State guides · VT

How Vermont taxes retirement income

Some 2026 figures pending confirmation  Tax year 2026 · research last updated October 2, 2026

At a glance

Tax rates

Brackets apply to Vermont taxable income. Other filing statuses are in the rules reference.

Social Security

Vermont taxes some Social Security, depending on age or income.

Taxable SS (federal 1040 line 6b) is subtracted in full if Vermont AGI (IN-111 line 1 = federal AGI) < $55,000 (single, HOH, surviving spouse, MFS) or < $70,000 (MFJ). Partial between $55,000-$65,000 / $70,000-$80,000: exempt fraction = (upper limit [$65,000 or $80,000] - AGI) / $10,000, rounded to 2 decimals, capped at 1, times taxable SS. None at AGI >= $65,000 / $80,000. Thresholds are fixed dollar amounts in 32 V.S.A. 5830e(a) (raised $5,000 by 2025 legislation, Act 71), not indexed; same for TY2026 . Taxpayer must elect EITHER this SS exemption OR the CSRS/non-SS government pension exemption — only one per return.

Pensions, IRAs and 401(k)s

Roth conversions

A Roth conversion counts as taxable income for Vermont. Whether a retirement income exclusion can cover part of it depends on the rules above.

Capital gains

Exclusion = greater of (a) flat exclusion: smaller of $5,000 or adjusted net capital gain, or (b) 40% of adjusted net capital gain from assets held MORE THAN 3 YEARS, capped at $350,000 — but publicly traded stocks/bonds/other financial instruments, depreciable personal property, and real estate used as a home are NOT eligible for the 40% exclusion; then limited to 40% of federal taxable income (Schedule IN-153). For a typical retiree with only marketable securities, only the $5,000 flat exclusion applies.

Credits and relief for older residents

• Vermont credit for the elderly or disabled. Subtraction from Vermont tax (IN-119) tied to the federal Schedule R credit (24% of federal credit, per Vermont's historic percentage) — see verify; rarely applies (federal Schedule R has very low income limits).
• Charitable contribution credit. Nonrefundable credit = 5% of the first $20,000 of IRC 170 charitable contributions, available whether or not the taxpayer itemizes federally.
• Medical expense deduction. Subtraction for federal Schedule A medical expenses (line 4) minus non-allowable items (e.g., retirement community fees) in excess of the Vermont standard deduction + personal exemptions (IN-111 line 6).

More detail from our research notes

Brackets, standard deduction, personal exemption and the 65+/blind add-on are TY2026 amounts DERIVED by statute (32 V.S.A. 5822(b)(2), 5811(21)(D)); single/MFJ brackets and the $5,400 exemption match the 2026 withholding tables (GB-1210-2026). Indexed annually. 2026 legislative session (Department of Taxes 2026 legislation summary) made no changes to rates, brackets, standard deduction, SS or retirement exemptions; it conformed to the IRC as of 12/31/2025 (Act 164 Secs. 60-61), added a QSBS add-back, and raised the property tax credit maximum for claims filed from 2027 (property-tax side, not modeled). Nothing retiree-relevant is scheduled for TY2027+. Additional standard deduction per federal 'box' checked (65+ or blind): $1,250 for TY2025, $1,300 derived for TY2026. Minimum tax: if federal AGI > $150,000, Vermont tax (IN-111 line 8) is the greater of the rate-schedule tax or 3% of federal AGI less US-obligation interest. Vermont adds 24% of the federal additional tax on early qualified-plan/IRA distributions. Tax tables apply below $75,000 taxable income; rate schedules above. US-obligation interest and railroad retirement are subtracted. Vermont does not allow itemized deductions (other than the medical subtraction and the charitable credit).

Pending confirmation

These points were still being confirmed against Vermont's published 2026 forms when this page was built. Most are waiting on forms the state publishes around the turn of the year.

4 items

• 2026 MFS/HOH brackets, standard deductions ($7,850/$15,700/$11,800) and the $1,300 age/blind add-on are DERIVED (32 V.S.A. 5822(b)(2), 5811(21)(D): 2017 base x CPI-U by the IRC 1(f)(3) method, which reproduces every published 2025 amount). Single/MFJ brackets and the $5,400 exemption match the 2026 withholding tables (GB-1210-2026). No 2026 rate schedule or IN-111 instructions posted as of 2026-10-02 (tax.vermont.gov/sites/tax/files/documents/IN-111-Instr-2026.pdf returns 404). Expected Dec 2026-Jan 2027 on https://tax.vermont.gov/document-categories/tax-rates-and-charts (a '2026 VT Rate Schedules' entry; only 2025 is listed as of 2026-10-02) and the 2026 IN-111 instructions.
• Whether the $10,000 CSRS exemption is per person or per return on a joint return (worksheet wording suggests per return).
• Elderly/disabled credit percentage (24%) not confirmed from the 2025 IN-119 instructions.
• Medical expense deduction taken only when the federal return itemizes ('taken at the federal level', 5811(21)(C)(iv)); continuing-care entrance fees (worksheet line 1b) aren't an input.

Sources

Every figure comes from these documents, mostly the state's own forms, instructions and statutes.

1. 2025 IN-111 instructions: rate schedules, standard deduction chart, $1,250 add-on, $5,300 exemption, 3% minimum tax over $150k AGI, worked example MFJ $85,000https://tax.vermont.gov/sites/tax/files/documents/IN-111-Instr-2025.pdf
2. 2025 IN-112 instructions: Retirement Income Exemption Worksheet (SS or CSRS election, $55k/$65k and $70k/$80k), military worksheet ($125k-$175k), medical deductionhttps://tax.vermont.gov/sites/tax/files/documents/IN-112-Instr-2025.pdf
3. 2025 Schedule IN-153 capital gains exclusion ($5,000 flat; 40% of >3-yr gains excl. publicly traded securities, $350,000 cap; 40% of federal taxable income limit)https://tax.vermont.gov/sites/tax/files/documents/IN-153-2025.pdf
4. 2025 legislation summary: SS and CSRS thresholds +$5,000, military exemptionhttps://tax.vermont.gov/tax-law-and-guidance/tax-legislation/2025
5. 2026 legislation summary: no rate/bracket/SS/retirement changes; QSBS add-back; Department of Taxes 2026 legislation summary, read 2026-10-02https://tax.vermont.gov/tax-law-and-guidance/tax-legislation/2026
6. 32 V.S.A. 5830e (SS and CSRS exemption thresholds $55k/$65k, $70k/$80k fixed; military exemption)https://legislature.vermont.gov/statutes/section/32/151/05830e
7. 2026 VT withholding tables GB-1210-2026: single/married brackets + $5,400 allowancehttps://tax.vermont.gov/sites/tax/files/documents/GB-1210-2026.pdf

Taxtirement's Vermont calculation is also checked against a second, independent implementation on 1,000 random households. How we check our numbers.

This page summarizes Vermont's 2026 rules as Taxtirement applies them, for education and planning. It isn't tax advice, and it doesn't cover every situation (for example part-year residents, businesses or military-only provisions). Rules change; check the state's current instructions, or a tax professional, before you act. Spotted something wrong? Tell us.