Mostly taxed
How Vermont taxes retirement income
Vermont exempts Social Security in full for single filers with income up to $55,000 and married couples filing jointly up to $70,000 (2025). The exemption phases out above those lines and ends at $65,000 for single filers and $80,000 for joint filers.
Most pensions are taxed. The exception is retirement income from systems that did not pay into Social Security: federal Civil Service Retirement System annuities and similar public pensions can have the first $10,000 excluded, under the same income limits. Vermont retirees can claim either the Social Security exemption or this exclusion, not both. Withdrawals from 401(k), 403(b), 457(b) and IRA accounts are taxed.
Income above the exemptions is taxed at rates from 3.35% to 8.75%, among the higher top rates in New England.
Questions
Does Vermont tax Social Security?
Not for single filers under $55,000 or joint filers under $70,000. It phases in above those lines.
Does Vermont tax VSTRS teacher pensions?
Yes. Vermont teachers pay into Social Security, so their pensions are taxed like other pensions.
Is there an exclusion for federal pensions?
Yes. Up to $10,000 of CSRS and similar non-covered public pensions, for moderate incomes.