More Vermonters Exempt From Social Security Taxes Thanks to New AARP-Backed Law

More Vermonters will be exempt from paying state taxes on their Social Security benefits, thanks to new legislation signed by Gov. Phil Scott. The law will raise the Social Security tax income exemption threshold from $45,000 to $50,000 for single filers and from $60,000 to $65,000 for joint filers, meaning more residents will be able to receive their benefits without paying state taxes.

The law also creates a tax exclusion for the first $10,000 of retirement income earned each year from military pensions and certain retirement programs for low- and middle-income Vermonters. We were active in pushing the bill over the finish line, encouraging Vermont residents to reach out to their elected officials to voice support for the bill.

Vermont is one of only 12 states that taxes residents’ Social Security benefits, although several states, including New Mexico, are either considering or have advanced legislation that would eliminate the tax on at least some residents. Nebraska passed AARP-backed legislation earlier this year that will phase out taxes on Social Security benefits by 2025 instead of the previously planned deadline of 2030.

Read more about Vermont’s new tax legislation, and visit our Social Security Research Center for more information about the program.