Is military retirement pay taxed in Vermont?
By a Navy veteran. Updated October 2026.
Partly
Vermont: Exempt if household income is $125,000 or less. Partial exemption up to $175,000. None above that. Federal income tax still applies to retired pay in every state.
What this means for your plan
Vermont taxes part of military retired pay. The exclusion can depend on your age, your income or the year you served, and only the amount above the exclusion is taxed. Runway uses about 5% as a planning rate for the part that is taxed, and you can change it. Run your own numbers instead of assuming the full amount is taxed or exempt.
VA disability pay is not taxed by the federal government, and most states follow that treatment.
Local taxes in Vermont
No local income tax that we know of. Confirm with your city or county.
Questions
Does Vermont tax military retirement pay?
Partly. Exempt if household income is $125,000 or less. Partial exemption up to $175,000. None above that.
Is VA disability pay taxed in Vermont?
VA disability compensation is not taxed by the federal government, and most states follow that treatment. Confirm with the Vermont Department of Taxes.
Where do I confirm the rules for Vermont?
Use the Vermont Department of Taxes and the DFAS retired pay tax page. Rules change, so check the current year before you decide where to live.
See it for your family
The free planner puts your retired pay, VA pay and Vermont tax on one 24-month timeline, so you can see the month money gets tight. The States tab in the full version compares all 50 states and DC side by side.
Open the plannerSource and method
This summary comes from the state treatment data in the Runway planner, compiled from published state guides. It is not an official ruling. For the official rule, see the Vermont Department of Taxes and the DFAS retired pay tax page.