Understanding your taxes is a big part of financial planning, whether you are in the midst of your career or are reaching your retirement years. Which parts of your income and how much they are taxed can greatly impact your financial planning and goals.
Additionally, staying informed about changes in tax laws and regulations is crucial as they can have a direct bearing on your overall financial strategy. Taking a proactive approach to tax planning can help you make informed decisions and optimize your financial well-being throughout your life journey.
Keep in mind this information is subject to change based on state laws.
States With No Personal Income Tax
These nine states have no state income tax, which means no tax on military retirement income:
- Alaska
- Florida
- Nevada
- New Hampshire (institutes tax on interest and dividends)*
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
*New Hampshire taxes residents on interest and dividends but does not tax regularly earned income or pension income.
States That Don’t Tax Military Retirement Pay
Many states have a state income tax but exempt military retirement pay and/or pension income from state income taxes.
- Alabama
- Alaska
- Arizona
- Arkansas
- Connecticut
- Florida
- Hawaii
- Illinois
- Indiana
- Iowa
- Kansas
- Louisiana
- Maine
- Massachusetts
- Michigan
- Mississippi
- Missouri
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Washington
- West Virginia
- Wisconsin
- Wyoming
States That Fully Tax Military Retirement Pay
The following states offer no special tax treatment for military retirement pensions:
- California
Military Retirement Income Taxes By State
The following table shows income taxes on military retirement pay by state.
| State | Military Retirement Pay State Income Tax Info |
|---|---|
| Alabama | Military retirement pay exempt |
| Alaska | No state income tax |
| Arizona | Military retirement pay exempt |
| Arkansas | Military retirement pay exempt |
| California | No special tax treatment of military retirement pay |
| Colorado | Under 55 get exempt up to $15,000 in 2023. 55 and older can claim regular pension and annuity subtraction on the applicable line of the Colorado subtractions from the Income Schedule (DR 0104AD) |
| Connecticut | Military retirement pay exempt |
| Delaware | Under 60 can exempt $2,000. 60 and older can exempt $12,500. |
| Florida | No state income tax |
| Georgia | Under 62 exemption up to $17,500. Veterans ages 62 to 64 are eligible for Georgia's existing retirement income tax exemption for up to $35,000. Over 65 are eligible for up to $65,000. |
| Hawaii | Military retirement pay exempt |
| Idaho | Military pensions are partially exempted up to $41,140 if you are age 65 or older. |
| Illinois | Military retirement pay exempt |
| Indiana | Military retirement pay exempt |
| Iowa | Military retirement pay exempt |
| Kansas | Military retirement pay exempt |
| Kentucky | Allows a pension income exclusion of up to $31,110. You may be able to exclude more than $31,110. |
| Louisiana | Military retirement pay exempt |
| Maine | Military retirement pay exempt |
| Maryland | You or your spouse may be able to subtract $5,000 of your military retirement income from your federal adjusted gross income. If you are 55 or older, you will be able to subtract $15,000 from your military retirement income. |
| Massachusetts | Military retirement pay exempt |
| Michigan | Military retirement pay exempt |
| Minnesota | Military retirement pay exempt |
| Mississippi | Military retirement pay exempt |
| Missouri | Military retirement pay exempt |
| Montana | Military retirement partially exempt depending on your income. |
| Nebraska | Military retirement pay exempt |
| Nevada | No state income tax |
| New Hampshire | Military retirement pay exempt |
| New Jersey | Military retirement pay exempt |
| New Mexico | $20,000 exempt in 2023. $30,000 exempt in 2024 through 2026. |
| New York | Military retirement pay exempt |
| North Carolina | Military retirement pay exempt |
| North Dakota | Military retirement pay exempt |
| Ohio | Military retirement pay exempt |
| Oklahoma | Military retirement pay exempt |
| Oregon | You may subtract your pension from Oregon income tax to the extent it was earned before October 1, 1991. Your entire pension is taxable if all of your service was after October 1, 1991. |
| Pennsylvania | Military retirement pay exempt |
| Rhode Island | Military retirement pay exempt |
| South Carolina | Military retirement pay exempt |
| South Dakota | No state income tax |
| Tennessee | No state income tax |
| Texas | No state income tax |
| Utah | Offers credits for military retirement pensions. |
| Vermont | Offers a $10,000 exemption from military retirement if you make $50,000 or less. |
| Virginia | Exempts $20,000 for the 2023 tax year, $30,000 for the 2024 tax year and $40,000 for 2025 and later. |
| Washington | No state income tax |
| West Virginia | Military retirement pay exempt |
| Wisconsin | Military retirement pay exempt |
| Wyoming | No state income tax |
State Tax Burdens and Military Pension Tax Rates
Just because a state doesn’t tax your income doesn’t mean you aren’t affected in other ways.
A state’s “tax burden” assesses the overall financial burden placed on residents and businesses within that state. This rate includes various types of taxes, such as income taxes, property taxes, sales tax, corporate taxes, estate and inheritance taxes, and more.
A higher tax burden rate implies a larger share of a state’s economic output or residents’ overall income goes toward paying taxes. Another way to put it is: what percentage of your income is toward the state government?
The tax burden rate can vary significantly from state to state due to differences in tax policies, rates, exemptions, and deductions.
Here is a look at state tax burdens next to their taxing military retirement income policy.
Alabama
- Military pensions are fully exempt from Alabama income tax.
- Overall Tax Burden: 7.35%
Alaska
- No personal income tax in Alaska.
- Overall Tax Burden: 5.06%
Arizona
- Military pensions are fully exempt from Arizona income tax.
- Overall Tax Burden: 7.62%
Arkansas
- Military pensions are fully exempt from Arkansas income tax.
- Overall Tax Burden: 8.40%
California
- No special tax treatment for military retirement pay in California.
- Overall Tax Burden: 8.89%
Colorado
- Military pensions are partially exempt from Colorado income tax.
- Overall Tax Burden: 8.28%
Connecticut
- Military pensions are fully exempt from Connecticut income tax.
- Overall Tax Burden: 9.83%
Delaware
- Military pensions are partially exempt from Delaware income tax.
- Overall Tax Burden: 6.12%
Florida
- No personal income tax in Florida.
- Overall Tax Burden: 6.33%
Georgia
- Military pensions are fully exempt from Georgia income tax.
- Overall Tax Burden: 7.46%
Hawaii
- Military pensions are fully exempt from Hawaii income tax.
- Overall Tax Burden: 12.31%
Idaho
- Military pensions are partially exempt from Idaho income tax.
- Overall Tax Burden: 7.64%
Illinois
- Military pensions are fully exempt from Illinois income tax.
- Overall Tax Burden: 9.38%
Indiana
- Military pensions are partially exempt from Indiana income tax.
- Overall Tax Burden: 8.58%
Iowa
- Military pensions are fully exempt from Iowa income tax.
- Overall Tax Burden: 9.15%
Kansas
- Military pensions are fully exempt from Kansas income tax.
- Overall Tax Burden: 8.71%
Kentucky
- Military pensions are partially exempt from Kentucky income tax.
- Overall Tax Burden: 8.43%
Louisiana
- Military pensions are fully exempt from Louisiana income tax.
- Overall Tax Burden: 8.05%
Maine
- Military pensions are fully exempt from Maine income tax.
- Overall Tax Burden: 11.14%
Maryland
- Military pensions are partially exempt from Maryland income tax.
- Overall Tax Burden: 9.44%
Massachusetts
- Military pensions are fully exempt from Massachusetts income tax.
- Overall Tax Burden: 8.48%
Michigan
- Military pensions are fully exempt from Michigan income tax.
- Overall Tax Burden: 7.40%
Minnesota
- Military pensions are partially exempt from Minnesota income tax.
- Overall Tax Burden: 9.41%
Mississippi
- Military pensions are fully exempt from Mississippi income tax.
- Overall Tax Burden: 8.56%
Missouri
- Military pensions are fully exempt from Missouri income tax. No tax on military retirement pay
- Overall Tax Burden: 7.11%
Montana
- Military pensions are partially exempt from Montana income tax.
- Overall Tax Burden: 6.93%
Nebraska
- Military pensions are fully exempt from Nebraska income tax.
- Overall Tax Burden: 8.84%
Nevada
- No personal income tax in Nevada.
- Overall Tax Burden: 7.69%
New Hampshire
- No personal income tax in New Hampshire.
- Overall Tax Burden: 6.14%
New Jersey
- Military pensions are fully exempt from New Jersey income tax.
- Overall Tax Burden: 9.76%
New Mexico
- Military pensions are partially exempt from New York income tax.
- Overall Tax Burden: 8.83%
New York
- Military pensions are fully exempt from New York income tax.
- Overall Tax Burden: 12.47%
North Carolina
- Military pensions are fully exempt from North Carolina income tax.
- Overall Tax Burden: 7.60%
North Dakota
- Military pensions are fully exempt from North Dakota income tax.
- Overall Tax Burden: 7.34%
Ohio
- Military pensions are fully exempt from Ohio income tax.
- Overall Tax Burden: 8.65%
Oklahoma
- Military pensions are fully exempt from Oklahoma income tax.
- Overall Tax Burden: 7.12%
Oregon
- Military pensions are partially taxed in Oregon income tax – see above table
- Overall Tax Burden: 7.80%
Pennsylvania
- Military pensions are fully exempt from Pennsylvania income tax.
- Overall Tax Burden: 7.95%
Rhode Island
- Military pensions are fully exempt from Rhode Island income tax.
- Overall Tax Burden: 9.07%
South Carolina
- Military pensions are fully exempt from South Carolina income tax.
- Overall Tax Burden: 7.44%
South Dakota
- No personal income tax in South Dakota.
- Overall Tax Burden: 6.69%
Tennessee
- No personal income tax in Tennessee.
- Overall Tax Burden: 6.22%
Texas
- No personal income tax in Texas.
- Overall Tax Burden: 8.01%
Utah
- Military pensions are partially exempt from Utah income tax – see above table
- Overall Tax Burden: 8.08%
Vermont
- Military pensions are partially exempt from Vermont income tax – see above table
- Overall Tax Burden: 10.28%
Virginia
- Military pensions are partially exempt from Virginia income tax – see above table
- Overall Tax Burden: 8.23%
Washington
- No personal income tax in Washington.
- Overall Tax Burden: 8.24%
West Virginia
- Military pensions are fully exempt from West Virginia income tax.
- Overall Tax Burden: 8.36%
Wisconsin
- Military pensions are fully exempt from Wisconsin income tax.
- Overall Tax Burden: 8.62%
Wyoming
- No personal income tax in Wyoming.
- Overall Tax Burden: 6.42%
*These tax burdens are based on figures from 2022.
It should be noted that many of these states have a progressive income tax system, which means that the more income you make, the higher the tax. A state with a progressive state tax will have a higher tax burden overall.
To make the most informed decision, ensure you research a state’s individual sales taxes, property taxes, income taxes, and other state-specific taxes to paint the best picture and decide what most benefits your unique situation.
Military Retirement Pay and VA Disability Compensation
Military retirees pay federal taxes on retirement pay. However, some situations may impact your retirement pay. A common one is receiving VA disability compensation due to a service-connected disability rating.
VA disability compensation is a nontaxable benefit. However, receiving disability compensation can impact your retirement pay. Military retirees who have a service-connected disability rating of 50% or higher receive concurrent receipt. This has no impact on military retirement pay.
Those with a service-connected disability rating of 40% or less are ineligible for concurrent receipt and have their military pension reduced by the amount of disability compensation they receive from the VA. The amount from the VA is nontaxable.
The net effect is to receive the same amount of income. However, the portion from the VA is tax-exempt, which lowers your effective taxable income. There may be exceptions for retirees receiving combat-related special compensation (CRSC).
Just remember, taxes are only a small factor in your relocation decision. You should take a look at all the different priorities in your life and make the relocation decision that best suits you.
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Sadie says
Thanks so much for this information. Is the information outlined in the article applicable to disability pay as well? Meaning, disability pay for a service related disability would have the same tax treatment applied?
Brittany Crocker says
Hi Sadie, that may depend on the state. Which state are you asking about?
Damion King says
USAR SM here. HOR is IL. Since joining the mililtary back in 2012, IL has never taxed my military income. You may want to update that on this list. I was AD 2012 to 2017, then Reserves 2017 to current. Again, IL has never taken out state income tax from my military pay.
Ryan Guina says
Thank you, Damion. Some states, including IL, do not take military pay. However, this article is focused on military retirement pay. We don’t have an article that covers which states tax military income from those who are still serving. Thanks!
Michael Grimmett says
West Virginia no longer taxes military retirement effective January 1, 2018.
Neil O'Connor says
I retired to NY in 2016 with a Marine reserve pension starting in 2015. Effective tax year 2018, only the first $20,000 remains free from NY State taxes. (“annuity income exclusion” Unless I’m doing my taxes wrong — I use H&R Block TaxCut.) Regardless, I can’t find a clear answer in NY State tax pubs; ref: Publication 361, and Publication 36
Ryan Guina says
Hello Neil, page 7 of Publication 361 states the following, “Military pension payments received by retired military personnel or their
beneficiaries are totally exempt from New York State tax.”
So it appears to me as though your pay should be tax-exempt at the state level. I would speak with a tax professional in your state or contact the state tax authority for more information.
Steve says
North Dakota Gov Doug Burgum passed a bill in April 2019 now exempting military pensions from state income tax.
Bonnie St Cyr says
My husband retired from the Army. Residing in MD. He passed away in Jan. of this year. I am receiving SBP payments. The payment statement shows no MD state tax witholdings. Does MD tax SBP?
Ryan Guina says
Hello Bonnie, I am sorry for your loss. Most states treat Survivor Benefit Pay as military retirement pay. So in the case of MD, they tax military retirement pay at the following schedule (as of 2019) – “Retirees are able to exclude the first $5,000 ($15,000 if 55 and older) of their military pension benefits.”
You can always contact DFAS or a tax professional for more information. I wish you the best.
Angie Barber says
In contacting NC on July 8 2019 the $4000 exclusion is no longer valid for those not meeting the 5 year rule for the Bailey Settlement. Their instructions for line 10 have been updated to remove that amount.
Bob Foessett says
I understand WV effective Jan 2018, does NOT tax military retirement pay. I read the story when the Governor signed it…many military retirees are moving to the panhandle counties near DC where they can use military facilities too. Please check out. Thanks. RF, Lt Col, USAF (Ret)
Van Bell says
Thank you for taking the time to put all this information together. Especially with the additional updates you have been making. Very much appreciated.
Mike Barbour says
Ryan,
The info in the Maryland breakout is correct; however, the infi in the table is dated. Thanks for the post – it’s very informative.
Ryan Guina says
Thanks, Mike. Updated to reflect the change. Thank you for the notification and thank you for your service!
Ana M Hambright says
My husband retired with 20 years in the Navy. Residing in Texas. My question he passed away November 28, 2018. How do I check if I am due any back taxes paid. I do t know if he had CRSC or CRDC. What or can I get information on this even though he passed away in 2018. Just trying to check my benefits.
Cecilia Duncan says
Contact DFAS INDIANAPOLIS retired pay at 866.912.6488
kevin says
Maryland now exempts the first $15 K
Ryan Guina says
Thank you for the update, Kevin. I just verified with the Maryland tax website. It is $5,000 for those under age 55, and $15,000 for those age 55 and up. We have updated the article accordingly. Thank you!
Lee says
You’re slightly incorrect on North Carolina . According to Bailey vs North Carolina, if you had 5 years of creditable service prior to 8/12/1989, your military retirement is tax free. Otherwise the $4000 limit is correct.
Ryan Guina says
Thank you, Lee. We have updated our article accordingly. The interesting thing is the North Carolina website did not have this listed on their income tax relief page. I had to dig to find this information. I appreciate the head’s up!
Chuck says
If you joined and retired after 89’ what does it mean then?
Ryan Guina says
Hello Chuck, it means that the first $4,000 ($8,000 for joint tax returns) of retirement pay is exempt from state taxes. The rest of your retirement pay is subject to state taxes.
Russell Jemalh Hogan says
Mk,
That’s really good to hear. Thanks for sharing.
Russell Jemalh Hogan says
Thomas,
You military income would still be taxed.
Sean G says
I’m under the impression Arkansas no longer taxes military retirement?
Ryan Guina says
Thank you for the update, Sean. You are correct, that change was made as of the 2018 tax year. We have updated this article accordingly. Thank you!
Thomas Barry says
Someone told me that if you retired from the military and the VA rated you as 100% disabled then not only is your VA disability check not subject to Federal Income Tax but your Military Retirement Check is exempted from Federal Income Tax too. Does anyone know if this is correct?
Ryan Guina says
Hello Thomas, no I have not heard of this. VA disability compensation is always exempt from federal taxes. Military retirement pay is generally always taxed at the federal level. However, military retirees who are eligible for Combat Related Special Compensation, or CRSC, may be eligible to have a portion of their military retirement pay exempt from federal taxes. CRSC must be applied for through the military retiree’s branch of service.
MK Clark says
Pa’s always been a haven for retired military members. Besides retirement pay tax exempt, retirees are well taken care of. My parents for one settled at Alden Place in Lebanon Pa and has since received one of the best medical treatment from Lebanon VA Medical Center, which is quite famous among veterans in the country.