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No. 71. An act relating to Vermont income tax exclusions and tax credits.
                                      (S.51)
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 32 V.S.A. § 5830f is amended to read:
§ 5830f. VERMONT CHILD TAX CREDIT
  (a) A resident individual or part-year resident individual who is entitled to a
child tax credit under the laws of the United States or who would have been
entitled to a child tax credit under the laws of the United States but for the fact
that the individual or the individual’s spouse does not have a taxpayer
identification number shall be entitled to a refundable credit against the tax
imposed by section 5822 of this title for the taxable year. The total credit per
taxable year shall be in the amount of $1,000.00 per qualifying child, as
defined under 26 U.S.C. § 152(c) but notwithstanding the taxpayer
identification number requirements under 26 U.S.C. § 24(e) and (h)(7), who is
five six years of age or younger as of the close of the calendar year in which
the taxable year of the taxpayer begins. For a part-year resident individual, the
amount of the credit shall be multiplied by the percentage that the individual’s
income that is earned or received during the period of the individual’s
residency in this State bears to the individual’s total income. An otherwise
eligible individual shall be entitled to the credit under this section without
regard for the laws of the United States pertaining to the amount of federal
child tax credit that may be refunded.
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Sec. 2. 32 V.S.A. § 5828b is amended to read:
§ 5828b. EARNED INCOME TAX CREDIT
  (a) A resident individual or part-year resident individual who is entitled to
an earned income tax credit granted under the laws of the United States or who
would have been entitled to an earned income tax credit under the laws of the
United States but for the fact that the individual, the individual’s spouse, or one
or more of the individual’s children does not have a qualifying taxpayer
identification number shall be entitled to a credit against the tax imposed for
each year by section 5822 of this title. The credit shall be for an individual
who claims one or more qualifying children 38 percent or for an individual
who does not claim one or more qualifying children 100 percent of the earned
income tax credit granted to the individual under the laws of the United States
or that would have been granted to the individual under the laws of the United
States but for the fact that the individual, the individual’s spouse, or one or
more of the individual’s children does not have a qualifying taxpayer
identification number, multiplied by the percentage that the individual’s
income that is earned or received during the period of the individual’s
residency in this State bears to the individual’s total income. A resident
individual or part-year resident individual who would have been entitled to or
granted an earned income tax credit under the laws of the United States but for
the fact that the individual, the individual’s spouse, or one or more of the
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individual’s children does not have a qualifying taxpayer identification number
shall be entitled to a credit under this section.
                                        ***
Sec. 3. 32 V.S.A. § 5830e is amended to read:
§ 5830e. RETIREMENT INCOME; SOCIAL SECURITY INCOME
   (a) Social Security income. The portion of federally taxable Social
Security benefits excluded from taxable income under subdivision
5811(21)(B)(iv) of this chapter shall be as follows:
      (1) For taxpayers whose filing status is single, married filing separately,
head of household, or surviving spouse:
         (A) If the federal adjusted gross income of the taxpayer is less than or
equal to $50,000.00 $55,000.00, all federally taxable benefits received under
the federal Social Security Act shall be excluded.
         (B) If the federal adjusted gross income of the taxpayer is greater than
$50,000.00 $55,000.00 but less than $60,000.00 $65,000.00, the percentage of
federally taxable benefits received under the Social Security Act to be
excluded shall be proportional to the amount of the taxpayer’s federal adjusted
gross income over $50,000.00 $55,000.00, determined by:
           (i) subtracting the federal adjusted gross income of the taxpayer
from $60,000.00 $65,000.00;
           (ii) dividing the value under subdivision (i) of this subdivision (B)
by $10,000.00; and
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           (iii) multiplying the value under subdivision (ii) of this subdivision
(B) by the federally taxable benefits received under the Social Security Act.
         (C) If the federal adjusted gross income of the taxpayer is equal to or
greater than $60,000.00 $65,000.00, no amount of the federally taxable
benefits received under the Social Security Act shall be excluded under this
section.
     (2) For taxpayers whose filing status is married filing jointly:
         (A) If the federal adjusted gross income of the taxpayer is less than or
equal to $65,000.00 $70,000.00, all federally taxable benefits received under
the Social Security Act shall be excluded.
         (B) If the federal adjusted gross income of the taxpayer is greater than
$65,000.00 $70,000.00 but less than $75,000.00 $80,000.00, the percentage of
federally taxable benefits received under the Social Security Act to be
excluded shall be proportional to the amount of the taxpayer’s federal adjusted
gross income over $65,000.00 $70,000.00, determined by:
           (i) subtracting the federal adjusted gross income of the taxpayer
from $75,000.00 $80,000.00;
           (ii) dividing the value under subdivision (i) of this subdivision (B)
by $10,000.00; and
           (iii) multiplying the value under subdivision (ii) of this subdivision
(B) by the federally taxable benefits received under the Social Security Act.
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         (C) If the federal adjusted gross income of the taxpayer is equal to or
greater than $75,000.00 $80,000.00, no amount of the federally taxable
benefits received under the Social Security Act shall be excluded under this
section.
  (b) Civil Service Retirement System income. The portion of income
received from the Civil Service Retirement System excluded from taxable
income under subdivision 5811(21)(B)(iv) of this title shall be subject to the
limitations under subsection (e) of this section and shall be determined as
follows:
     (1) For taxpayers whose filing status is single, married filing separately,
head of household, or surviving spouse:
         (A) If the federal adjusted gross income of the taxpayer is less than or
equal to $50,000.00 $55,000.00, the first $10,000.00 of income received from
the Civil Service Retirement System shall be excluded.
         (B) If the federal adjusted gross income of the taxpayer is greater than
$50,000.00 $55,000.00 but less than $60,000.00 $65,000.00, the percentage of
the first $10,000.00 of income received from the Civil Service Retirement
System to be excluded shall be proportional to the amount of the taxpayer’s
federal adjusted gross income over $50,000.00 $55,000.00, determined by:
           (i) subtracting the federal adjusted gross income of the taxpayer
from $60,000.00 $65,000.00;
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           (ii) dividing the value under subdivision (i) of this subdivision (B)
by $10,000.00; and
           (iii) multiplying the value under subdivision (ii) of this subdivision
(B) by the first $10,000.00 of income received from the Civil Service
Retirement System.
         (C) If the federal adjusted gross income of the taxpayer is equal to or
greater than $60,000.00 $65,000.00, no amount of the income received from
the Civil Service Retirement System shall be excluded under this section.
     (2) For taxpayers whose filing status is married filing jointly:
         (A) If the federal adjusted gross income of the taxpayer is less than or
equal to $65,000.00 $70,000.00, the first $10,000.00 of income received from
the Civil Service Retirement System shall be excluded.
         (B) If the federal adjusted gross income of the taxpayer is greater than
$65,000.00 $70,000.00 but less than $75,000.00 $80,000.00, the percentage of
the first $10,000.00 of income received from the Civil Service Retirement
System to be excluded shall be proportional to the amount of the taxpayer’s
federal adjusted gross income over $65,000.00 $70,000.00, determined by:
           (i) subtracting the federal adjusted gross income of the taxpayer
from $75,000.00 $80,000.00;
           (ii) dividing the value under subdivision (i) of this subdivision (B)
by $10,000.00; and
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           (iii) multiplying the value under subdivision (ii) of this subdivision
(B) by the first $10,000.00 of income received from the Civil Service
Retirement System.
         (C) If the federal adjusted gross income of the taxpayer is equal to or
greater than $75,000.00 $80,000.00, no amount of the income received from
the Civil Service Retirement System shall be excluded under this section.
  (c) Other contributory retirement systems; earnings not covered by Social
Security. Other retirement income, except U.S. military retirement income
pursuant to subsection (d) of this section, received by a taxpayer of this State
shall be excluded pursuant to subsection (b) of this section as though the
income were received from the Civil Service Retirement System and shall be
subject to the limitations under subsection (e) of this section, provided that:
                                       ***
  (d) U.S. military retirement income and U.S. military survivor benefit
income. For taxpayers of any filing status, U.S. military retirement income,
and U.S. military survivor benefit income received by an eligible beneficiary,
received by a taxpayer of this State shall be excluded from taxable income
under subdivision 5811(21)(B)(iv) of this chapter as follows:
      (1) If the federal adjusted gross income of the taxpayer is less than or
equal to $125,000.00, all federally taxable U.S. military retirement income and
survivor benefit income shall be excluded.
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      (2) If the federal adjusted gross income of the taxpayer is greater than
$125,000.00 but less than $175,000.00, the percentage of federally taxable
U.S. military retirement income and survivor benefit income to be excluded
shall be proportional to the amount of the taxpayer’s federal adjusted gross
income over $125,000.00, determined by:
         (A) subtracting the federal adjusted gross income of the taxpayer
from $175,000.00;
         (B) dividing the value under subdivision (A) of this subdivision (2)
by $50,000.00; and
         (C) multiplying the value under subdivision (B) of this subdivision
(2) by the federally taxable U.S. military retirement income and survivor
benefit income received.
      (3) pursuant to subsection (b) of this section as though the income were
received from the Civil Service Retirement System and shall be subject to the
limitations under subsection (e) of this section If the federal adjusted gross
income of the taxpayer is equal to or greater than $175,000.00, no amount of
the federally taxable U.S. military retirement income and survivor benefit
income received shall be excluded under this section.
  (e)(1) Requirement to elect one exclusion. A taxpayer of this State who is
eligible during the taxable year for more than one of the exclusions under
subsections (a), (b), and (c) of this section the Social Security income
exclusion under subsection (a) of this section and any of the exclusions under
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subsections (b)–(d) of this section shall elect either only one of the exclusions
for which the taxpayer is eligible under subsections (b)–(d) of this section or
the Social Security income exclusion under subsection (a) of this section, but
not both, for the taxable year. A taxpayer of this State who is eligible during
the taxable year for more than one of the exclusions under subsections (b)–(d)
of this section shall elect only one of the exclusions for which the taxpayer is
eligible for the taxable year.
      (2) A taxpayer of this State who is eligible during the taxable year for
the military retirement and survivor benefit exclusion under subsection (d) of
this section may elect that exclusion regardless of whether the taxpayer also
elects an exclusion under subsections (a)–(c) of this section.
Sec. 4. 32 V.S.A. § 5813 is amended to read:
§ 5813. STATUTORY PURPOSES
                                      ***
   (aa) The statutory purpose of the Vermont veteran tax credit in section
5830g of this title is to provide financial support to Vermonters who served in
the U.S. uniformed services.
Sec. 5. 32 V.S.A. § 5830g is added to read:
§ 5830g. VERMONT VETERAN TAX CREDIT
   (a) A resident individual or part-year resident individual who served in the
uniformed services shall be entitled to a refundable credit against the tax
imposed by section 5822 of this title for the taxable year.
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   (b) A taxpayer shall be eligible for the credit under this section provided
the taxpayer has a discharge record, or other record of separation from active
duty, verifying service in the uniformed services.
   (c)(1) If the federal adjusted gross income of the taxpayer is less than or
equal to $25,000.00, the amount of tax credit provided under this section shall
be $250.00.
        (2) If the federal adjusted gross income of the taxpayer is greater than
$25,000.00 but less than $30,000.00, the amount of credit shall be $250.00 less
$5.00 per $100.00 of federal adjusted gross income exceeding $25,000.00 of
federal adjusted gross income.
        (3) If the federal adjusted gross income of the taxpayer is $30,000.00 or
greater, no amount of credit shall be provided under this section.
Sec. 6. EFFECTIVE DATE
   Notwithstanding 1 V.S.A. § 214, this act shall take effect retroactively on
January 1, 2025 and apply to taxable years beginning on and after January 1,
2025.
Date Governor signed bill: June 25, 2025
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