Tool | November 2018

State-by-State Guide to Taxes on Retirees


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The Bottom Line
Map 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 in the Green Mountain State. It has a steep top income tax rate, and most retirement income is taxed. Starting in 2018, the state began exempting part or all of all or part of Social Security benefits for residents below certain income levels, but it’s still one of Kiplinger’s top ten least tax-friendly states for retirees.

State Sales Tax

6% state levy. Municipalities can add 1% to that, but the average combined rate is 6.18%. 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)

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


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

The median property tax on Vermont’s median home value of $218,900 is $3,893.

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.