by Guy Page

Governor Phil Scott will hold a ceremonial bill signing on Wednesday, June 25, to enact S.51, a sweeping new law aimed at expanding Vermont income tax exclusions and credits for families, low-income workers, retirees, and veterans.

The signing ceremony is scheduled for noon at the State House and will be attended by legislators, advocates, and Vermont military retirees. 

The legislation began as H.483 but stalled because the House couldn’t agree to include military retirement income tax exemption. The Senate plunked most of H.483 into an existing tax benefits bill and passed it. Eventually it passed with strong bipartisan support in both the House and Senate. 

S.51 is retroactively effective to January 1, 2025, meaning Vermonters will be able to claim the new benefits when they file their 2025 tax returns.

“S.51 is about making Vermont more affordable for the people who need it most—working families, retirees, and those who have served our country,” Gov. Scott said in a statement. “This legislation reflects our shared commitment to fairness and support for all Vermonters.”

As outlined by the Campaign for Vermont, here are the key provisions of S.51:

Vermont Child Tax Credit (CTC):

• Increases the refundable credit to $1,000 per child age 6 or younger.
  
• Expands eligibility to those without a federal taxpayer identification number (TIN).
  
• Prorated for part-year residents based on Vermont income.
  

Earned Income Tax Credit (EITC):

• Extends the credit to taxpayers without a qualifying TIN.
  
• Mirrors federal amounts: 38% of the federal credit for families with children, 100% for those without.
  
• Also prorated for part-year residents.
  

Retirement Income and Social Security Exclusions:

• Raises income thresholds for full Social Security exclusion:
  
  • $55,000 (single) and $70,000 (married filing jointly).
    
• Introduces a $10,000 exclusion for Civil Service Retirement System (CSRS) and other public pension income for middle-income earners.
  
• Military retirement income and Survivor Benefit Plan payments are fully excluded for incomes up to $125,000, with partial exclusions up to $175,000.
  

Vermont Veteran Tax Credit:

• New refundable $250 credit for veterans earning less than $25,000.
  
• Phases out entirely at $30,000 AGI.
  
• Requires discharge papers or proof of military service.
  

Eligible taxpayers may elect only one exclusion between Social Security, CSRS, and other retirement incomes—but military retirement benefits may be claimed independently.

The legislation clarifies that the purpose of the Vermont Veteran Tax Credit is to provide targeted financial relief to veterans, especially those living on low or fixed incomes.

“S.51 demonstrates our appreciation for those who have served, and our commitment to equity in our tax code,” said Senate Finance Committee Chair Ann Cummings (D-Washington). “It helps lift families and retirees across Vermont.”