Vermont Military Retirement Taxes 2026: Complete Tax Guide
Military pension exempt for AGI up to $125K - Green Mountain State
🎯 Quick Summary: Vermont Military Retirement Taxes (2026)
- ✓ Military retirement pay: Exempt when AGI is $125,000 or less
- ✓ VA disability payments: Tax-free (federal and state)
- ✓ State income tax: 3.35% - 8.75% graduated (pension exempt for most)
- ✓ Property tax: Up to $40,000 exemption for veterans
- ✓ Overall ranking: Excellent for retirees seeking rural quality of life
Why Vermont Is Excellent for Military Retirement
Vermont stands out as a hidden gem for military retirees. Since 2025 Vermont has fully exempted military retirement pay for households with AGI of $125,000 or less, which covers most retirees. The break phases out between $125,000 and $175,000 of AGI.
Beyond the exceptional tax benefits, Vermont offers four distinct seasons with stunning fall foliage, exceptionally low crime rates (among the safest states in America), small-town charm with strong community values, world-class outdoor recreation (skiing, hiking, fishing), property tax exemptions for veterans, excellent public schools, farm-to-table dining culture, and a laid-back lifestyle that appeals to many retirees seeking peace and natural beauty.
2026 Vermont Military Retirement Tax Breakdown
State Income Tax on Military Retirement Pay
🎉 Exempt for Most (AGI Cap Applies)
Vermont fully exempts military retirement pay when your AGI is $125,000 or less, with no age requirement. From $125,000 to $175,000 of AGI the exempt share shrinks proportionally (exempt fraction = ($175,000 - AGI) / $50,000), and above $175,000 the pension is taxed at Vermont's graduated rates (3.35% - 8.75%).
VA Disability Compensation
✓ Completely Tax-Free
VA disability payments are tax-exempt at both the federal and Vermont state levels. Whether you receive 10%, 100%, or any rating in between, you keep every dollar.
Vermont State Income Tax (2026)
| Income Type | Tax Rate | Notes |
|---|---|---|
| Military retirement pay | 0% for most | Exempt when AGI is $125,000 or less; phases out to $175,000 |
| VA disability | 0% (Exempt) | All ratings exempt |
| Other income (wages, business) | 3.35% - 8.75% | Graduated rate based on income |
| Social Security benefits | Partially taxable | Based on total income level |
Real Example: How Much You'll Save in Vermont (2026)
Let's compare a military retiree in Vermont vs. New Hampshire to see the tax savings:
Example Scenario: E-7 Retired After 20 Years
- • Military retirement pay: $2,881/month ($34,572/year)
- • VA disability (50%): $1,133/month ($13,595/year)
- • Civilian job: $40,000/year
- • Total annual income: $88,167
Vermont (AGI Under $125K)
AGI is $74,572, under the cap: pension $0 tax
Civilian income: $40,000 × ~5.5% avg = $2,200
State tax: $2,200
New Hampshire (No Income Tax)
No income tax at all (the dividends tax ended in 2025)
But higher property taxes offset some savings
State income tax: $0
Vermont's military pension exemption provides significant value
Over 20 years under the AGI cap: $44,000+ saved on state taxes vs. states that tax military pensions
Cost of Living in Vermont for Military Retirees (2026)
Vermont's cost of living is approximately 2% above the national average, but varies significantly by region. Burlington and ski resort areas are more expensive, while rural communities are very affordable:
| Category | vs National Average | Notes |
|---|---|---|
| Overall | 2% above | Very affordable rural areas |
| Housing | 10% above | Median home: $320K-$360K |
| Healthcare | At average | White River Junction VA Medical Center |
| Groceries | At average | Local farms, co-ops available |
| Utilities | 15% above | Cold winters = high heating costs |
| Transportation | 5% below | Car essential, low traffic |
Military Presence in Vermont
Vermont does not have major active duty military bases, but maintains strong National Guard facilities and a dedicated veteran community:
🎖️ Vermont National Guard Facilities
- Camp Johnson (Colchester) - State Military Reservation, VT Army National Guard HQ
- 158th Fighter Wing (Burlington International Airport) - Air National Guard, F-35A Lightning II
- Vermont Army National Guard - Multiple armories statewide
✈️ Additional Military Presence
- Vermont State Guard - State defense force
- Military museums - Vermont National Guard Museum (Colchester)
- Strong veteran community - High per-capita veteran population
Veteran Healthcare Facilities
Vermont has 1 major VA medical center and several community-based outpatient clinics serving the entire state:
Note: White River Junction VA Medical Center is a full-service facility providing comprehensive healthcare to veterans in Vermont and nearby New Hampshire.
Vermont Military Education Benefits (Tier 2: Good Programs)
Vermont offers solid education benefits for military service members, veterans, and their families. The state provides National Guard tuition assistance and in-state tuition benefits for veterans:
🎓 Vermont National Guard State Tuition Waiver - Partial Tuition at VT State Colleges
Good state Guard benefit! The Vermont National Guard State Tuition Waiver Program provides partial tuition coverage at Vermont state colleges and universities.
- Benefit: Partial tuition waiver at Vermont State Colleges (formerly Vermont State Colleges System)
- Eligibility: Active Vermont National Guard members in good standing
- Coverage varies by funding availability
- Can be combined with Federal Tuition Assistance (up to $4,500/year)
- Covers undergraduate and some graduate programs
- Contact your Education Services Officer for current benefit levels
Note: This program covers partial tuition, not 100% like some other states. However, when combined with Federal TA, it significantly reduces education costs for Guard members.
🏠 In-State Tuition for All Veterans
All honorably discharged veterans qualify for in-state tuition at Vermont public colleges and universities, regardless of residency status.
- Applies to: All Vermont public institutions (Vermont State University system, Community College of Vermont)
- Eligibility: Veterans using GI Bill benefits or who served on active duty for at least 90 days
- Also covers: Spouses and dependents using transferred GI Bill benefits
- No waiting period required
🏫 Vermont State University System
Vermont's state university system (formed in 2023 from merger of former Vermont State Colleges) includes multiple campuses with dedicated veteran services.
Vermont State University Campuses:
- Castleton Campus (Castleton)
- Johnson Campus (Johnson)
- Lyndon Campus (Lyndonville)
- Randolph Campus (Randolph Center) - Vermont Technical College
- Williston Campus (Williston) - Vermont Technical College
All campuses offer veteran-friendly services, military credit transfer, and competitive in-state tuition rates for qualifying veterans.
📚 Community College of Vermont (CCV)
Community College of Vermont provides affordable education with 12 locations statewide, making it accessible to veterans throughout Vermont.
CCV Locations:
- Bennington
- Brattleboro
- Burlington
- Middlebury
- Montpelier
- Newport
- Rutland
- Springfield
- St. Albans
- St. Johnsbury
- White River Junction
- Winooski
Average tuition: ~$8,000/year for in-state students. Fully covered by GI Bill with housing allowance.
🎓 Private Universities in Vermont
Vermont is home to several prestigious private colleges and universities, many participating in the Yellow Ribbon Program.
Notable Private Schools:
- University of Vermont (UVM) - Burlington (state-assisted private university)
- Middlebury College - Middlebury (highly ranked liberal arts)
- Norwich University - Northfield (oldest private military college in US)
- Champlain College - Burlington
- Saint Michael's College - Colchester
- Bennington College - Bennington
Note: Yellow Ribbon amounts and eligibility vary by school and program. Check with each institution's veterans office.
📋 How to Apply for Vermont Military Education Benefits
Vermont National Guard State Tuition Waiver:
- Contact your Vermont National Guard Education Services Officer
- Complete application through your unit
- Apply early (funding may be limited)
- VT National Guard website: vt.ng.mil
State Veteran Benefits & Property Tax Exemption:
- Vermont Office of Veterans Affairs
- Phone: 1-802-828-3379
- Website: veterans.vermont.gov
- Regional veteran service officers available statewide
GI Bill & Federal Benefits:
- Apply for GI Bill through VA.gov
- Contact school's veterans office for enrollment assistance
Best Cities in Vermont for Military Retirees (2026)
| City | Nearby Military/VA | Median Home Price | Why It's Great |
|---|---|---|---|
| Burlington | 158th Fighter Wing, VA Clinic | $425,000 | Largest city, Lake Champlain, vibrant downtown, UVM |
| Montpelier | VA Clinic (nearby) | $340,000 | State capital, small-town charm, walkable, excellent schools |
| Brattleboro | VA Clinic | $310,000 | Arts community, Connecticut River, close to White River VA |
| Rutland | VA Clinic | $265,000 | Most affordable, ski country, outdoor recreation, strong community |
Pros and Cons of Retiring in Vermont
✅ Pros
- • Pension exempt when AGI is $125,000 or less
- • Property tax exemption up to $40,000 for veterans
- • Lowest crime rate in the nation
- • Stunning natural beauty and four distinct seasons
- • Excellent public schools
- • Strong sense of community
- • World-class outdoor recreation (skiing, hiking, fishing)
- • Farm-to-table dining culture
- • Very rural and peaceful
- • No major urban sprawl
- • White River Junction VA Medical Center
- • High quality of life
⚠️ Cons
- • Very cold winters with heavy snow
- • High heating costs (utilities 15% above average)
- • No major active duty military bases
- • Limited job market (very rural)
- • Higher housing costs than some rural states
- • Graduated state income tax on civilian earnings (3.35%-8.75%)
- • Social Security partially taxable
- • Limited shopping and entertainment options
- • Car absolutely necessary
- • Smaller veteran community than states with bases
- • Remote location (long drives to major cities)
Frequently Asked Questions
Does Vermont tax military retirement pay?
Not for most retirees. Vermont fully exempts military retirement pay when your AGI is $125,000 or less. Between $125,000 and $175,000 the exemption phases out, and above $175,000 it disappears. Active duty, reserve, and National Guard pensions all qualify, with no age requirement.
What is Vermont's state income tax rate in 2026?
Vermont has a graduated state income tax ranging from 3.35% to 8.75% (2026). Military retirement pay escapes it entirely when your AGI is $125,000 or less. You pay these rates on other taxable income like civilian wages or business income. The rates are progressive, so higher earners pay higher percentages on the top portion of their income.
What property tax benefits do veterans get in Vermont?
Vermont offers a property tax exemption of up to $40,000 of assessed value for qualifying veterans. To qualify, you must be a Vermont resident who served during wartime or received an armed forces expeditionary medal. The exemption reduces your property's assessed value, lowering your annual property tax bill. Contact your local town clerk or Vermont Office of Veterans Affairs to apply.
Are there any active duty military bases in Vermont?
Vermont does not have any major active duty military bases. However, the state has Vermont National Guard facilities including Camp Johnson in Colchester (VT Army National Guard headquarters) and the 158th Fighter Wing at Burlington International Airport (F-35A Lightning II operations). The primary VA healthcare facility is the White River Junction VA Medical Center, which serves veterans throughout Vermont.
Does Vermont offer education benefits for National Guard?
Yes. Vermont offers the Vermont National Guard State Tuition Waiver Program, which provides partial tuition coverage at Vermont state colleges and universities for active Vermont National Guard members. The benefit can be combined with Federal Tuition Assistance (up to $4,500/year). Guard members should contact their Education Services Officer for details on current funding levels and availability.
What is the cost of living in Vermont for military retirees?
Vermont's overall cost of living is approximately 2% above the national average. Housing costs are about 10% higher than average (median home prices $320K-$360K), and utilities are 15% higher due to cold winters requiring significant heating. However, the state offers excellent quality of life with low crime rates (lowest in the nation), strong community values, beautiful scenery, and four-season outdoor recreation. Rural areas are very affordable, while Burlington and ski resort areas are more expensive.
Is Vermont a good state for military retirees who love the outdoors?
Absolutely! Vermont is one of the best states for outdoor enthusiasts. The state offers world-class skiing (Killington, Stowe, Sugarbush, Stratton), excellent hiking (Long Trail, Green Mountains, Appalachian Trail), fishing (Lake Champlain, numerous rivers and streams), hunting, mountain biking, kayaking, and year-round outdoor activities. With 100% military pension exemption and low crime rates, Vermont is ideal for retirees seeking an active outdoor lifestyle in a safe, beautiful environment.
Calculate Your Vermont Retirement Income
Use our free calculator to see exactly how much you'll keep after taxes when retiring in Vermont. Factor in your military pension, VA disability, and any civilian income to plan your retirement with confidence.
Ready to Calculate Your Vermont Retirement Income?
See exactly what civilian salary you need based on your retirement pay, VA disability, and Vermont's AGI-capped pension exemption
Use the Free Calculator →Comparing states? The $4.99 worksheet ranks your exact pension in all 50, Vermont included, with 20-year state tax totals for each. Get the worksheet or see a sample first.
See how Vermont stacks up in the full 50-state ranking of military retirement taxes.
🍁 Bottom Line for Vermont Military Retirement
Vermont offers solid tax advantages for military retirees: the pension is exempt when AGI is $125,000 or less, plus property tax exemptions up to $40,000. Combined with the lowest crime rate in America, stunning natural beauty, strong community values, excellent outdoor recreation, and high quality of life, Vermont is an exceptional retirement destination for servicemembers who value peace, safety, and rural living. Use our calculator above to see your exact financial picture in the Green Mountain State.
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