An act relating to exempting military retirement and survivor benefit income from Vermont income tax

2025-2026 Regular Session Introduced by Sarita Austin and 74 co-sponsors

Exempts from Vermont state income tax the amounts of military retirement pay and survivor benefits.

Read first time and referred to the Committee on Ways and Means

Summary of Bill H.43 (2025-2026 Session) - Vermont

Purpose and Intent

H.43 seeks to exempt income from Vermont state income tax that arises from military retirement and survivor benefits.

The bill aims to align Vermont tax policy with the financial realities of military retirees and their survivors, potentially reducing tax liability for those receiving military retirement pay and survivor benefits.

Key Provisions and Changes

Exemption: The core provision would remove from Vermont taxable income the amounts that come from:

Military retirement pay received by a veteran.
Survivor benefits paid to beneficiaries after the death of a qualifying service member (e.g., annuity-like payments to a surviving spouse or other eligible survivors).

Scope of exemption:

Applies to income that is currently included in Vermont adjusted gross income for state income tax purposes.
Likely mirrors exemptions found in other states that provide preferential tax treatment for military retirement and survivor benefits.

Administration and interaction:

The exemption would reduce the amount of Vermont taxable income, thereby lowering state income tax liability for affected individuals.
The bill would specify how the exemption is to be calculated and reported on Vermont tax filings (e.g., whether the exempt amount is added back for any federal tax credit considerations, and how it interacts with other Vermont deductions/credits).

Who Would Be Affected

Primary beneficiaries:

Veterans receiving military retirement pay.
Survivors receiving a military survivor benefit (such as surviving spouses or other eligible beneficiaries).

Indirect effects:

Could influence state revenue by reducing taxable income reported by a segment of residents.
May affect individuals who previously itemized deductions or claimed other credits, depending on how the exemption interacts with existing tax provisions.

Procedural and Timeline Aspects

Introduction and referral:

The bill was introduced and read for the first time on January 17, 2025.
It was referred to the Vermont House Committee on Ways and Means for consideration.

Status indicators:

At the time of the provided information, no further committee actions, amendments, or floor actions are listed beyond referral. Legislative progress would depend on committee hearings, potential amendments, and votes on the House floor and in the Senate (if applicable).

Additional Context

The bill includes a large list of co-sponsors, indicating broad bipartisan or cross-membership support in the sponsoring chamber.

No explicit fiscal note, sunset provision, or detailed interaction with other tax credits and deductions is included in the provided summary; such details would typically appear in committee amendments or fiscal notes accompanying the bill.

Potential Impacts to Consider

Revenue: State revenue may decrease to the extent military retirement and survivor benefits are a substantial portion of income for exempted filers.

Equity and tax fairness: The exemption targets a specific group (military retirees and survivors), potentially improving financial stability for those individuals.

Administrative burden: Likely minimal if the exemption follows standard tax reporting procedures; the exact calculation and forms would be clarified in the bill's text and accompanying guidance.

If you’d like, I can tailor this summary to focus on a particular audience (e.g., policymakers, veterans’ organizations, or taxpayers) or compare H.43 to similar exemptions in other states.