Tool | November 2017

State-by-State Guide to Taxes on Retirees

Vermont

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The Bottom Line
Map of Vermont

Least Tax-Friendly

One of Kiplinger's top ten least tax-friendly states for retirees, the Green Mountain State doesn't coddle retirees. Not only does it tax most retirement income, including Social Security, it has a steep top income tax rate. Vermont's state sales tax rate is 6%, and local jurisdictions may add up to 1%.

State Sales Tax

6% state levy. Municipalities can add 1% to that, but the average combined rate is 6.17%. A wide range of clothing is exempt. Soda, however, is taxable.

Income Tax Range

Low: 3.55% (on up to $37,950 of taxable income for singles and up to $63,350 for joint filers)

High: 8.95% (on taxable income over $416,700 for single filers and over $421,900 for joint filers)Low: 3.55% (on up to $37,950 of taxable income for singles and up to $63,350 for joint filers)

High: 8.95% (on taxable income over $416,700)

Effective tax rate: 3.6%/individual, 5.2%/joint

Social Security

Social Security benefits are taxed to the extent they are taxed at the federal level.

Exemptions for Other Retirement Income

Railroad Retirement benefits are exempt, but all other retirement income is taxed. Out-of-state government pensions are fully taxed.

IRAs

Taxable at ordinary income tax rates.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Taxable at ordinary income tax rates.

Private Pensions

Taxable at ordinary income tax rates.

Public Pensions

Taxable at ordinary income tax rates.

Property Taxes

Eligible Vermont residents can make a claim for a rebate of their school and municipal property taxes if their household income does not exceed a certain level. Generally, household incomes of $99,000 or more do not receive an adjustment. The maximum property tax adjustment is $8,000.

There is a property tax exemption for veterans. The first $10,000 (may be increased up to $40,000 by a vote of the town) of appraisal value of the residence of a qualifying veteran, his or her surviving spouse, or child may be exempt.

The median property tax on Vermont's median home value of $214,600 is $3,797.

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.

Inheritance and Estate Taxes

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