State-by-State Guide to Taxes on Retirees
Tool | November 2019

State-by-State Guide to Taxes on Retirees


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The Bottom Line
Flag of Vermont

Least Tax-Friendly

You’ll need plenty of firewood to make it through Vermont winters, and plenty of money for the tax bill, too. The Green Mountain State has has a steep top income tax rate, and most retirement income is taxed. The state also taxes all or part of Social Security benefits for single residents with federal adjusted gross income over $45,000 (over $60,000 for married couples filing a joint return).

The average sales tax rate is only 6.22%, and food for home consumption, clothing, and nonprescription drugs are all exempt, limiting this tax's effect (remember, no-sales-tax New Hampshire is next door.

Property taxes are the seventh-highest in the U.S. Homeowners age 65 and older may qualify for a tax credit worth 24% of the Federal Elderly and Permanently Disabled Tax Credit if their household income does not exceed a certain level.

Vermont also taxes estates that exceed $2.75 million in value. The tax is imposed at a flat 16% rate.

State Sales Tax

6% state levy. Municipalities can add 1% to that, but the average combined rate is 6.22%, according to the Tax Foundation. A wide range of clothing is exempt year round.

Income Tax Range

Low: 3.35% (on up to $38,700 of taxable income for singles and up to $64,600 for joint filers)

High: 8.75% (on taxable income over for $195,450 for singles and up to $237,950 for joint filers)

Effective tax rate: 3.35% for single filers, 4.81% for joint filers

Social Security

Social Security benefits are exempt for single filers making less than $45,000 a year ($60,00 for joint filers). This break phases out as income rises and expires for single filers making more than $55,000 ($70,000 for joint filers.)

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt.

Property Taxes

In Vermont, residents pay $1,908 in taxes per $100,000 of assessed home value.

Tax breaks for seniors: If you are 65 and older or disabled, you may qualify for a Vermont tax credit that is worth 24% of the Federal Elderly and Permanently Disabled Tax Credit, as long as you do not exceed certain income limitations.

Vehicle Taxes

Sales tax due on purchases.

Inheritance and Estate Taxes

Estate tax is imposed on estates exceeding $2.75 million. The rate is a flat 16%. There is no inheritance tax.