It’s no secret that state taxes can make a big difference in how much of your hard-earned military retirement pay you actually get to keep.
The good news?
- As of 2024, 38 states fully exempt military retirement pay from taxes while 11 states offer partial tax breaks.
- California is the only state that fully taxes military retirement pay as well as the District of Columbia (Washington, DC).
Okay, let’s deep-dive the latest information, so you can see which states are putting money back in your pocket and where you might still get hit with taxes.
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Summary of Key Points
- 38 Total States Fully Exempt Military Retirement Pay: As of September 2024, 38 states either have no state income tax or fully exempt military retirement pay, allowing veterans to keep more of their hard-earned benefits without additional state taxes.
- 11 States Offer Partial Exemptions: These states provide partial tax breaks on military retirement pay, with exemptions varying based on factors such as age, income level, or the year you retired.
- California and Washington, D.C. Fully Tax Military Retirement Pay: As of September 2024, California and the District of Columbia are the only places in the U.S. where military retirement pay is still fully taxed.
9 States with No Income Tax
The following 9 states don’t collect state income taxes at all, so if you’re living in one of these places, your military retirement pay is fully tax-free:
- Alaska
- Florida
- Nevada
- New Hampshire (only taxes interest and dividends)
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
If you’re stationed or retired in any of these states, you’re in the clear when it comes to state income taxes on your retirement pay.
No extra hoops to jump through—just more of your retirement staying right where it belongs: in your bank account.
26 States That Don’t Tax Military Retirement Pay, Despite Having a State Income Tax
Here’s a list of states that still have an income tax, but they’ve chosen to fully exempt military retirement pay:
- Alabama
- Arizona
- Arkansas
- Hawaii
- Illinois
- Indiana
- Iowa
- Kansas
- Louisiana
- Maine
- Massachusetts
- Michigan
- Mississippi
- Missouri
- Nebraska
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Pennsylvania
- Rhode Island
- South Carolina
- West Virginia
- Wisconsin
For veterans living in these states, it’s important to update your tax withholding to zero with the Defense Finance and Accounting Service (DFAS), ensuring that no unnecessary state income taxes are withheld from your military retirement pay.
11 States With Partial Tax Exemptions for Military Retirement Pay
Some states have specific exemptions based on your age, income level, or the year you retired.
Here’s a list of states that offer partial tax breaks on retired military pay:
- Colorado: Exemptions vary by age—$15,000 for those under 55, $20,000 for those aged 55-64, and $24,000 for those 65 and older.
- Delaware: Taxpayers under 60 can exclude $2,000, while those 60 and older can exclude $12,500 of their retirement pay.
- Georgia: Veterans under 62 can exclude $17,500, with an additional $17,500 exemption for earned income over $17,500. Veterans 62 to 64 can exclude up to $35,000, and those 65 or older can exclude up to $65,000.
- Idaho: Allows exemptions of up to $40,140 for single filers and $60,210 for married couples if you’re 65 or older (or 62 and disabled).
- Kentucky: Exempts up to $31,110 for all military retirees.
- Maryland: Veterans under 55 can subtract $5,000 of military retirement income, while those 55 and older can subtract up to $20,000.
- New Mexico: Veterans can exempt up to $30,000 of military retirement income starting in 2024.
- Oregon: Only retirement pay earned before October 1, 1991, is tax-exempt.
- Utah: Offers a tax credit of 4.85% on military retirement pay.
- Vermont: Provides a $10,000 exemption if your income is below $50,000 for single filers or $65,000 for joint filers.
- Virginia: Veterans can exempt up to $20,000 in 2024, increasing to $30,000 in 2025.
What States Tax Military Retirement Pay?
California and the District of Columbia (Washington, D.C.) are the only areas in the U.S. that still fully tax military retirement pay.
If you live in either of these two places, you’ll be taxed at the standard state income tax rate for your military retirement pay.
Conclusion & Wrap-Up
No one likes taxes, especially when they cut into your hard-earned military retirement pay.
But with so many states offering full or partial exemptions for military retirees, there are ways to maximize the money you keep.
Always check your state’s current tax laws or consult a tax professional to ensure you’re taking full advantage of these benefits.
Make sure you’re not overpaying; keep your military retirement pay right where it belongs—in your hands.
About the Author
Brian Reese
Brian Reese is a world-renowned VA disability benefits expert and the #1 bestselling author of VA Claim Secrets and You Deserve It. Motivated by his own frustration with the VA claim process, Brian founded VA Claims Insider to help disabled veterans secure their VA disability compensation faster, regardless of their past struggles with the VA. Since 2013, he has positively impacted the lives of over 10 million military, veterans, and their families.
A former active-duty Air Force officer, Brian has extensive experience leading diverse teams in challenging international environments, including a combat tour in Afghanistan in 2011 supporting Operation ENDURING FREEDOM.
Brian is a Distinguished Graduate of Management from the United States Air Force Academy and earned his MBA from Oklahoma State University’s Spears School of Business, where he was a National Honor Scholar, ranking in the top 1% of his class.
