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, or married filing separately, and at least $65,000 for married or civil-union couples filing jointly. 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 higher for that first group and by $80,000 for joint filers. Vermont also gives certain military and Civil Service retirees a $10,000 exclusion, while taxing IRA and 401(k) withdrawals in full.

This guide walks through the threshold for each filing status and the phase-out, the $10,000 CSRS and military exclusion, and how retirement-account income is treated.

In This Guide

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 certain government and military pensions, and ordinary retirement-account income is taxable. 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)
CSRS and military retirement Up to $10,000 exclusion Income-tested to comparable 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, topping out at 8.75 percent. 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, or married filing separately under a $55,000 threshold, and puts married and civil-union couples filing jointly on a higher one. 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
Married filing jointly $65,000 or less, and the statute puts it as high as $70,000 $80,000 or higher
Civil-union joint filers $65,000 or less, and the statute puts it as high as $70,000 $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. 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 carries one caveat worth knowing before you file. The Vermont statute sets the joint full-exemption ceiling as high as $70,000 of federal AGI, while the Department of Taxes retiree summary uses $65,000. A couple at $65,000 or below is fully exempt under either reading; a couple between $65,000 and $70,000 should confirm their treatment against current Vermont guidance. Both sources agree the joint exemption is gone by $80,000.

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 $10,000 exclusion for certain pensions. 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, or married filing separately, and at or below $65,000 for married and civil-union couples filing jointly, phasing out across the next band of income and disappearing at $65,000 or higher for the first group and by $80,000 for joint filers.

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, or married filing separately, and at or below $65,000 for married and civil-union couples filing jointly. 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, or married-filing-separately filer between $55,000 and $65,000 keeps part of the exemption; at $65,000 or higher it is gone entirely, and the same happens for joint filers by $80,000. Retirees near the line should run their actual numbers 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 comparable thresholds. 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. The exclusion is modest, 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 leaves retirees who live mostly on IRA and 401(k) money with the least protection, 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 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. 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, and married-filing-separately filers, and at or below $65,000 for married and civil-union couples filing jointly, phasing out across the next band of income and disappearing at $65,000 or higher for the first group and by $80,000 for joint filers. One wrinkle affects couples: 32 V.S.A. § 5830e sets the joint full-exemption ceiling as high as $70,000, above the $65,000 the Department of Taxes retiree summary uses, so a couple with AGI between $65,000 and $70,000 should confirm their exact treatment with the current Vermont guidance.

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 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, or married filing separately, and at or below $65,000 for married and civil-union couples filing jointly. Above your line the exemption phases out, disappearing at $65,000 or higher for the first group and by $80,000 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 filers. 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. There is no separate exemption for retirement-account income.

Is military retirement income taxed in Vermont?

Vermont excludes up to $10,000 of military and CSRS retirement income, income-tested to comparable thresholds. Amounts above the exclusion, or income over the thresholds, are taxable.

At what income does the Social Security exemption disappear?

For single, head-of-household, and married-filing-separately 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 above the joint threshold and is gone by $80,000.

Can I claim both the Social Security exemption and the $10,000 exclusion?

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 where your income lands before doing anything else.

  • Find the threshold for your filing status: $55,000 if you file single, head of household, or married filing separately; $65,000 if you file jointly as a married or civil-union couple.
  • 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.
  • 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

FinancialVermont Senior Property Tax ReliefHow Vermont homeowners reduce their property-tax bill with the Property Tax Credit on Form HS-122, income up to $115,400, maximum $8,000, available at any age. FinancialVermont Estate TaxDoes Vermont have an estate tax? Yes, with a flat $5 million exemption and a flat 16% rate on the value above it. No inheritance tax. Here's how it works. FinancialHow Each State Taxes Retirement IncomeRetirement income tax varies enormously by state. Learn how states treat Social Security, pensions, and IRA or 401(k) money, and find your state's rules. FinancialHow to Pay for Senior CareHow to pay for senior care: what it costs nationally and how Medicaid, Medicare, VA benefits, and private pay each fit. Who qualifies, what's covered, in 2026. FinancialBuilding a Senior Care Funding PlanA step-by-step plan to pay for senior care: estimate the cost, inventory income and assets, find the payers you qualify for, sequence them, and get free help. FinancialRetirement Accounts for CareHow to use a retirement account to pay for senior care: the tax on IRA and 401(k) withdrawals, the early-penalty exceptions, RMDs at 73, and the tax-spike trap.

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.

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Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.