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Older Vermonters are now among the millions of retirees nationwide who stand to benefit from a major federal tax change.
Under the One Big Beautiful Bill, a new senior tax deduction will phase out federal taxes on Social Security for the vast majority of recipients.
In Vermont, about 100,000 seniors are expected to qualify for this targeted tax relief.
Federal Tax Relief on Social Security Income
The law, passed by the Trump administration, introduces a dedicated deduction for Americans aged 65 and older—$6,000 for individuals and $12,000 for married couples. Added to existing deductions, total write-offs could reach $23,750 and $46,700, respectively.
This expansion means 88% of seniors receiving Social Security will no longer owe federal income tax on those benefits. That’s a jump from 64% under previous law, resulting in 14.2 million more retirees paying no federal tax on a key part of their income.
Vermont’s Senior Households Poised to Benefit
Vermont is one of the oldest states in the country by age. Of its roughly 647,000 residents, about 147,000 are aged 65 and over—nearly 23% of the population, according to the most recent census information. That makes the Green Mountain State second only to Maine in senior population share.
Among these older Vermonters, 100,000 are expected to benefit directly from the new Social Security tax exemption. In addition, the law is projected to boost real wages for workers in Vermont by $3,800 to $6,900, and raise take-home pay up to $10,600 for certain households.
Limits on Who Benefits
While the senior tax deduction offers welcome relief for many, it’s not designed for everyone. Middle-income retirees who still owe taxes are likely to benefit the most. For these households, the deduction could lower taxable income enough to wipe out federal tax liability entirely.
But lower-income retirees—those living solely on Social Security or small pensions—may not gain anything from the deduction. They already pay little to no federal income tax and have no liability to reduce.
The deduction also has an upper limit. It begins phasing out at $75,000 for individuals and $150,000 for married couples, disappearing entirely above $175,000 and $250,000.
Another limitation: the provision is only authorized through 2028. Its future beyond that depends on congressional renewal.
Could This Help Vermont Seniors Stay in Their Homes?
In a high-cost state like Vermont, where property taxes and heating expenses can hit retirees hard, this tax relief could make aging in place more sustainable—especially in counties like Chittenden, Windsor, and Washington.
When combined with the higher SALT deduction cap, which now allows deductions up to $40,000, seniors who itemize could see thousands more in savings. That could be enough to cover rising insurance premiums, annual taxes, or basic home maintenance.
The deduction also arrives alongside a projected COLA increase in 2026, giving Vermont’s retired population a rare double-boost: more income, and less tax.
This article was produced with editorial input from Dina Sartore-Bodo, Gabriella Iannetta, and Allaire Conte.