Vermont Schedule IN-112 (2026): Line 12 Retirement Exemption

Updated October 19, 2026. Quick answer: Vermont Schedule IN-112 is filed with Form IN-111, and Part I line 12 is where the Retirement Income Exemption Worksheet result goes. The worksheet has you choose between a Social Security exemption and another retirement system exemption, then tests your adjusted gross income against its steps. The amount it produces is entered on line 12.

What this form does

The schedule is titled “Vermont Tax Adjustments and Credits” and carries the note “INCLUDE WITH FORM IN-111”. Part I is split into additions and subtractions, and line 12 sits in the subtractions as “Retirement Benefits Exempt from Taxation”. For the state-level picture, see Vermont retirement taxes and whether Vermont taxes pensions.

The instructions have a worksheet headed “RETIREMENT INCOME EXEMPTION WORKSHEET” and tell you to “PLEASE READ ALL INSTRUCTIONS CAREFULLY BEFORE COMPLETING THIS WORKSHEET.”

Who it applies to

Question 1 of the worksheet is the either/or at the heart of line 12: “You can choose to exempt your taxable social security income OR the income you received from a contributory annuity,” continuing “pension, endowment, or retirement system of the U.S. government or a state government, including the Civil Service” Retirement System. It adds the limit on the second choice: “Note that the second exemption only applies to benefits that are based on earnings not covered by the” Social Security Act.

The worksheet then sets filing-status tests on adjusted gross income. Question 2 asks “Married filing jointly, is your Adjusted Gross Income (AGI) on Form IN-111” and question 3 asks “Single, head of household, surviving spouse, or married filing separately, is your AGI less than” a stated amount; the dollar limits sit in those question bullets in the instructions. For a stop answer the worksheet says “No, STOP. You do not qualify for this exemption.”

On elections, Section II states “You may only elect one exclusion per taxable year.”

The lines, one by one

Lines 13 and 14 are printed directly under line 12 on the schedule and have their own instructions; they are listed here only because they sit beside it. Lines 9 and 10 of the worksheet cover the Social Security choice, and lines 11 and 12 cover the other retirement systems choice.

The figures the form prints

Each of these sits inside one worksheet sentence. For the full exemption under the other choice, question 3 says “enter your eligible retirement system income or $10,000, whichever is less.”

Section II describes who uses the partial calculation: “This section is for married joint filers with an Adjusted Gross Income (AGI) between” two amounts printed there. Line 7 reads “Divide Line 6 by $10,000.” and line 11 reads “Enter the lesser of the retirement income you earned from that source or $10,000.”

The other filing-status amounts are printed in the question 2, question 3 and line 4 bullets of the worksheet, and are not repeated here.

Where the result goes next

For the Social Security choice, line 10 says “Amount of partial exemption. Multiply Line 9 by Line 8.” and for the other choice, line 12 reads “Amount of partial exemption. Multiply Line 11 by Line 8.” Both then direct you to “Enter this amount on Schedule IN-112, Part I, Line 12.” The schedule’s own bottom line is “SUBTRACT Line 18 from Line 6” and the same line says to “Enter on Form IN-111, Line 2”. Your payers’ figures come from Form 1099-R; see 1099-R boxes explained, Form 1040 line 5a and 5b and Form 1040 line 4a and 4b.

A worked example

The worksheet’s Section II prints its own arithmetic in lines 4 to 8, 11 and 12, so it can be recomputed. This is an illustration, not a state example, using invented amounts for a single filer who elected one of the other retirement exemptions.

Line 4 is $65,000. Suppose the AGI on line 5 is $60,000. Line 6 is $65,000 minus $60,000 which is $5,000. Line 7 is $5,000 divided by $10,000 which is 0.50. Line 8 is the lesser of 0.50 or 1 which is 0.50. Suppose the retirement income from that source is $8,000. Line 11 is the lesser of $8,000 or $10,000 which is $8,000. Line 12 is $8,000 times 0.50 which is $4,000.

The amounts are invented for the computation; your own lines depend on your own return.

Edition and line numbers

This page reads the 2025 Vermont Schedule IN-112 (Rev. 10/25) and its 2025 instructions, the current files the Vermont Department of Taxes served on 2026-10-19. Check the edition printed on your own form and use that edition’s line numbers.

Common mistakes

• Claiming both choices. The worksheet says “You may only elect one exclusion per taxable year.”
• Using the other retirement systems choice for earnings that were covered by Social Security. The worksheet says “Note that the second exemption only applies to benefits that are based on earnings not covered by the”
• Stopping at the worksheet without carrying the result. The worksheet says “Enter this amount on Schedule IN-112, Part I, Line 12.”

Related: Vermont retirement taxes, whether Vermont taxes pensions, Form 1040 line 5a and 5b, Form 1040 line 4a and 4b, and 1099-R boxes explained.

Sources

• 2025 Vermont Schedule IN-112, Vermont Tax Adjustments and Credits (Rev. 10/25), Vermont Department of Taxes: tax.vermont.gov
• 2025 Schedule IN-112 Instructions, Vermont Department of Taxes: tax.vermont.gov

Read from the state revenue documents linked above on October 19, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the state revenue department is the right place to confirm anything consequential.