In our 510,000-path Monte Carlo study of 30-year retirement outcomes, Vermont retirees finished at 72.39% success rate (ranked #42 of 51 by success rate, #44 of 51 by lowest median lifetime state tax). Median 30-year state-tax cost: $110,250 — that is $110,250 more than a Wyoming retiree pays. Median terminal balance after 30 years: $814,092. State tax is part of the optimization here — the playbook below shows the federal-state-ACA stack.
The VT verdict
For a retiree planning withdrawals in 2026, Vermont is one of the higher-burden states for retirees, especially on traditional pre-tax withdrawals. Still taxes social security at higher incomes, with a $5m estate exemption.
Vermont has no dollar-capped retirement-income exclusion, so every converted dollar enters the state tax base. The marginal cost of a conversion here is the federal bracket plus the state rate plus, below 65, whatever premium tax credit crossing the 400% FPL cliff would cost you.
Worked example: $30k Roth conversion in Vermont
Consider a married couple age 58 in Vermont with $75,000 of taxable income, both on ACA Marketplace coverage. They want to convert $30,000 from a traditional IRA to a Roth. The Vermont state tax on that conversion is approximately $2,625 — the full amount is taxed at 8.75%. Federal tax at the 22% bracket adds another $6,600. And because the conversion pushes their MAGI to $105,000 — over the 400% FPL cliff of $84,600 — they lose their full ACA premium tax credit, roughly $12,000. Total cost of the $30,000 conversion: about $21,225, or an effective 70.8% marginal rate. That state figure uses Vermont's top bracket rate, so read it as a ceiling: a household whose income lands in a lower bracket pays less, and Vermont's own deductions reduce it further. The federal-state-ACA stack matters in Vermont.
Cost breakdown
| Component | Amount |
|---|---|
| Federal income tax (22% bracket) | $6,600 |
| Vermont state income tax | $2,625 |
| ACA premium tax credit clawback | $12,000 |
| Total cost on $30,000 conversion | $21,225 (70.8% effective) |
Scenario B (high-tax): cliff-protective $15k conversion in Vermont
A Vermont couple aged 58 with $66K MAGI, both on a Silver-tier Marketplace plan converts only $15,000 because crossing the 400% FPL cliff in Vermont layers state tax, federal tax at 22%, AND a ~$12,000 PTC clawback on top of each other. State tax on $15k: $1,312 — the full amount is taxed at 8.75%. Federal tax: $3,300. PTC preserved. Effective rate: 30.8%. In a high-tax state, the optimization is small annual conversions over many years — never a single 'big year' if Marketplace coverage is in play.
What the Monte Carlo data says about Vermont
QuantCalc Research ran a 30-year, 10,000-path Monte Carlo simulation for an identical representative retiree (age 60, $2M starting balance, 60/40 portfolio, $80K real annual spend) in each of the 51 U.S. jurisdictions. Here's how Vermont compared to the best- and worst-case states:
| Metric | Vermont | Wyoming (best) | California (worst) |
|---|---|---|---|
| 30-year success rate | 72.39% | 77.11% | 69.03% |
| Rank (of 51) | #42 | #1 | #51 |
| Median lifetime state tax (30y) | $110,250 | $0 | $154,980 |
| Median total tax (30y) | $328,650 | $218,400 | $373,380 |
| Median terminal balance | $814,092 | $999,751 | $695,612 |
| Δ success vs Wyoming | -4.72 pp | — | −8.08 pp |
Sources: QuantCalc 51-State Monte Carlo Study (2026-05-12) — 510,000 total paths, methodology fully documented and dataset released CC-BY-4.0. Vermont's row in the dataset uses the same portfolio + spend + retirement age as every other state — the only variable is state tax treatment.
How Vermont treats capital gains in retirement
Vermont taxes long-term capital gains as ordinary income at the same top bracket rate (8.75%). That stacks on top of federal LTCG (0%/15%/20%) and the 3.8% NIIT for high earners. A 'free' federal 0% LTCG harvest still costs you up to 8.75% at the state level — meaningful in this jurisdiction, particularly during Roth-conversion years when your MAGI is already elevated.
Why the ACA cliff hits hard in Vermont
The 400% federal-poverty-level cliff is federal, not state-specific — but its dollar impact depends on the benchmark Silver-plan premium in your county. Vermont's Marketplace pricing and your household composition determine the size of the subsidy at risk. A two-person household near 400% FPL can easily have $10,000–$15,000 of annual premium tax credit on the line. Under the OBBBA 2026 restoration of the cliff, $1 of additional MAGI above 400% FPL eliminates the entire credit.
For 2026 the 400% FPL threshold is:
- Household of 1: $62,600
- Household of 2: $84,600
- Household of 3: $106,600
- Household of 4: $128,600
Optimal Roth conversion strategy for Vermont
The VT-specific playbook depends on tier:
- Identify your cliff distance. Compute MAGI from all income sources (wages, capital gains, interest, dividends, traditional withdrawals). Find your headroom under 400% FPL. Use the live cliff widget above for a quick check.
- Stay under the cliff if you can. In Vermont at 8.75%, the marginal cost of going over the cliff is federal tax + state tax + full PTC clawback. The break-even conversion size is smaller than in tax-free states.
- If you must go over, convert big. Once you've crossed the cliff, additional conversion dollars only cost federal + state tax (no incremental PTC loss). A "rip the bandage" conversion year can be efficient if you have many traditional dollars to move.
- Coordinate with capital gains and the 0% LTCG bracket. Vermont taxes long-term capital gains as ordinary income at the same top bracket rate (8.75%). That stacks on top of federal LTCG (0%/15%/20%) and the 3.8% NIIT for high earners. A 'free' federal 0% LTCG harvest still costs you up to 8.75% at the state level — meaningful in this jurisdiction, particularly during Roth-conversion years when your MAGI is already elevated.
- Plan ahead for IRMAA. The IRMAA Medicare premium surcharge has a 2-year lookback. A Vermont resident in their early 60s converting today will see IRMAA implications at 65. See RMD + IRMAA calculator for the lookback math.
State tax basics for Vermont retirees
| Question | Vermont |
|---|---|
| State income tax | 8.75% top marginal |
| Number of brackets | 4 |
| Social Security taxed | Yes (with thresholds) |
| 401(k) / Traditional IRA taxed | Yes |
| Retirement-income exclusion (couple) | None |
| Roth conversion draws that exclusion | Not applicable |
| State estate / inheritance tax | Yes |
| Retirement-friendliness tier | high tax |
| Notable feature | still taxes Social Security at higher incomes, with a $5M estate exemption |
| 30-yr MC success rate (rank) | 72.39% (#42/51) |
| Median 30-yr state tax | $110,250 |
Model your full Vermont retirement scenario
Free 10,000-path Monte Carlo with state-specific tax engine, ACA cliff, Roth conversion optimizer, IRMAA lookback — all in your browser, no signup.
Run a free simulation →Related calculators and reading
- All-states retirement tax comparison — see Vermont alongside the other 50 jurisdictions.
- State Retirement Tax Data 2026 — the per-jurisdiction rate, exclusion and Social Security figures behind this page, as CSV and JSON.
- ACA Subsidy Cliff Optimizer — find the largest Roth conversion that keeps you under 400% FPL.
- Roth Conversion Optimizer — bracket-fill vs. fixed-amount strategy comparison.
- RMD + IRMAA Calculator — Medicare premium surcharge based on 2-year-old MAGI.
- Safe Withdrawal Rate Calculator — sequence-of-returns-aware withdrawal planning.
- Research: 51-State 30-year Monte Carlo (2026) — full ranking and dataset.
- Research: Monte Carlo ACA Cliff 2026 — 80,000-path study of the cliff cost.
FAQ
Does Vermont tax Roth conversions?
Vermont taxes Roth conversions as ordinary income at the state level. A $30,000 conversion by a couple aged 58 costs about $2,625 in state tax alone — the full amount is taxed at 8.75% — on top of federal tax and any ACA subsidy clawback. That state figure uses Vermont's top bracket rate, so read it as a ceiling: a household whose income lands in a lower bracket pays less, and Vermont's own deductions reduce it further.
What is Vermont's 30-year Monte Carlo retirement success rate?
In QuantCalc's 510,000-path Monte Carlo study, a representative retiree in Vermont (age 60, $2M balance, 60/40 portfolio, $80K real spend) finished 30 years at 72.39% success rate — ranked #42 of 51 jurisdictions. Median 30-year state tax: $110,250. Median terminal balance: $814,092.
What is the ACA cliff in Vermont for 2026?
The ACA premium-tax-credit cliff is a federal threshold, not state-specific. For a household of two in 2026, it sits at 400% of the federal poverty level — $84,600. Crossing it by even $1 of MAGI eliminates the full subsidy under the OBBBA 2026 rules.
Is Vermont a good state to retire for tax purposes?
Vermont is one of the higher-burden states for retirees, especially on traditional pre-tax withdrawals. Still taxes social security at higher incomes, with a $5m estate exemption. In our Monte Carlo ranking it placed #42 of 51 jurisdictions.
Does Vermont tax Social Security benefits?
Yes — Vermont taxes Social Security benefits. Social Security is fully exempt when AGI is at or below the threshold. Above it, the exemption is ratably phased out over the next $10,000 of AGI. The AGI threshold is $55,000 for a single filer and $70,000 for a married couple filing jointly.
Does Vermont tax 401(k) and IRA withdrawals?
Yes — Vermont taxes 401(k) and traditional IRA withdrawals as ordinary income, at a top bracket rate of 8.75%.
Does Vermont have a state estate or inheritance tax?
Yes — Vermont has a state-level estate or inheritance tax in addition to the federal estate tax. Plan transfers accordingly.
How does Vermont tax capital gains?
Vermont taxes long-term capital gains as ordinary income at the same top bracket rate (8.75%). That stacks on top of federal LTCG (0%/15%/20%) and the 3.8% NIIT for high earners. A 'free' federal 0% LTCG harvest still costs you up to 8.75% at the state level — meaningful in this jurisdiction, particularly during Roth-conversion years when your MAGI is already elevated.
Last updated 2026-08-23. State income tax figures reflect the 2026 schedule published by Vermont's tax authority. ACA poverty-level figures from HHS 2026 Federal Register. Monte Carlo numbers from the QuantCalc 51-state research drop (2026-05-12, CC-BY-4.0). This page is educational. Not tax, legal, or financial advice — consult a qualified advisor.