No, military retirement is not fully taxable in Vermont for 2025 due to a new tax law, Act 71. The exemption is tiered based on your Federal Adjusted Gross Income (AGI).
2025 Vermont military retirement tax exemptions
Full exemption: If your Federal AGI is $125,000 or less, your military retirement pay and survivor benefits are fully exempt from Vermont state income tax.
Partial exemption: If your Federal AGI is between $125,000 and $175,000, you will receive a partial exemption. The amount of the exemption is calculated proportionally.
No exemption: If your Federal AGI is over $175,000, your military retirement pay is not eligible for this exemption.
Survivor benefits: These benefits are also covered by the new exemption.
Retroactive: The new law is retroactive to January 1, 2025, meaning you can apply the exemptions on your 2025 income taxes, which will be filed in 2026.