Some States exempt all or a portion of retired pay from income taxation. Some States exempt disability retired pay in the same manner as the Federal Government. In all States, disability payments received from VA and all Social Security payments are exempt from taxation. Few States, if any, permit a retirement income credit of the type granted by the Federal Government.
State income tax, where applicable, is not withheld from retired pay unless a state has entered into an agreement with the Department of Defense to permit finance centers to withhold state income tax.Retirees who do not currently have state tax withheld from retired pay may request it from DFAS by a letter over their signature and social security number. The letter must state the amount of tax to be withheld and the state to which it will be paid.
You can contact DFAS at:
Defense Finance and Accounting Service
US Military Retirement Pay
P.O. Box 7130
London, KY 40742-7130
Toll Free: 1-800-321-1080
Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming do not have a personal income tax. Two others, New Hampshire and Tennessee, tax only dividend and interest income.
The following States have special provisions for Military or Public pensions:
|Missouri++||New Jersey||New York|
* = Exempts USPHS and NOAA retired pay as federal employment.
*** = Exempt depending on date of retirement - prior to 1998; after this date, some may be exempt.
+ NC allows full exemption for retirees with five years of service as of August 12, 1989; otherwise a deduction of up to $ 4,000 ($ 8,000 for joint filers) is allowed.
++Missouri has a Public Pension Exclusion which covers a portion of pension income.
All Other Military Retired Pay Taxable:
|New Mexico||North Dakota||Ohio*|
|Virginia*||West Virginia||South Carolina**|
* Does not tax Social Security or railroad retirement benefits.
** Does not tax Social Security benefits.
*** Does not tax Railroad Retirement Benefits
**** Does not tax Railroad Retirement Benefits; however, Social Security Benefits may be taxed
++ Possible exemption on all Federal pensions