Does Vermont tax Social Security benefits?

Vermont fully exempts Social Security benefits from state tax if your federal AGI is at or below $50,000 (single or head of household) or $65,000 (married filing jointly). Above those thresholds the exclusion phases out linearly over the next $10,000 of AGI, after which Social Security is taxed to the extent it is included in federal income.

Are pensions and 401(k) withdrawals taxed in Vermont?

Yes. Vermont taxes most pension income, annuity payments, and IRA or 401(k) withdrawals as ordinary income at its graduated rates of 3.35% to 8.75% (2025). There is no general retirement-income exclusion beyond the Social Security and military/CSRS provisions, so these distributions are taxed in full.

Does Vermont give a break on military retirement pay?

Yes. Vermont allows an exclusion of up to $10,000 of eligible military retirement pay (and certain CSRS pensions), subject to the same AGI-based phase-out used for Social Security. Above the income thresholds the exclusion shrinks and eventually disappears. The calculator applies the $10,000 cap and phase-out automatically.

What are Vermont's 2025 income tax rates?

Vermont has four brackets in 2025: 3.35%, 6.60%, 7.60% and 8.75%. The bracket thresholds differ by filing status. Taxable retirement income is stacked through these brackets just like wages, which is why your AGI and the mix of income streams matter for the final figure.

Is this a substitute for filing advice?

No. This is a planning estimate using published 2025 Vermont rules. Actual Vermont returns involve the standard deduction, personal exemptions, credits and the precise federal taxable amount of Social Security. Use the result for budgeting and confirm with a tax professional or tax.vermont.gov.

Vermont Retirement Income Tax Calculator

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Retirees often assume one state is much like another for taxes — but Vermont has specific rules that can sharply change the picture. This calculator models how Vermont treats the four most common retirement income streams: Social Security, pensions, IRA/401(k) withdrawals, and military/CSRS pay, applying Vermont’s AGI-based exclusions and its graduated rates.

How it works

Each income type follows its own rule:

Social Security is fully exempt if federal AGI is at/below $50,000 (single) or $65,000 (married filing jointly). Above that, the exclusion phases out linearly over the next $10,000 of AGI. The calculator computes the excluded fraction and taxes only the remainder.
Military / CSRS pay gets an exclusion of up to $10,000, subject to the same AGI phase-out.
Pensions, IRA and 401(k) withdrawals are taxed as ordinary income — no special exclusion.

All taxable retirement income is then stacked through Vermont’s 2025 brackets: 3.35% / 6.60% / 7.60% / 8.75%.

Example and notes

A single retiree with $55,000 AGI receiving $24,000 of Social Security sits inside the phase-out band: with the full-exemption floor at $50,000 and the band ending at $60,000, half the band remains, so 50% of the taxable Social Security is excluded. Pension and 401(k) dollars are taxed in full. The tool shows exactly how much of each stream Vermont reaches.

Because the Social Security exclusion hinges on a hard AGI threshold, even a small change in other income — an extra IRA withdrawal, for instance — can pull more of your benefits into the taxable band. This is a planning estimate; confirm details at tax.vermont.gov before filing.