An act relating to excluding military disability retirement from personal income taxation

This bill (H.603) excludes U.S. military disability retirement income from Vermont's personal income tax. It directly affects Vermont veterans receiving military disability retirement pay under 10 U.S.C. chapter 61. The bill provides full exclusion for taxpayers with federal adjusted gross income under $125,000, partial exclusion for incomes between $125,000-$175,000 (proportional to income above $125,000), and no exclusion for incomes of $175,000 or more. The change applies retroactively to taxable years beginning January 1, 2026.