Vermont bill proposes to exclude military disability retirement income from personal income taxation.

Vermont H0603 amends state tax law to exclude military disability retirement income from personal income taxation. The exclusion applies retroactively from January 1, 2026, and to taxable years beginning on and after that date. Eligible taxpayers can exclude all federally taxable U.S. military retirement income and survivor benefit income if their federal adjusted gross income is less than or equal to $125,000. A proportional exclusion applies for incomes between $125,000 and $175,000, with no exclusion for incomes of $175,000 or more.

Vermont bill proposes to exclude military disability retirement income from personal income taxation.

Vermont H0603 amends state tax law to exclude military disability retirement income from personal income taxation. The exclusion applies retroactively from January 1, 2026, and to taxable years beginning on and after that date. Eligible taxpayers can exclude all federally taxable U.S. military retirement income and survivor benefit income if their federal adjusted gross income is less than or equal to $125,000. A proportional exclusion applies for incomes between $125,000 and $175,000, with no exclusion for incomes of $175,000 or more.