000 exclusion if you have CSRS or another non-Social-Security-covered government pension.legislature.vermont.gov. (n.d.). 32 V.S.A. § 5830e — Retirement income; Social Security income (all four exclusions and the election rule). Retrieved Jul 30, 2026, from https://legislature.vermont.gov/statutes/section/32/151/05830e
- 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
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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.
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