Updated October 29, 2026. Quick answer: Partly, and the statute names only CSRS. 32 V.S.A. section 5830e excludes “the first $10,000.00 of income received from the Civil Service Retirement System”, in full at federal adjusted gross income of $55,000 or less for a single filer or $70,000 or less for a joint return, then phasing out to zero at $65,000 and $80,000.
What Vermont does with a FERS or CSRS annuity
| Question | What the Vermont documents say |
|---|---|
| What the source says | Vermont law names the Civil Service Retirement System and lets a retiree exclude the first $10,000 of that income from taxable income, with the exclusion phasing out and ending as federal adjusted gross income rises. |
| Amount or limit | The first $10,000 of Civil Service Retirement System income is excluded when federal adjusted gross income is $55,000 or less (single, separate, head of household, surviving spouse) or $70,000 or less (married filing jointly); the exclusion shrinks proportionally above those levels and is zero at $65,000 or more (single types) and $80,000 or more (joint). A taxpayer eligible for more than one retirement or Social Security exclusion must elect only one. |
| Change for 2026 | No 2026 change is printed in the state documents cited here. |
In the Vermont documents’ own words
- “(b) Civil Service Retirement System income. The portion of income received” (32 V.S.A. 5830e Retirement income; Social Security income)
- “income of the taxpayer is less than or equal to $55,000.00” (32 V.S.A. 5830e Retirement income; Social Security income)
- “income of the taxpayer is less than or equal to $70,000.00” (32 V.S.A. 5830e Retirement income; Social Security income)
- “the income is received from a contributory annuity, pension, endowment, or retirement” (32 V.S.A. 5830e Retirement income; Social Security income)
- “elect only one of the exclusions for which the taxpayer” (32 V.S.A. 5830e Retirement income; Social Security income)
How this differs from other pensions in Vermont
Other retirement income from a contributory system of the U.S. government, a state, or a local government is excluded the same way as CSRS income only if the system was based on earnings not covered by Social Security. U.S. military retirement income has its own separate exclusion. See also Does Vermont tax pensions? and military retirement pay.
FERS, CSRS and your TSP
The state documents cited here do not address TSP withdrawals. For the Thrift Savings Plan itself, see state tax on TSP withdrawals and the TSP calculator.
Where this rule sits on the Vermont return
The exclusion is written into 32 V.S.A. section 5830e subsection (b), the same section that sets the Social Security and other retirement exclusions. A filer who qualifies for more than one of them must elect only one.
Checks before you rely on this answer
- Confirm your annuity is CSRS and not FERS before relying on the exclusion, because the statute names only the Civil Service Retirement System.
- Compare your federal adjusted gross income with the phase-out range for your filing status before counting on the full $10,000.
- If you also receive Social Security or another retirement exclusion under the same section, check which one is larger, because the statute makes you elect only one of them. The separate military retirement exclusion is not among the ones the election clause names.
What the Vermont documents leave open
The statute names the Civil Service Retirement System only, so how a FERS basic annuity is treated is not stated in the documents cited here. The 2025 IN-111 instructions do not describe the exclusion, Vermont’s tax rates were not read, and no 2026 booklet exists yet.
Common mistakes
- Assuming a FERS annuity gets the CSRS exclusion. The statute names the Civil Service Retirement System only.
- Claiming the exclusion at any income. It phases out as federal adjusted gross income rises and is zero at $65,000 for a single filer and $80,000 for a joint return.
- Stacking exclusions. A filer who qualifies for more than one retirement or Social Security exclusion must elect only one.
Related: Does Vermont tax pensions?, Vermont military retirement pay, Vermont retirement deduction line by line, and FERS, TSP and Social Security sequencing.
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Answer againSources
- 32 V.S.A. 5830e Retirement income; Social Security income: https://legislature.vermont.gov/statutes/section/32/151/05830e
- 2025 Form IN-111 Instructions: https://tax.vermont.gov/sites/tax/files/documents/IN-111-Instr-2025.pdf
Read from the state documents linked above on October 29, 2026. General information, not tax advice.