Bill S.17 proposes to exempt military retirement and survivor benefit income from Vermont income tax. The bill amends current law by adding new definitions and provisions that specifically exclude U.S. military retirement income and survivor benefit income received by the surviving spouse or dependent of a deceased service member from taxable income. This is achieved by inserting new language into 32 V.S.A. § 5811 and § 5830e, while also repealing the previous exclusion for U.S. military retirement income in § 5830e(d).

Additionally, the bill modifies the requirements for taxpayers eligible for multiple exclusions, allowing them to choose one or both exclusions under certain conditions. The effective date of the bill is set to take effect upon passage, with the provisions retroactively applying to taxable years starting January 1, 2026. This change aims to provide financial relief to military families by ensuring that their retirement and survivor benefits are not subject to state income tax.

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