The Short Answer
Full-time active-duty pay earned while stationed outside Vermont is exempt; pay earned in Vermont is taxable, and Guard/Reserve in-state unit training pay is exempt up to $2,000. Your base pay is set by the federal pay table — identical to every other state for your rank and years of service. What actually changes in Vermont is your BAH (averaging $1,600/mo without dependents and $2,000/mo with dependents) and how Vermont treats the taxable portion of your pay.
State tax status: ✗ TAXED
2026 Worked Example — E-5, 6 Years, With Dependents in Vermont
Here is how the math actually lands for a mid-career enlisted member stationed in Vermont, built the way I read my own LES. Base pay and BAS are federal; the Vermont BAH figure is the state average.
| Monthly line item | Amount | Taxable? |
|---|---|---|
| Base pay (E-5, over 6 yrs) | $3,874 | Yes (federal + state) |
| BAH with dependents (Vermont avg) | $2,000 | No — tax-free |
| BAS (enlisted) | $476.95 | No — tax-free |
| Gross monthly entitlements | $6,350.95 | — |
| Taxable income (base pay only) | $3,874 | — |
| Est. Vermont state income tax | varies — see notes | — |
Only the $3,874 of base pay is taxable — the $2,476.95 of BAH + BAS is completely tax-free. Run your exact rank, ZIP, and dependency status in the Military Pay Calculator for a precise estimate.
How Vermont Taxes Each Type of Military Pay
Active-Duty Base Pay
Full-time active-duty pay earned while stationed outside Vermont is exempt; pay earned in Vermont is taxable, and Guard/Reserve in-state unit training pay is exempt up to $2,000.
Guard & Reserve Drill Pay
Vermont exempts up to $2,000 of in-state National Guard or Reserve unit training (drill) pay; amounts above that are taxed.
Military Retirement Pay
Military retirement pay is fully exempt if federal AGI is $125,000 or less, phases out between $125,000 and $175,000, and is fully taxable above $175,000.
VA Disability Compensation
VA disability compensation is exempt federally and is not taxed by Vermont.
SCRA & Residency in Vermont
A nonresident servicemember stationed in Vermont is protected from Vermont tax on military pay by SCRA.
This is the single most misunderstood rule in military pay. Your home of record / state of legal residence — not your duty station — generally determines who can tax your military pay. Changing it is a deliberate act, not something that happens automatically when you PCS.
Major Military Installations in Vermont
- Vermont Air National Guard (Burlington)
- Camp Ethan Allen Training Site
- Vermont Army National Guard (Colchester)
BAH is set by the Military Housing Area covering your duty ZIP. Verify your exact rate at the official DoD BAH lookup.
Official Sources
FAQ — Military Pay in Vermont
Does Vermont tax my military base pay?
Full-time active-duty pay earned while stationed outside Vermont is exempt; pay earned in Vermont is taxable, and Guard/Reserve in-state unit training pay is exempt up to $2,000.
Is my BAH taxed in Vermont?
No. BAH is federally tax-free and is never counted as income for Vermont state income tax, regardless of how Vermont treats base pay.
Does Vermont tax military retirement pay?
Military retirement pay is fully exempt if federal AGI is $125,000 or less, phases out between $125,000 and $175,000, and is fully taxable above $175,000.
I'm stationed in Vermont but my home of record is elsewhere — who taxes me?
A nonresident servicemember stationed in Vermont is protected from Vermont tax on military pay by SCRA.