If you serve in the military or have served, Vermont offers a property tax exemption for disabled veterans that your town can choose to make larger, and the state recently began excluding military retirement pay from its income tax. Vermont draws military families after a PCS, which is short for Permanent Change of Station, the official military move from one duty station to another, with the Burlington Air National Guard Base and its F-35-flying 158th Fighter Wing in South Burlington and the Army Mountain Warfare School at Camp Ethan Allen Training Site in Jericho anchoring the state's military footprint. This guide explains the main rules in plain language and points you to the state's own sources. Tax law changes, and Vermont towns set the size of this exemption, so treat these figures as a starting point and confirm the current rules before you file.
How Vermont Helps Disabled Veterans With Property Taxes
Vermont offers a property tax exemption that lowers the appraised value of a qualifying veteran's home before taxes are figured. The U.S. Department of Veterans Affairs, known as the VA, is the federal agency that assigns the disability ratings the program relies on. As the Vermont Office of Veterans Affairs explains, state law sets a minimum exemption of $10,000 of appraised value, and towns may vote to raise it as high as $40,000. The exemption reduces the home's appraised value, so a $200,000 home with a $20,000 exemption is taxed as if it were worth $180,000.
Who Qualifies
The exemption is open to more than just the most severely disabled. According to the Office of Veterans Affairs, you may qualify if you receive VA disability compensation at a rating of 50 percent or higher, receive a Non-Service Connected Pension (also called the Improved Pension), or collect permanent military retirement pay for a medical retirement. The home must be owned by the veteran or survivor and be the primary residence; a rented home does not qualify, and the benefit cannot be passed to a landlord.
How Much Your Town Allows
Because the amount is set locally, the same veteran can see a different exemption from one town to the next. Every town must grant at least the $10,000 minimum, but a town's voters can increase it up to $40,000 by placing a measure on the local ballot. If you want a larger exemption in your town, you would work through your town's local ballot process. Until then, plan around the amount your town currently grants.
Surviving Spouses
The benefit can carry to a surviving spouse. A surviving spouse of a veteran who received the exemption may be eligible to continue it, and surviving spouses may also qualify based on Dependency and Indemnity Compensation or a death pension. Because the details depend on your situation, confirm them with the Vermont Office of Veterans Affairs before you rely on the benefit.
How It Works With Your Local Tax Bill
Vermont's exemption is unusual in that you apply to the state, not your town: you send proof of eligibility to the Vermont Office of Veterans Affairs, which then notifies your town to apply the exemption to your tax bill. Property tax itself is still set and collected by your town. You must provide proof of eligibility every year before May 1, although a veteran who is determined to be totally and permanently disabled only has to provide proof once.
Because towns set their own tax rates and can vote to raise the exemption, the same disability rating can save different amounts in different towns. If you are weighing where to settle, our guide to the military bases in Vermont can help you picture the local cost of owning a home.
Military Pay and Vermont State Income Tax
Vermont has a graduated state income tax, and it recently grew friendlier to military retirees. As the Vermont Office of Veterans Affairs notes, the Governor signed Act 71 in May 2025 to exclude military retirement pay from taxable income. The excludable amount depends on your federal adjusted gross income, and a taxpayer who receives both Social Security and military retirement pay may elect only one of the two exclusions, not both. You claim the exclusion when you file your state income tax return.
Active-duty pay is treated under the usual residency rules, and a service member who keeps another home state and is stationed in Vermont on orders is generally not taxed by Vermont on military pay. VA disability compensation is not part of your federal income, so Vermont does not tax it. Because rates and rules can change, confirm the current details with the Vermont Department of Taxes before you file.
A Note for Military Spouses: MSRRA
If you are a military spouse, the Military Spouse Residency Relief Act, known as MSRRA, may matter to you. MSRRA is a federal law that lets a military spouse keep a home state for tax and voting purposes even after moving on military orders. You do not automatically become a Vermont resident just because your service member got orders here.
Under the related federal rules, a service member, the spouse, or both may choose the service member's home state, the spouse's home state, or the service member's permanent duty station for residency. Because that choice affects both states' taxes, confirm yours before you file. For the property tax exemption in this guide, what usually matters most is that the qualifying veteran owns and lives in the home as the primary residence.
