Updated October 16, 2026. Quick answer: Tied to federal. Vermont requires withholding on pension and annuity payments to residents when federal withholding is required, and the guidance says “You must withhold Vermont income tax on payments to Vermont residents”.
More on public pension systems, topic by topic: Vermont VSERS employment after retirement, Vermont VSERS disability retirement and Vermont VSERS early retirement.
Vermont pension withholding at a glance
| Item | What the documents say |
|---|---|
| Is state withholding required on regular pension payments? | Tied to federal withholding: required when federal withholding is required |
| Default rate if you give the payer no form | For periodic payments, the Vermont wage charts or tables; no flat percent is published |
| Lump sum or one-time payment | For a nonperiodic payment the Vermont withholding can be estimated at 30% of the federal withholding |
| Form to start, change or stop it | No pension-specific Vermont form is named; the wage Form W-4VT (Rev. 12/18) is the only Vermont certificate in the guide, and an employer may use federal Form W-4 information if no Vermont form is submitted |
| Changed for 2026? | 2026 withholding tables are effective January 1, 2026 through December 31, 2026; no pension-specific change stated |
What the Vermont documents say
Vermont’s Department of Taxes says payers must withhold on payments to residents when federal withholding is required, and also where the recipient elects optional federal withholding without stating that the payment is exempt from Vermont withholding.
For periodic payments the Department says “the tax is computed using the Vermont wage charts or tables”. For nonperiodic payments it says “the Vermont withholding can be estimated at 30% of the federal withholding”.
For wages, the guide says the filing status, allowances and extra withholding come from the employee’s Form W-4VT and that employees should complete or update it. Its annuities section names no form, and it says Vermont withholding is required where the recipient elects optional federal withholding and does not specifically state that the payment is exempt from Vermont withholding.
What the printed rate means in dollars
If federal withholding on a $50,000 nonperiodic payment were the 20% the IRS describes, that is $10,000 (computed as $50,000 times 20%), and the Vermont estimate of 30% of that federal amount is $3,000 (computed as $50,000 times 20% times 30%). This illustrates the formula, not a prediction of what your payer withholds.
What a mover should know
This page is about Vermont as a state of residence. An instruction line written for a nonresident or part-year filer is not the rule for a resident, and none of the documents read settles a part-year or two-state case, so check each state’s own rule. The federal side is the same everywhere; CMG’s federal 20% withholding on a pension lump sum page covers it, state tax withholding on IRA and 401(k) withdrawals in Vermont covers the account side, and state withholding on retirement withdrawals lists the other states checked.
What the documents do not say
- The documents read name no Vermont pension-specific certificate; they point to Form W-4VT and to the payer’s own form. The documents read do not say how a direct rollover is treated for Vermont withholding.
Common mistakes
- Choosing no federal withholding and expecting state tax to be withheld anyway; in a state tied to federal withholding the two usually move together.
- Assuming the answer for one state applies to another, or that state withholding settles the state tax owed at filing.
Related: state tax withholding on IRA and 401(k) withdrawals in Vermont, Vermont retirement taxes, whether Vermont taxes pensions, state withholding on retirement withdrawals, and retirement withholding calculator.
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Answer againSources
- 2026 Income Tax Withholding Instructions, Tables, and Charts (GB-1210-2026): https://tax.vermont.gov/sites/tax/files/documents/GB-1210-2026.pdf
- IRS Tax Topic 413, Rollovers from retirement plans: https://www.irs.gov/taxtopics/tc413
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.