Retiring in Vermont
Retiring in Vermont means weighing real, genuine draws -- consistently favorable safety, strong healthcare access, natural beauty, and community -- against the honest fact that Vermont is NOT a low-tax retirement haven: a capped, income-limited Social Security exemption and fully taxable pension and 401(k)/IRA income at rates up to 8.75% make Vermont a genuinely high-tax state for most retirees.
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Learn moreThis record discloses honestly, upfront: Vermont is NOT a low-tax retirement destination
Vermont's real, current tax treatment of retirement income runs genuinely, substantially less favorable than the no-income-tax or retirement-friendly states this dataset has documented elsewhere. Per the Vermont Dept. of Taxes' own pages (reviewed this pass), Vermont's Social Security exemption is real but income-capped, not universal: for 2026, the exemption applies in full only up to $65,000 AGI (married filing jointly) or $55,000 AGI (other filing statuses), phasing out completely by $80,000 / $65,000 AGI respectively -- meaning higher-income retirees receive no Social Security exemption at all. Most OTHER retirement income -- private and public pension income, and by extension 401(k)/IRA withdrawals -- is real, current, and fully taxable in Vermont at the state's graduated rates, up to the 8.75% top marginal bracket, with only a modest $10,000 exclusion available for certain government-pension or military-retirement income specifically (and a taxpayer may claim only one such exemption category, not several stacked together). This record discloses this real tax tension honestly rather than describing Vermont as retirement-tax-friendly.
Vermont's real draws for retirees -- natural beauty, community, and genuine healthcare access -- are equally real and should be weighed directly against that tax burden
Against that real tax burden, Vermont offers genuine, disclosed draws this record credits directly: a consistently favorable safety profile (violent crime 39% below the national average, a 3rd-place 2026 US News Crime & Corrections ranking), consistent top-10-nationally healthcare access rankings -- with the University of Vermont Medical Center anchoring a real, substantial healthcare hub in the Burlington/Chittenden County area specifically -- and a genuine, four-season natural-beauty and small-community lifestyle many retirees specifically move to Vermont for. Vermont's real, substantial 65-plus population (approximately 134,141, or 20.79% of the state, per this pass's research, projected to approach nearly 25% by 2030) means a genuine, sizable retiree community already exists, even as the state's overall population shrinks -- a real, honest signal that Vermont's draws for retirees specifically outweigh its tax burden for a meaningful share of the people who already live there.
A pending 2025-2026 legislative bill could eliminate Vermont's Social Security tax entirely -- confirm its current status directly rather than assuming it has taken effect
This pass's direct research found a real, current legislative development a prospective retiree should track directly: a 2025-2026 bill (S.51) under consideration in the Vermont Legislature to eliminate the state's tax on Social Security benefits entirely, with potential effect as early as 2026, per mychamplainvalley.com's coverage and the Legislative Joint Fiscal Office's own bill text this pass reviewed. This record discloses that development honestly as PROPOSED and under consideration as of this pass's research, not as confirmed, enacted law -- a prospective retiree should confirm the bill's final, current status directly with the Vermont Dept. of Taxes before budgeting around a full Social Security exemption.
Below-average homeowners insurance and a genuinely high property tax burden round out a retiree's everyday-cost picture
Vermont's real, current homeowners insurance runs consistently below the national average (approximately $1,054-$1,170/year, the 2nd-cheapest state in the nation per one source), a genuine, direct everyday-cost advantage for a retiree on a fixed income. This record discloses, alongside that advantage, Vermont's real, high statewide property tax burden (Tax Foundation's 4th-highest-in-the-nation 1.51% effective rate, with FY2026 education property tax bills projected to rise a real, disclosed 5.9% on average) -- a retiree should confirm a specific target town's current combined property tax rate directly, and should review the state's real assisted-living cost picture and the state-run Vermont Veterans' Home detailed fully in the retirement-communities topic before committing to a specific Vermont community.
Key takeaways
- This record discloses honestly, upfront: Vermont is NOT a low-tax retirement haven. Its Social Security exemption is real but income-capped (full exemption only up to $65,000/$55,000 AGI in 2026), and most other retirement income (pensions, 401(k)/IRA withdrawals) is fully taxable at rates up to the 8.75% top marginal bracket.
- Vermont's real draws for retirees are equally genuine: consistently favorable safety, top-10-nationally healthcare access, and a substantial 65+ population share (~20.79% of the state, approaching 25% by 2030) -- a real, sizable retiree community already exists despite the tax burden.
- A real, current 2025-2026 legislative bill (S.51) to eliminate Vermont's Social Security tax entirely was under consideration as of this pass's research -- confirm its final status directly rather than assuming it has taken effect.
- Below-national-average homeowners insurance ($1,054-$1,170/year, 2nd cheapest in the nation) offsets some of Vermont's real, high property tax burden -- confirm a specific target town's current combined rate directly.
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