Below is a list of Vermont's subtractions from income.
Adjustment for Past Bonus Depreciation (Form IN-112)
Enter the difference between the depreciation calculated by standard MACRS methods and the depreciation calculated using the Federal bonus depreciation for assets placed in service for the current tax year.
Railroad Retirement Income (Form IN-112)
Enter the Railroad Retirement income (Tier 1) and (Tier 2) amount received. Even though this income is taxable on a Federal level, it is exempt from Vermont tax. For Social Security that includes (Tier 1) or (Tier 2) benefits, only enter the portion included in your Federal Adjusted Gross Income.
Bond/Note Interest Income (Form IN-112)
The following Bonds/Interest income below may be subtracted;
- Vermont Student Assistance Corporation
- Build America
- Vermont Telecommunications Authority
- Vermont Public Power Supply Authority
The income is exempt from Vermont income tax, to the extent the interest or income is included in the Federal Adjusted Gross Income.
Military Retirement Income Exemption (IN-112)
For taxpayers of any filing status with Adjusted Gross Income equal to or less than $125,000, all military retirement and survivor benefit income is exempt. For income greater than $125,000, but less than $175,000, the exempt income decreases as the taxpayer's income increases. Income equal to or greater than $175,000, would not qualify for the exemption.
Military Pay (Form IN-113)
You may enter the amount of VT exempt military pay received in 2025 that is included in your Federal Adjusted Gross Income. Exempt Military Pay is:
- Wages earned from the armed services for full-time active duty outside of Vermont. You may be asked to provide the Required Supporting Documents: Copy of active duty orders.
- Up to $2,000 for National Guard or U.S. Reserve training pay earned in Vermont if your Adjusted Gross Income for tax year 2025 is less than $50,000. You may be asked to provide the Required Supporting Documents: Copy of DFAS form or certification statement from unit that all training was completed during the calendar year.
- Student loan repayment can be taken only if the amount is included in your Adjusted Gross Income. Enter the repayment benefit made under 10 U.S.C. Chapters 109 and 1609 for 2025. You may be asked to provide the Required Supporting Documents: Certification statement from armed services showing your name, address, social security number, amount of student loan repayment, and payment date.
Veteran Tax Credit (IN-112)
The Vermont Veteran Tax Credit was signed into law on June 25, 2025, as part of Act 71. Any Vermont Resident or Part-Year Resident who has a discharge record or other record of separation from Active Duty, may receive a refundable tax credit in the amount of $250, if the Federal Adjusted Gross Income is less than, or equal to $25,000. For Veterans with income greater than $25,000, but less than $30,000, the credit decreases as income increases. Income equal to, or greater than $30,000, do not qualify for the credit.
VT-based Solar Energy Credit (Form IN-119)
Any unused VT-based business solar energy credit may be carried forward for five years following the year the credit was claimed.
Investment Tax Credit (Form IN-119)
This credit is limited to the amount of Investment Tax Credit attributable to the Vermont-property portion from federal Form 3468.
Vermont Capital Gains Exclusion (Form IN-153)
The general exclusion amount for tax year 2025 is $5,000 or the actual amount of net adjusted capital gains, whichever is less.
To enter any of the following subtractions from income on your Vermont return within your account, please follow the steps below:
- State Section
- Edit (3 dots)
- Subtractions from Income