Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state. Go to Retiree Tax Map Vermont Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line Least Tax-Friendly One of Kiplinger's top ten least tax-friendly states for retirees, the Green Mountain State doesn't coddle retirees. Not only does it tax most retirement income, including Social Security, it has a steep top income tax rate. Vermont's state sales tax rate is 6%, and local jurisdictions may add 1%. Vermont's property taxes are among the ten highest in the U.S., according to the Tax Foundation. State Sales Tax 6% state levy. Municipalities can add 1% to that, but the average combined rate is 6.17%. A wide range of clothing as well as nonprescription drugs are exempt. Soda, however, is taxable. Income Tax Range Low: 3.55% (on up to $39,900 of taxable income for singles and up to $69,900 for joint filers)High: 8.95% (on taxable income over $415,600 for single filers and over $421,900 for joint filers) Social Security Social Security benefits are taxed to the extent they are taxed at the federal level. Exemptions for Other Retirement Income Railroad Retirement benefits are exempt, but all other retirement income is taxed. Out-of-state government pensions are fully taxed.IRAsTaxable at ordinary income tax rates.401(k)s and Other Defined-Contribution Employer Retirement PlansTaxable at ordinary income tax rates.Private PensionsTaxable at ordinary income tax rates.Public PensionsTaxable at ordinary income tax rates. Property Taxes Eligible Vermont residents can make a claim for a rebate of their school and municipal property taxes if their household income does not exceed a certain level. Generally, household incomes of $99,000 or more do not receive an adjustment. The maximum property tax adjustment is $8,000.There is a property tax exemption for veterans. The first $10,000 (may be increased up to $40,000 by a vote of the town) of appraisal value of the residence of a qualifying veteran, his or her surviving spouse, or child may be exempt.The median property tax on Vermont's median home value of $214,600 is $3,797.Tax breaks for seniors: If you are 65 and older or disabled, you may qualify for a Vermont tax credit that is worth 24% of the Federal Elderly and Permanently Disabled Tax Credit, as long as you do not exceed certain income limitations. Inheritance and Estate Taxes Vermont has no inheritance tax, but it does have an estate tax if property exceeds $2.75 million. The maximum estate tax rate is 16%.