State Retirement Income Tax

Some states don't charge income tax on military retired pay. In all states, VA & Social Security disability payments are tax-free.

If you have issues with retired pay and state income tax, including changing your withholding amount, you can always contact DFAS for assistance.

You can contact DFAS at:

Defense Finance and Accounting Service
US Military Retirement Pay
8899 E 56 St
Indianapolis, IN 46249-1200
 
Phone: 800-321-1080

States Without Personal Income Tax

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.

States That Don't Tax Military Retirement Pay

The following states do not tax retired military pay.

Alabama Iowa Michigan Ohio
Arkansas (effective 2018) Kansas Minnesota Pennsylvania
Connecticut Louisiana Mississippi West Virginia (effective 2018)
Hawaii Maine New Jersey Wisconsin
Illinois Massachusetts New York  

 

States With Special Military Retirement Pay Exemptions

The following states have special provisions for military or public pensions:

Arizona1 Indiana6 North Carolina11
Arkansas2 Kentucky7 Oklahoma12
Colorado3 Maryland8 Oregon13
Delaware4 Missouri9 South Carolina14
Idaho5 Nebraska10 West Virginia15
  1. The first $2,500 of military retirement pay is exempt.
  2. The first $6,000 of military retirement pay is exempt, in 2018 all military retirement is tax-free.
  3. Military retirees ages 55 - 64 can exclude up to $20,000 in any one tax year from their retirement pay, those 65 and over can exclude up to $24,000.
  4. Up to $2,000 of military retirement excluded for individuals under age 60; $12,500 if 60 or older.
  5. Up to $3,000 of military pay excluded for individuals 62 or older.
  6. Servicemember or surviving spouse (if 60 on the last day of the tax year) is entitled to a deduction of up to $5,000 of military retirement or survivor benefits. If you received both military and retirement pay or survivor benefits in the same tax year, you cannot exclude more than $5,000.
  7. Partially exempt if retired after December 31, 1997; exempt if retired before January 1, 1998
  8. Military retirees are exempt from income tax on the first $5,000, with an increase to the first $10,000 (once they become over the age of 65), of their retirement income.
  9. Married couples with Missouri adjusted gross income less than $100,000 and single individuals with Missouri adjusted gross income less than $85,000, may deduct the greater of $6,000 or 100 percent of their public retirement benefits, to the extent the amounts are included in their federal adjusted gross income.
  10. Special rules see our Nebraska State Benefits Page.
  11. Only if you had at least 5 years active duty before August 12,1989
  12. The greater of 75% of your retirement pay or $10,000
  13. If you had military service before October 1, 1991 you may be able to deduct a portion of your retirement pay. If you didn't have military or federal service prior to October 1, 1991, your military retirement is taxed normally.
  14. An individual taxpayer who has military retirement income, may deduct an amount from his South Carolina taxable income equal to the amount of military retirement income that is included in his South Carolina taxable income. The deductions are phased in over five years beginning in 2016.
  15. First $2,000 is exempt, plus an additional exclusion total whose formula is years of military service multiplied by 2 percent, multiplied by military pension; or $20,000, whichever is less. In 2018 all military retirement is tax-free.
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Related Topics

Military Taxes