Bill H.878 proposes significant changes to Vermont's taxation laws by exempting all Social Security benefits from income tax and capping annual property tax increases at one percent. The bill amends existing statutes to remove previous provisions that limited the exclusion of Social Security income based on income thresholds. Specifically, it repeals the detailed income brackets that determined the exclusion amount for federally taxable Social Security benefits, thereby simplifying the tax structure for individuals receiving such benefits. The bill also clarifies that the purpose of this exemption is to alleviate the tax burden on Vermonters who rely on Social Security income.

Additionally, the bill introduces a provision that mandates the calculation of property tax yields to ensure that the average homestead property tax bill does not increase by more than one percent from the previous year. The effective dates for these changes are set to take effect retroactively on January 1, 2026, for the Social Security income exemption, while the property tax cap will be implemented starting January 1, 2027. This legislation aims to provide financial relief to residents, particularly those with low to moderate incomes, by reducing their tax liabilities.

Statutes affected:
As Introduced: 32-5830e, 32-5811, 32-5813, 32-5402