Vermont Veteran Tax Benefits 2025: Property Tax, Income Tax & Exemptions

Bottom Line Up Front: Vermont veterans with 50%+ disability ratings get minimum $10,000 property tax exemptions (up to $40,000 depending on town), full exemption on military retirement income if AGI is under $125,000 (starting tax year 2025), and vehicle registration fee waivers for VA-funded vehicles. A 70% disabled veteran in Burlington with a $400,000 home saves approximately $2,100-$8,400 annually in property taxes alone. Over 20 years, property tax exemptions provide $42,000-$168,000 in savings depending on your municipality. Vermont recently improved from one of the worst to a middle-tier state for military retirement taxation, though neighboring New Hampshire still offers superior benefits with no income tax.

Property Tax Exemptions by Disability Rating

Minimum State-Mandated Exemption

Vermont law requires every municipality to provide at least $10,000 in property tax exemption for eligible veterans on both the municipal and education grand lists. This is not optional—every city and town must offer this baseline benefit.

Eligibility requirements (you need just ONE of these):

• VA disability compensation of 50% or higher
• Veterans Pension for Non-Service Connected Disability (also called VA Pension or Improved Pension)
• Widower's Pension
• Military retirement pay for a permanent medical military retirement

Contact: Vermont Office of Veterans Affairs, (802) 828-3379

Enhanced Municipal Exemptions (Up to $40,000)

State law permits cities and towns to vote to increase the exemption up to $40,000 on the municipal grand list. This means your actual benefit depends entirely on where you live in Vermont.

High-Benefit Municipalities ($30,000-$40,000 exemptions)

Several Vermont towns voted to provide maximum or near-maximum exemptions:

• Burlington: $40,000 municipal exemption
• South Burlington: $40,000 municipal exemption
• Winooski: $35,000 municipal exemption
• Shelburne: $30,000 municipal exemption

Mid-Range Municipalities ($15,000-$25,000 exemptions)

Many towns offer moderate enhanced exemptions:

• Montpelier: $20,000 municipal exemption
• Rutland: $20,000 municipal exemption
• Brattleboro: $15,000 municipal exemption
• Bennington: $15,000 municipal exemption

Baseline Municipalities ($10,000 exemptions)

Towns that haven't voted to increase exemptions offer the state minimum of $10,000. Check with your local assessor to confirm your town's current exemption level.

Action required: Contact your town assessor's office to determine your municipality's exact exemption amount. If your town offers only the $10,000 minimum, consider advocating for an increase at town meeting.

How Property Tax Exemptions Work

The exemption reduces your property's assessed value, which lowers the base used to calculate your property tax bill. Vermont property taxes include both municipal and education components.

Example calculation for Burlington (FY 2024 rates):

• Home assessed value: $400,000
• Veteran exemption: $40,000
• Taxable value: $360,000

Without exemption:

• Municipal tax rate: $0.7523 per $100 = $3,009
• Homestead education rate: $1.4485 per $100 = $5,794
• Total annual property tax: $8,803

With $40,000 exemption:

• Municipal tax on $360,000: $2,708
• Education tax on $360,000: $5,215
• Total annual property tax: $7,923
• Annual savings: $880

However, the education exemption applies to both the municipal AND education grand lists, so the actual calculation provides even more savings:

Corrected calculation with full exemption:

• Municipal tax savings: ($40,000 × $0.7523) / 100 = $301
• Education tax savings: ($40,000 × $1.4485) / 100 = $579
• Total annual savings: $880

For municipalities offering the full $40,000 exemption, annual savings typically range from $800-$1,200 depending on local tax rates.

Property Tax Exemption Application Process

Critical deadlines: You must apply by May 1 every year. The exemption does NOT automatically renew—you must reapply annually.

Required documents:

1. VA Award Letter showing disability rating of 50%+ OR documentation of VA Pension OR military retirement orders showing medical retirement
2. Vermont Property Tax Exemption Application (Form VT-143)
3. Proof of primary residence in Vermont (driver's license, utility bills)

How to apply:

1. Obtain your current year's Property Tax Exemption Application from the Vermont Office of Veterans Affairs website or by calling (802) 828-3379
2. Attach your VA Award Letter or qualifying documentation
3. Submit both documents to: Vermont Office of Veterans Affairs, 118 State Street, Montpelier, VT 05602
4. The Veterans Affairs office will forward your approved application to your town listers

Important: The exemption applies only to your primary residence owned by you or your survivor spouse. Investment properties and second homes do not qualify.

Alternative Property Tax Credit (General Homestead Program)

While there's no specific "Alternative Veterans Property Tax Credit," Vermont offers a Property Tax Credit available to all homeowners, including veterans, that can provide additional savings beyond the veteran-specific exemption.

Maximum Credit Amounts

• State education property tax portion: Up to $5,600
• Municipal property tax portion: Up to $2,400
• Combined maximum: $8,000 per year

Income Eligibility

Households with total household income under $136,900 may qualify for a credit. The credit amount decreases as income increases.

How to Claim

File Form HS-122 (Homestead Declaration and Property Tax Credit Claim) and Form HI-144 (Household Income) with your Vermont income tax return by the standard filing deadline (generally April 15).

Contact: Vermont Department of Taxes, tax.IndividualIncome@vermont.gov, (802) 828-2865

Veteran Strategy: Stack Your Benefits

You can potentially receive BOTH the veteran property tax exemption AND the general property tax credit if you meet income requirements. Here's the optimal approach:

1. Apply for veteran exemption by May 1 (reduces assessed value)
2. File for property tax credit by April 15 (provides refundable credit based on income)
3. Calculate total savings from both programs

Example for 60% disabled veteran in Montpelier:

• Home value: $450,000
• Household income: $85,000
• Veteran exemption: $20,000 (Montpelier's enhanced rate)
• Annual property tax savings from exemption: ~$600
• Additional property tax credit (income-based): ~$1,800-$2,500
• Combined annual benefit: $2,400-$3,100

This stacking strategy maximizes your Vermont tax benefits.

Military Retirement Income Tax Treatment

Vermont made MAJOR changes to military retirement taxation, transitioning from one of only five states that fully taxed military pensions to offering substantial exemptions starting in tax year 2025.

2024 Tax Year (Returns Filed in 2025)

For income earned in 2024, Vermont's limited exemption remains:

• Exemption amount: Up to $10,000 of military retirement income
• Income limits: AGI not exceeding $50,000 (single) or $65,000 (married filing jointly)
• Phase-out: Exemption eliminated at $75,000 AGI for married filing jointly

Critical restriction: You can only claim ONE of the following exemptions even if multiple apply:

• Social Security exemption
• Military retirement exemption
• Civil Service Retirement System exemption
• Other retirement system exemption

This meant most Vermont military retirees paid full state income tax on their pensions in 2024.

2025 Tax Year and Beyond (GAME CHANGER)

Act 71, signed into law on June 25, 2025, provides dramatic improvements starting with the 2025 tax year:

Full Exemption Tier (AGI ≤ $125,000)

All military retirement and survivor benefit income is 100% exempt for taxpayers of any filing status whose adjusted gross income is $125,000 or less.

Real-world impact: A retired E-8 with $30,000 annual military pension and $95,000 total AGI pays ZERO Vermont income tax on the pension starting in 2025.

Vermont's 2024 income tax rates range from 3.35% to 8.75%. For a retiree in the 6.60% bracket with $30,000 military pension:

• Annual tax savings: $1,980
• 10-year savings: $19,800
• 20-year savings: $39,600 (not accounting for cost-of-living adjustments that increase pension amounts)

Partial Exemption Tier ($125,000 < AGI < $175,000)

For taxpayers whose AGI is over $125,000 but less than $175,000, the exempt amount phases out gradually as income increases.

Example phase-out calculation:

• AGI: $150,000 (midpoint of phase-out range)
• Military pension: $40,000
• Approximate exemption: ~$20,000 (50% of pension)
• Taxable military income: ~$20,000

The exact phase-out formula is linear, reducing the exemption proportionally as you move from $125,000 to $175,000 AGI.

No Exemption Tier (AGI ≥ $175,000)

No exemption available for taxpayers whose AGI equals or exceeds $175,000. Full pension is taxable at Vermont rates.

Vermont Income Tax Rates (2024-2025)

Vermont uses a progressive rate structure:

• 3.35% on income up to $45,400 (single) / $75,700 (married)
• 6.60% on income $45,400-$110,050 (single) / $75,700-$183,400 (married)
• 7.60% on income $110,050-$229,550 (single) / $183,400-$279,450 (married)
• 8.75% on income over $229,550 (single) / $279,450 (married)

Note: These brackets are adjusted annually for inflation. Check the Vermont Department of Taxes website for current-year rates.

Combat Pay Treatment

Combat pay excluded at the federal level carries through to Vermont state taxes since Vermont uses federal adjusted gross income (AGI) as the starting point for state tax calculations.

Federal combat zone exclusion for 2024:

• Enlisted and warrant officers: Full combat pay excluded (no limit)
• Officers: Up to $10,519.80 per month ($10,294.80 base + $225 imminent danger pay)

Vermont treatment:

• Automatic exclusion (follows federal treatment)
• No additional Vermont-specific forms required
• Combat zone filing extensions: 180 days after qualifying service ends

Example: An E-5 deployed to a combat zone for 8 months earning $3,500/month in combat pay excludes the entire $28,000 from both federal and Vermont income taxes.

Vehicle Registration and Title Fee Exemptions

Vermont provides vehicle-related fee exemptions to veterans who acquired vehicles with VA financial assistance—typically through the VA's Automobile Allowance and Adaptive Equipment grant program.

Who Qualifies

Honorably discharged veterans who are Vermont residents and who acquired a motor vehicle with financial assistance from the U.S. Department of Veterans Affairs under the Automobile Allowance grant (for veterans with service-connected loss or loss of use of limbs or vision).

Exempted Fees

Registration fees: No charge for annual vehicle registration Title fees: No charge for certificate of title Driver's license fees: No charge for license to operate the vehicle Replacement vehicles: Exemption transfers to replacement vehicles acquired during veteran's lifetime

Recent expansion (S.123): Proposed legislation would extend exemptions to include:

• Annual emissions testing fee
• EV infrastructure fee

Check with Vermont DMV for current status of this expansion.

Required Documentation

Your registration application must be accompanied by VA Form 21-4502 (Application for Automobile or Other Conveyance and Adaptive Equipment), showing approved VA financial assistance.

Vermont DMV Contact: (802) 828-2000, DMV.VTrans@vermont.gov

Annual Savings

Standard Vermont vehicle fees:

• Registration: $76 (passenger vehicle, 2 years) = $38/year
• Title fee: $35 (one-time when purchasing)
• License renewal: $32 (5 years) = $6.40/year

Annual savings for eligible veteran: ~$44/year + one-time $35 title fee savings per vehicle

Over 20 years: $880 in registration savings + $35-$70 in title savings (depending on vehicle replacements)

While not Vermont's largest veteran benefit, every dollar counts—and these exemptions require minimal paperwork once initially approved.

20-Year Cumulative Savings Projections

Let's calculate real-world savings over 20 years for different veteran profiles living in various Vermont municipalities.

Profile 1: 70% Disabled Veteran, Burlington

• Home value: $400,000
• Property tax exemption: $40,000 (Burlington maximum)
• Municipal rate: $0.7523 per $100
• Education rate: $1.4485 per $100
• Annual property tax savings: $880
• 20-year property tax savings: $17,600 (not accounting for property value appreciation or rate increases, which would increase savings)

Military retirement: $28,000/year

• AGI: $95,000 (full exemption tier in 2025+)
• Vermont tax rate: 6.60%
• Starting 2025 annual income tax savings: $1,848
• Years of savings (2025-2044): 20 years
• 20-year military retirement tax savings: $36,960

Vehicle exemptions: $44/year × 20 = $880

Total 20-year savings: $55,440

Profile 2: 100% Disabled Veteran, Rutland

• Home value: $300,000
• Property tax exemption: $20,000 (Rutland enhanced rate)
• Municipal rate: $0.82 per $100 (estimated)
• Education rate: $1.48 per $100 (estimated)
• Annual property tax savings: $460
• 20-year property tax savings: $9,200

Military retirement: $35,000/year

• AGI: $75,000 (full exemption tier)
• Vermont tax rate: 6.60%
• Starting 2025 annual income tax savings: $2,310
• 20-year military retirement tax savings: $46,200

Property tax credit (income-based): Additional $1,500/year estimated

• 20-year property tax credit savings: $30,000

Total 20-year savings: $85,400

Profile 3: 50% Disabled Veteran, Brattleboro (Baseline Benefits)

• Home value: $325,000
• Property tax exemption: $15,000 (Brattleboro enhanced rate)
• Municipal rate: $0.79 per $100 (estimated)
• Education rate: $1.45 per $100 (estimated)
• Annual property tax savings: $336
• 20-year property tax savings: $6,720

Military retirement: $22,000/year

• AGI: $108,000 (full exemption tier)
• Vermont tax rate: 6.60%
• Starting 2025 annual income tax savings: $1,452
• 20-year military retirement tax savings: $29,040

Total 20-year savings: $35,760

Profile 4: Minimum Exemption Scenario (Town with $10,000 baseline)

• Home value: $350,000
• Property tax exemption: $10,000 (state minimum, no enhanced municipal vote)
• Combined tax rate: $2.25 per $100 (estimated average)
• Annual property tax savings: $225
• 20-year property tax savings: $4,500

This illustrates why it's crucial to research municipality exemption levels before choosing where to live in Vermont—or to advocate for increased exemptions at town meetings.

Comparison to Neighboring States

How do Vermont's veteran tax benefits stack up against New Hampshire, Massachusetts, and New York?

New Hampshire: Clear Winner for Tax Benefits

Income tax: NONE—New Hampshire has no state income tax on wages or military retirement (eliminated interest and dividend tax in 2025) Property tax: Varies by town; some offer exemptions ranging from $50 to $4,000 for veterans with service-connected disabilities Vehicle: Disabled veterans exempt from driver's license and motor vehicle registration fees

Verdict: New Hampshire provides the most favorable overall tax environment. A military retiree with $40,000 pension saves approximately $2,640/year just on income taxes alone compared to Vermont (pre-2025 rules). Even with Vermont's 2025 improvements, NH's zero income tax remains superior.

20-year advantage vs Vermont: $52,800 in income tax savings alone for $40,000 military pension earner

Massachusetts: Strong on Military Retirement

Income tax: 5% flat rate, but military retirement pay is 100% exempt (no income caps) Property tax: Varies by municipality; exemptions range from $400-$1,500 typically; some towns offer more for 100% disabled veterans Vehicle: Some municipalities offer excise tax exemptions

Verdict: Massachusetts beats Vermont for military retirees with high incomes (>$125,000 AGI) since MA has no income cap on the pension exemption. However, Vermont's property tax exemptions are generally more generous.

Advantage: MA wins for high-income retirees; Vermont wins for lower/middle-income veterans focused on property taxes

New York: Competitive Property Tax Benefits

Income tax: Military retirement pay partially or fully exempt depending on age and disability

• Up to $15,000 exempt for those over 59½
• Full exemption for disabled veterans receiving pension from VA Property tax: Alternative Veterans Exemption provides significant property tax reductions for disabled veterans; Cold War veterans exemption; combat zone tax credit Vehicle: Some property tax relief on vehicles in certain counties

Verdict: New York's property tax programs can be extremely generous, particularly in counties with strong veteran support. Income tax treatment is complex but favorable for disabled veterans.

Advantage: Competitive; depends heavily on specific NY county vs. specific VT municipality

Vermont's Competitive Position (Updated for 2025)

Before 2025: Vermont ranked among the WORST states for military retirees, fully taxing pensions with minimal exemptions.

Starting 2025: Vermont moves to middle-tier status with full pension exemptions for retirees with AGI under $125,000—covering the vast majority of military retirees.

Remaining disadvantage: New Hampshire's zero income tax and lower overall cost of living still make NH more financially attractive for many veterans. However, Vermont's property tax exemptions ($10,000-$40,000) exceed NH's typical offerings ($50-$4,000).

Best scenario: Vermont appeals most to disabled veterans with middle incomes ($75,000-$125,000 AGI) who want property tax relief and can now also get full military retirement income exemption. Those with high retirement incomes (>$175,000) should consider NH or MA instead.

Maximizing Your Vermont Veteran Tax Benefits: Action Plan

Follow this checklist to ensure you're capturing every available benefit:

Immediate Actions (Do This Month)

1. Verify your VA disability rating - Log into VA.gov and download your current VA Award Letter showing disability rating. If you're not yet rated at 50%+, consider filing for an increase if your conditions have worsened.

2. Research your municipality's exemption amount - Call your town assessor's office and ask: "What is the current property tax exemption amount for veterans in our town?" Write down the answer and compare to the $40,000 maximum.

3. Gather property tax exemption documents - Locate your property deed, recent property tax bill, and VA Award Letter. Make copies.

4. Check vehicle eligibility - If you received VA Automobile Allowance, ensure you have VA Form 21-4502 and that your vehicle registration reflects the fee exemption.

Annual Actions (Mark Your Calendar)

By April 15:

• File Vermont income tax return
• Include Form HS-122 (Homestead Declaration and Property Tax Credit Claim) if income is under $136,900
• Include Form HI-144 (Household Income)
• Starting tax year 2025, military retirement income is automatically exempt if AGI ≤ $125,000 (no special form required—just exclude from Vermont income)

By May 1:

• Submit Property Tax Exemption Application (VT-143) to Vermont Office of Veterans Affairs
• Include current VA Award Letter showing 50%+ disability rating
• CRITICAL: This must be done EVERY year—exemption does not auto-renew

Long-Term Strategic Actions

Consider relocation within Vermont - If you live in a town offering only the $10,000 minimum exemption, research towns with maximum $40,000 exemptions:

• Burlington and South Burlington offer $40,000
• Annual savings difference: $450-$675 depending on tax rates
• 20-year difference: $9,000-$13,500

Attend town meetings - If your town hasn't voted to increase the veteran exemption above $10,000, advocate for an increase at the annual town meeting. Prepare a brief presentation showing the benefit to local veterans and the minimal fiscal impact to the town.

Plan retirement income carefully - If you're approaching retirement with projected AGI near $125,000, consider strategies to stay below that threshold to maintain the full military pension exemption:

• Traditional IRA contributions (reduce AGI)
• Health Savings Account contributions (reduce AGI)
• Timing of retirement account withdrawals

Explore additional education benefits - Veterans using Vermont National Guard Tuition Benefit or attending Vermont State Colleges get in-state tuition rates regardless of residency, further stretching your education dollars.

Key Contacts and Resources

Vermont Office of Veterans Affairs 118 State Street, Montpelier, VT 05602 Phone: (802) 828-3379 Website: veterans.vermont.gov Services: Property tax exemption applications, benefit counseling, VA claim assistance

Vermont Department of Taxes 133 State Street, Montpelier, VT 05602 Phone: (802) 828-2865 Email: tax.IndividualIncome@vermont.gov Website: tax.vermont.gov Services: Income tax questions, property tax credit claims, homestead declarations

Vermont DMV (Motor Vehicles) 120 State Street, Montpelier, VT 05603 Phone: (802) 828-2000 Email: DMV.VTrans@vermont.gov Website: dmv.vermont.gov/military Services: Vehicle registration exemptions, license fee waivers

Your Town Assessor's Office Contact information varies by municipality. Search "[Your Town Name] Vermont assessor" to find local contact info. Services: Property value assessments, local exemption amounts, exemption applications

Veteran Service Organizations

• Vermont Veterans of Foreign Wars (VFW): vfwvt.org
• Vermont American Legion: vtlegion.org
• Disabled American Veterans (DAV) Vermont: dav.org/veterans/find-your-local-office/

These VSOs provide free assistance with VA claims, benefit applications, and advocacy.

Frequently Asked Questions

Q: Do I have to reapply for the property tax exemption every year?

A: Yes, absolutely. The exemption does NOT automatically renew. You must submit a new Property Tax Exemption Application (VT-143) along with your current VA Award Letter to the Vermont Office of Veterans Affairs by May 1 every single year. Miss the deadline, lose the benefit for that year.

Q: Can I get both the $40,000 property tax exemption and the property tax credit?

A: Yes, if you qualify for both based on your disability rating and household income. The property tax exemption reduces your assessed value, while the property tax credit provides a refundable credit. They work together, not against each other.

Q: What if my disability rating is exactly 50%?

A: You qualify for the full exemption. The requirement is "50% or higher," so 50% meets the threshold.

Q: I'm rated 40% disabled. Do I get any property tax exemption?

A: Not under the veteran-specific exemption program, which requires 50%+. However, you may still qualify for the general homestead property tax credit if your household income is under $136,900. Additionally, consider filing for an increase in your VA rating if your conditions have worsened since your original rating.

Q: Does the exemption apply to my second home or rental property?

A: No. The exemption applies only to your primary residence in Vermont. Investment properties, second homes, and rental properties do not qualify.

Q: My spouse is a veteran, but the house is in my name. Can we still get the exemption?

A: The property must be owned by the veteran or the veteran's surviving spouse. If your veteran spouse owns the home (or you own it jointly), you qualify. If you're the surviving spouse of a deceased veteran who was receiving the exemption, you can continue to receive it. But if you're married to a living veteran and the home is solely in the non-veteran spouse's name, you likely won't qualify—consider adding your veteran spouse to the deed.

Q: How much will I actually save with a $40,000 exemption in Burlington?

A: Using FY 2024 Burlington tax rates: approximately $880 per year. This assumes the exemption applies to both municipal and education property taxes. Actual savings depend on annual tax rate fluctuations.

Q: When does the new military retirement income tax exemption start?

A: Tax year 2025. This means income earned in calendar year 2025, reported on tax returns filed in early 2026. For 2024 income (returns filed in spring 2025), the old limited exemption still applies (up to $10,000 exempt if AGI under $50,000/$65,000).

Q: I'm a retired O-5 with $75,000 military pension and $160,000 total AGI. How much of my pension is exempt starting in 2025?

A: Your AGI of $160,000 falls in the phase-out range ($125,000-$175,000). The exemption phases out linearly. You're $35,000 into the $50,000 phase-out range (70% of the way through). Therefore, approximately 30% of your pension remains exempt: $22,500 exempt, $52,500 taxable. You'll save roughly $1,485 in annual Vermont income taxes (at 6.60% bracket) compared to the old rules where the entire pension was taxable.

Q: Can I deduct my property taxes on my federal return if I'm getting the Vermont exemption?

A: Yes. The Vermont exemption reduces your assessed value for state/local tax purposes, but you still pay property taxes and can deduct the actual amount paid on your federal Schedule A (if you itemize). The exemption doesn't reduce your federal tax deduction.

Q: What happens if I move to a different town in Vermont mid-year?

A: Property tax exemptions are based on your residence as of April 1 (the grand list date in Vermont). If you move after April 1, the exemption applies to the property you owned on April 1. If you move before April 1, you'll need to apply for the exemption at your new town for that tax year.

Q: Do National Guard members qualify for these tax benefits?

A: If you're a current National Guard member without a VA disability rating, you generally won't qualify for the property tax exemption (which requires 50%+ disability or retirement pension). However, Guard members can access Vermont National Guard Tuition Benefits and, if federally activated, combat zone tax exclusions. Once you receive a VA disability rating of 50%+ or retire with a military pension, you'll qualify for the property tax exemption.

Q: I'm 100% disabled through the VA. Does that change my property tax exemption amount?

A: No. Vermont's property tax exemption is the same whether you're 50% or 100% disabled—you get the town's standard exemption ($10,000-$40,000 depending on municipality). The benefit is not tiered by disability rating. However, at 100% disability, you likely have no military retirement income tax to pay (since VA disability compensation is federally tax-exempt), maximizing your overall tax benefit.

Q: Can I get a refund if I didn't know about these benefits and didn't claim them in past years?

A: For property tax exemptions, generally no. These are annual exemptions that must be applied for by May 1 each year. If you missed previous years, you lose those benefits. However, for income tax issues (like not claiming the military retirement exemption), you can file amended Vermont tax returns for up to three years to claim refunds.

Q: Does Vermont offer any sales tax exemptions for veterans?

A: Vermont does not have a general sales tax, so this question doesn't apply. However, Vermont does have a 9% Meals and Rooms Tax. There are no veteran-specific exemptions from this tax.

Q: Are there any other Vermont veteran benefits I should know about related to taxes?

A: Not directly tax-related, but veterans should explore:

• Vermont National Guard Tuition Benefit (covers in-state tuition at Vermont colleges)
• Vermont state employment preference (5 points added to test scores for veterans, 10 points for disabled veterans)
• Vermont State Veterans' Home in Bennington (nursing and long-term care facility)
• Free hunting and fishing licenses for 100% disabled veterans

Q: How does Vermont's new military retirement exemption compare to nearby states?

A: New Hampshire: No income tax (best). Massachusetts: 100% exempt regardless of income (better for high earners). New York: Complex rules, partial exemptions. Vermont's 2025 rules place it in the middle tier—excellent for middle-income retirees (AGI under $125K), less competitive for high-income retirees.

Q: I receive VA disability compensation AND military retirement pay (concurrent receipt). Does the tax exemption apply to both?

A: VA disability compensation is federally tax-exempt and not included in your Vermont taxable income regardless. The Vermont military retirement exemption applies to your military retirement pay (the pension you receive for years of service). So yes, you benefit from both: VA disability is never taxed, and starting in 2025, your military retirement is also exempt if your AGI is under $125,000.

Q: What if my property taxes still seem too high even with the exemption?

A: First, verify your property assessment is accurate—contact your town assessor if you believe your home is over-assessed. Second, apply for the homestead property tax credit if your income qualifies. Third, attend town meetings to advocate for better veteran benefits or lower overall property tax rates. Finally, consider whether relocating to a lower-tax Vermont town (like Rutland, with lower overall cost of living) makes financial sense.

Q: Where can I get free help applying for these benefits?

A: Contact the Vermont Office of Veterans Affairs at (802) 828-3379. They provide free assistance with benefit applications. Additionally, county Veterans Service Officers can help—find yours at veterans.vermont.gov. Veteran Service Organizations like VFW, American Legion, and DAV also offer free benefit assistance.

Q: Is there a Vermont estate tax or inheritance tax that affects veterans differently?

A: Vermont has an estate tax that applies to estates over $5 million (as of 2024). There are no special veteran exemptions from the estate tax. However, this only affects very high-net-worth individuals. There is no separate inheritance tax in Vermont.

Q: Can I get the property tax exemption if I'm behind on my property taxes?

A: The exemption reduces your future tax liability, but it doesn't eliminate past-due taxes. You'll still need to pay any back taxes owed. However, getting the exemption can reduce your current and future bills, making it easier to catch up on past-due amounts.

Q: I'm a veteran who recently moved to Vermont from another state. When can I start claiming these benefits?

A: For the property tax exemption, you must be a Vermont resident and own property in Vermont. You can apply in your first year of residency as long as you meet the disability rating requirements and submit the application by May 1. For the military retirement income exemption, you're eligible as soon as you become a Vermont resident for tax purposes (generally, when Vermont becomes your domicile and you spend more than 183 days per year here).

Conclusion

Vermont's 2025 tax law changes represent a massive victory for military retirees, eliminating income tax on military pensions for the vast majority of veterans (those with AGI under $125,000). Combined with property tax exemptions of $10,000-$40,000 depending on your municipality, Vermont veterans can save $2,000-$5,000+ annually.

However, benefits vary dramatically based on where you live within Vermont. A veteran in Burlington with the maximum $40,000 property tax exemption enjoys far greater savings than one in a town offering only the $10,000 minimum. Research carefully before choosing your Vermont home base.

While Vermont has improved significantly, New Hampshire remains the regional winner for pure tax benefits due to its complete absence of income tax. But Vermont now competes effectively for middle-income veterans who prioritize property tax relief and the state's quality of life.

Your next steps:

1. Download your VA Award Letter today
2. Contact your town assessor to confirm local exemption amounts
3. Mark April 15 and May 1 on your calendar for annual filings
4. Calculate your projected 20-year savings using the formulas in this guide
5. If you're considering moving to Vermont, factor these tax benefits into your cost-of-living analysis

Welcome home, and thank you for your service.

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Sources: VA.gov, Military OneSource, Benefits.gov