Military Retirement Fully Exempt Under $125,000 AGI — Act 71
From tax year 2025, ALL military retirement and survivor benefit income is exempt for any filing status with adjusted gross income of $125,000 or less — phasing out to nothing at $175,000. Every uniformed service counts, PHS and NOAA corps included. You cannot claim this and the Vermont Social Security exclusion in the same year: a retiree drawing both has to choose.
Verified August 27, 2026
What this benefit is
From tax year 2025, ALL military retirement and survivor benefit income is exempt for any filing status with adjusted gross income of $125,000 or less — phasing out to nothing at $175,000. Every uniformed service counts, PHS and NOAA corps included. You cannot claim this and the Vermont Social Security exclusion in the same year: a retiree drawing both has to choose.
What it's worth: 100% exempt at AGI ≤ $125,000; phased between $125,000 and $175,000; nothing at $175,000+
- The saving is your marginal state rate on the amount exempted; the AGI test is the whole gate — no age or rating is involved.
- A taxpayer may NOT claim both the Vermont Social Security exclusion and the military retirement pay exclusion in the same year.
- That choice falls on most military retirees over 62, who are drawing both. Work out which exclusion is larger for your year before filing — it is not always the military one.
- The amounts and thresholds here are verified against the tax department.
Who is entitled to it
- You receive military retired pay.
- Your home is in this state.
Not sure whether that describes you?
Answer a few questions about this benefit specifically — we only ask what this one actually depends on, and we stop as soon as we know.
How to claim it
Deadline: With your return- 1Claim the exemption on the state return from tax year 2025 — first filed in 2026 under Act 71, signed 25 June 2025.
- 2Survivor benefit income shares the exemption on the same AGI terms — a surviving spouse under the cap excludes the SBP annuity in full.
- 3Title 10 retired pay from every uniformed service qualifies: Army, Navy, Air Force, Space Force, Marines, Coast Guard, National Guard, PHS Commissioned Corps and the NOAA Commissioned Officer Corps.
- File with
- Department of Taxes, on your annual return
- Annual
- Claimed once a year.
Sources
- authority · published policyDepartment of Taxes — military and veterans page (Vermont Act 71, effective tax year 2025)
Why only one source type: The department's own page states both thresholds, the phase-out, the survivor inclusion and the service list in terms; it rendered only in a browser.
This finder provides an informational match, not a government eligibility determination. The responsible agency decides your application.