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Bill

S 308

An act relating to the military retirement income tax exclusion

2025-2026 Regular Session Introduced by Scott Beck and 7 co-sponsors

Vermont would exclude all or part of military retirement pay from state income tax for eligible retirees.

Read 1st time & referred to Committee on Finance
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WeVote Research Nonpartisan
Bill Summary · S 308

Summary of Bill S. 308 (Session 2025-2026) – Vermont

Title

An act relating to the military retirement income tax exclusion

Purpose and intent

  • The bill aims to modify Vermont tax policy to provide an exclusion from state income tax for military retirement income.
  • The underlying goal is to align Vermont tax treatment with federal policies or practices seen in other states, potentially improving financial relief for military retirees residing in Vermont.

Key provisions and changes

  • Exclusion of military retirement income: The bill would authorize an exclusion from Vermont personal income tax for a portion (or all) of military retirement pay received by eligible individuals. The exact amount or formula for the exclusion would be specified in the bill (not provided in the summary you supplied), including any phase-in, phase-out, or applicability limits.
  • Eligibility criteria: The bill would define who qualifies for the exclusion (e.g., individuals receiving military retirement, possibly covering active-duty retirement pay, and potentially distinguishing between federal and state military retirement systems). It may specify residency requirements (e.g., domiciled in Vermont) and filing status implications.
  • Interaction with other credits/deductions: The bill could address how the military retirement exclusion interacts with existing Vermont deductions, exemptions, and credits, including any overall cap on deductions or income thresholds.
  • Effective date: The bill would establish when the exclusion begins (e.g., for tax year 2026 or for taxable years beginning on/after a specified date) and whether taxpayers can claim retroactive relief if benefits were not previously excluded.
  • Sunset or review provisions: There may be a clause for periodic review or sunset terms, determining whether the exclusion remains in effect indefinitely or is subject to reevaluation.

Who would be affected

  • Vermont resident military retirees who receive retirement pay from federal military service.
  • Taxpayers currently subject to Vermont personal income tax who qualify under the eligibility criteria.
  • Other taxpayers might be indirectly affected if the exclusion alters Vermont’s overall revenue projections or tax policy considerations.

Procedural and timeline aspects

  • Current action: Read 1st time and referred to the Committee on Finance (as of 2026-01-27).
  • Next steps: The Committee on Finance would typically hold hearings, consider amendments, and draft a committee bill or a revised version for floor consideration. If advanced, the bill would move to the full House for debate, potential amendments, and a vote, followed by passage to the Senate (or conference, if applicable) and eventual enactment upon approval by both chambers and the governor.
  • Sponsor information: The bill has several sponsors and co-sponsors, indicating cross-chamber or bipartisan support. Co-sponsors include Kesha Ram Hinsdale, Chris Mattos, Richard Westman, Thomas Chittenden, Scott Beck, Randy Brock, Russ Ingalls, and Dave Weeks.

Practical considerations and potential impact

  • Revenue impact: Excluding military retirement income reduces Vermont tax revenue. The exact magnitude would depend on the exclusion amount, number of eligible retirees in Vermont, and interaction with other deductions.
  • Administrative considerations: Taxpayers would need to claim the exclusion on their Vermont income tax return, and the Department of Taxes would administer and verify eligibility and ensure correct application of the exclusion.
  • Policy implications: The bill reflects a policy choice to provide targeted relief to military retirees, potentially improving affordability for retirees and signaling support for service members.

If you’d like, I can tailor this summary to include hypothetical figures (e.g., exclusion amount, phase-in) or compare this bill to current Vermont tax law or to similar exclusions in other states.

Compiled from official sources — confirm details with the bill’s official record.

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