Bill S.17 proposes to exempt military retirement and survivor benefit income from Vermont income tax. The bill amends current tax definitions to include U.S. military retirement income and survivor benefit income received by the surviving spouse or dependent of a deceased service member as non-taxable income. Specifically, it adds this income to the list of items that can be deducted from federal adjusted gross income, thereby reducing the taxable income for eligible individuals.

Additionally, the bill repeals the previous provision that excluded U.S. military retirement income from certain retirement income exclusions, streamlining the process for taxpayers. It also 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 retroactive application to January 1, 2026, for the relevant tax years.

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