Bill H.43 proposes to exempt military retirement and survivor benefit income from Vermont income tax. The bill amends current tax definitions and regulations to include specific provisions for U.S. military retirement income and survivor benefits. Notably, it adds new language to the definition of taxable income, allowing for the exclusion of U.S. military retirement income and survivor benefit income received by the surviving spouse or dependent of a deceased service member. Additionally, it repeals previous provisions that excluded U.S. military retirement income from certain retirement income exclusions.

The bill also modifies the existing retirement income regulations, ensuring that military retirement income is treated similarly to other contributory retirement systems. It clarifies that taxpayers eligible for multiple exclusions must choose one for the taxable year. The effective date of the bill is set for passage, with specific provisions taking effect retroactively on January 1, 2026, applying to taxable years on and after that date.

Statutes affected:
As Introduced: 32-5811, 32-5830e