Vermont Veteran Benefits: What the Statutes Actually Say
Vermont's veteran benefits, cited to statute. The military retirement exclusion is now income-tested rather than capped, and the property tax exemption is set by your town.
Vermont rewrote its military retirement exclusion and most summaries have not caught up. The old rule was a flat $10,000 cap. The new rule excludes all of it below an income threshold and none of it above one, which is a very different calculation and creates a cliff worth planning around.
The property tax exemption, meanwhile, is decided by town vote within a statutory band, so two Vermont towns can give the same veteran four times the benefit.
Every figure below is cited to the statute or the state agency that administers it.
Military retirement pay: all or nothing, by AGI
Under 32 V.S.A. 5830e, military retirement and survivor benefit income is:
- Fully excluded if your federal adjusted gross income is at or below $125,000
- Phased out between $125,000 and $175,000
- Gone entirely at $175,000 and above
The old $10,000 cap was removed, retroactive to 2025. So if you read a guide saying Vermont exempts only $10,000 of military retirement, that guide is out of date.
Vermont's top marginal rate is 8.75 percent, so the swing is significant. Two things follow:
- Below $125,000 AGI, Vermont is better than it looks. A full military pension exclusion plus a full survivor benefit exclusion in a high-rate state is worth more than the same exclusion in a low-rate state.
- The phase-out band is a planning problem. Between $125,000 and $175,000 of AGI, each additional dollar of income costs you exclusion as well as being taxed. If you are near the bottom of that band, timing a TSP withdrawal or a Roth conversion into a different year is worth a conversation with a tax preparer.
Note it is federal AGI, which includes your spouse's income on a joint return. VA disability compensation is not taxable and does not count toward AGI.
Property tax: $10,000 to $40,000, and your town picks
Under 32 V.S.A. 3802(11), Vermont exempts a portion of the appraised value of a veteran's primary residence.
Eligibility:
- VA disability compensation for at least 50 percent disability, or a VA pension, or permanent medical retirement
- Must be your primary residence
The amount:
- $10,000 of appraised value is the statutory minimum
- A town may vote to raise it up to $40,000
Two important points.
It does not scale with your rating. A veteran at 50 percent and a veteran at 100 percent receive the same amount. The rating is a qualification test, not a multiplier.
The town vote is the whole story. Vermont's effective property tax rate is about 1.51 percent, which is high. At that rate, a $10,000 exemption saves roughly $151 a year and a $40,000 exemption saves about $604. Before buying in a specific Vermont town, call the listers or the town clerk and ask what amount they have adopted under 3802(11). It is a four-fold difference and nobody will mention it unprompted.
Vermont is one of the 29 jurisdictions that do not fully exempt property tax for a veteran rated 100 percent permanent and total.
A detail worth noting: eligibility includes veterans receiving a VA pension or permanent medical retirement, not only those with a 50 percent or higher disability rating. That is broader than most state statutes and is frequently left out of summaries.
Surviving spouses
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Unremarried surviving spouses, and also minor children, of veterans who qualified may continue the exemption on the primary residence, at the same minimum $10,000 and up to $40,000 at town option. See the Vermont Office of Veterans Affairs property tax exemption page.
State employment preference
Under 20 V.S.A. 1543 and 3 V.S.A. 310(f), per Vermont Human Resources:
- 5 points added to an employment test score for eligible veterans
- 10 points for disabled veterans
The extra that is easy to miss: eligible veterans may also apply to some State promotional-only postings. Those are normally closed to outside applicants, so this effectively opens a hidden set of vacancies to veterans who do not currently work for the state.
Hunting and fishing
Vermont resident veterans who have ever had a service-connected VA disability rating of 60 percent or greater qualify for a free permanent fishing, hunting, or combination license. See Vermont Fish and Wildlife.
Read "ever had" carefully. If your rating was once 60 percent or above and has since been reduced, you still qualify. That is unusually forgiving drafting, and it is the opposite of how most states handle a reduced rating.
Vehicles and licenses
Free veteran designation. The Vermont DMV adds a "VETERAN" designation to a driver license or non-driver ID at no additional charge, once the Office of Veterans Affairs confirms honorable-discharge status. See Vermont DMV military page.
Veteran and Disabled Veteran plates. Any veteran may apply for a Veterans' plate. Disabled veterans qualify for the Disabled Veteran plate with a certified Certificate of Veteran Status (form VG-168) and a medical form. VA-financed vehicles register free of fees. See Vermont DMV military plates.
The state veterans home
The Vermont Veterans' Home in Bennington is a state-operated 177-bed nursing home providing skilled nursing care.
Eligibility: veterans who served at least 90 days with an honorable discharge, plus Gold Star parents and spouses. Vermont veterans receive admission priority, but the 90-day service floor is low and there is no disability requirement.
What the common summaries get wrong
| Claim you will see | What is actually true |
|---|---|
| "Vermont exempts $10,000 of military retirement" | Out of date. The cap was removed retroactive to 2025. Now fully excluded at or below $125,000 federal AGI. |
| "Vermont taxes military retirement" | Only above the phase-out. Nothing below $125,000 AGI, all of it at $175,000 and above. |
| "Survivor benefit income is taxed" | No. It is covered by the same exclusion. |
| "Disabled veterans get a full property tax exemption" | No. $10,000 to $40,000 of appraised value, set by town vote. |
| "The exemption scales with your rating" | No. Same amount at 50% as at 100%. |
| "You need a 50% rating for the property exemption" | A VA pension or permanent medical retirement also qualifies. |
| "A reduced rating ends the free hunting license" | No. The statute covers anyone who has ever had a 60%+ rating. |
If you are considering Vermont
Vermont is better than its reputation for a military retiree under $125,000 of household AGI, because a full pension exclusion against an 8.75 percent top rate is worth a lot. It is worse than its reputation above $175,000, where you lose the exclusion entirely and pay high rates on a high income in a high property tax state.
On property tax, the deciding factor is which town you buy in. Ask before you commit.
Compare Vermont against any other state on both dimensions with our State Value Calculator, or see the full picture on the Vermont benefits page.
Sources
- 32 V.S.A. 5830e, military retirement income exclusion
- 32 V.S.A. 3802, property tax exemptions
- Vermont Office of Veterans Affairs, property tax exemption
- Vermont Human Resources, veterans preference
- Vermont Fish and Wildlife, military licenses
- Vermont DMV, military
- Vermont DMV, military license plates
- Vermont Veterans' Home, eligibility
Figures verified against Vermont statute and state agency pages on 5 November 2026. The property tax exemption amount above the $10,000 statutory minimum is adopted by each town, so confirm with your town listers or clerk. This is general information, not tax or legal advice.
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