Vermont taxes most forms of retirement income at rates from 3.35% to 8.75%. This includes Social Security benefits and income from retirement accounts. Military pensions are not taxed. Public pensions are fully taxed. Income from 401(k), 403(b), IRA, or other qualified retirement plans is taxed at your marginal tax rate.
Vermont is not a great state for retirees when it comes to taxes. Property taxes are high compared to most states. Sales tax rate is about average but many essential items are exempt. Income tax rates go up to 8.95% which is high nationally. Vermont also has an estate tax.
Social Security retirement benefits in Vermont are taxable if taxed federally. In general, Social Security is taxed if you have other income sources besides Social Security benefits.
Alaska and New Hampshire have no income tax, no sales tax and no tax on Social Security benefits.
Does Vermont give tax breaks to seniors?
- Retirement income is generally taxable, except federal railroad benefits.
- Vermont has not indicated plans to stop taxing Social Security.