Military Retirement Income Taxes by State – Which States Don’t Tax Military Retirement Pay?

Which states don’t tax military retirement pay?

You may be surprised to learn that 25 states do not tax any of your military retirement pay, while 19 states offer special considerations for military retirement income or other pension plans. That leaves only 7 states that offer no special tax treatment of military pensions. (Washington D.C. is included in these facts).

Since I couldn’t find a website with detailed, state-by-state tax information on the whole income picture, I decided to create my own.  Where applicable, I try to include links to the relevant state website, so you can double-check this information whenever you want. Keep in mind this was accurate at the time of publication, but is subject to change based on state laws.

How State Taxes Impact Your Financial Planning

Understanding your taxes is a big part of financial planning, whether you are in the midst of your career, or you are reaching your retirement years. Which parts of your income and how much they are taxed can have a large impact on your financial planning and goals. That is why we put together this list of states that tax military retirement pay.

However, when you’re deciding where to live after leaving the military, taxes on military pensions are only one part of the equation.  It’s also important to consider taxes on the rest of your income. Understanding the big picture can help your military retirement pay go further.

Many states have multiple income tax brackets, based upon taxable income.  However, this article only contains the highest marginal individual tax bracket.  For a true side-by-side comparison on tax liability, you might want to run the numbers yourself.  If you are planning a more complex post-retirement career, such as owning your own business, you may want to sit down with a tax professional or fee-only financial planner for more detailed tax planning.

State Taxes on Military Retirement Pay – Full Table

The following table shows state income taxes on military retirement pay, including which states have no state income tax, which states exempt military pension income from state taxes, which states offer special tax treatments for military pensions, and which states tax military retirement pay as ordinary income. The sections below the table offer further details on state income taxes.

State	Military Retirement Pay State Income Tax Info
Alabama	Military Retirement Pay Exempt
Alaska	No State Income Tax
Arizona	Up to $2,500 in military retirement pay can be exempted from taxable income.
Arkansas	Military Retirement Pay Exempt
California	No Special Tax Treatment of Military Retirement Pay
Colorado	The following military pension amounts can be excluded from Colorado income, based upon age: $20,000 (55-64); $24,000 (65+)
Connecticut	Military Retirement Pay Exempt
Delaware	The following military pension amounts can be excluded from Delaware income, based upon age: $2,000 (Under 60); $12,500 (60+)
Florida	No State Income Tax
Georgia	No Special Tax Treatment of Military Retirement Pay
Hawaii	Military Retirement Pay Exempt
Idaho	Military pensions are partially exempted according to the following table: - Married Filing Jointly (must be either 65+ or 62+ and disabled): $47,934 - Single (must be either 65+ or 62+ and disabled): $31,956
Illinois	Military Retirement Pay Exempt
Indiana	First $6,250 is tax-free. 25% of the amount above this is tax-free in 2019, followed by an increase to 50% in 2020, 75% in 2021, and 100% in 2022 and subsequent years.
Iowa	Military Retirement Pay Exempt
Kansas	Military Retirement Pay Exempt
Kentucky	Military pensions are fully exempt if you retired before 1997. Personnel retiring after 1997 are subject to taxation to the extent their pension exceeds $41,110.
Louisiana	Military Retirement Pay Exempt
Maine	Military Retirement Pay Exempt
Maryland	Retirees are able to exclude the first $5,000 ($15,000 if 55 and older) of their military pension benefits.
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	No Special Tax Treatment of Military Retirement Pay
Nebraska	Special provisions apply. See Note under Nebraska for more details.
Nevada	No State Income Tax
New Hampshire	Military Retirement Pay Exempt
New Jersey	Military Retirement Pay Exempt
New Mexico	Exemption may be allowed for low-income retirees.
New York	Military Retirement Pay Exempt
North Carolina	Up to $4,000 is exempt from North Carolina income tax.
North Dakota	Military Retirement Pay Exempt
Ohio	Military Retirement Pay Exempt
Oklahoma	Retired servicemembers may deduct the greater of $10,000 or 75% of their retirement income from Oklahoma income tax.
Oregon	You may subtract your pension from Oregon income tax to the extent it was earned before October 1, 1991. If all of your service was after October 1, 1991, your entire pension is taxable.
Pennsylvania	Military Retirement Pay Exempt
Rhode Island	No Special Tax Treatment of Military Retirement Pay
South Carolina	Military pensions can be deducted in the following amounts: Under 65: $17,500 per year; Age 65+: $30,000 per year
South Dakota	No State Income Tax
Tennessee	No State Income Tax on Earnings or Pensions
Texas	No State Income Tax
Utah	Utah taxes military pensions. People over 65 may be eligible for a $450 (single) or $900 (married filing jointly) exclusion. However, income phaseouts apply.
Vermont	No Special Tax Treatment of Military Retirement Pay
Virginia	No Special Tax Treatment of Military Retirement Pay
Washington	No State Income Tax
Washington D.C.	Military retirees 62 and older are allowed to deduct up to $3,000 of their public pension.
West Virginia	The first $2,000 in pension income can be excluded.
Wisconsin	Military Retirement Pay Exempt
Wyoming	No State Income Tax

States with No Income Tax

There are 9 states that have no state income tax*.

• Alaska
• Florida
• Nevada
• New Hampshire (institutes tax on interest and dividends)*
• South Dakota
• Tennessee (institutes tax on interest and dividends; this is being phased out by 2022)*
• Texas
• Washington
• Wyoming

* New Hampshire and Tennessee tax citizens on interest and dividends, but do not tax regular earned income or pension income. Taxes on interest and dividends represent a small amount of taxes for most taxpayers in these states.

States That Don’t Tax Military Retirement Pay

The following 15 states have a state income tax, but exempt military retirement pay, and/or pension income from state income taxes. See the next section for more details regarding each state’s highest marginal tax bracket and special tax treatment for military retirement income.

• Alabama
• Arkansas
• Connecticut
• Hawaii
• Illinois
• Kansas
• Louisiana
• Massachusetts
• Michigan
• Mississippi
• New Jersey
• New York
• North Dakota
• Ohio
• Pennsylvania
• Wisconsin

States that Fully Tax Military Retirement Pay

The following states offer no special tax treatment for military retirement pensions:

• California
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont
• Virginia

Highest Marginal Tax Rates By State & Military Pension Tax Rates

This section covers the highest state income tax bracket, as well as more details regarding taxation on military retirement pay. You will note that several of the states that offer special considerations for military retirement pay or other pensions often do so by age, usually somewhere in the age 60-65 range, depending on state. Age 60 is the normal age for receiving Guard and Reserve retirement benefits, though some members do qualify to receive retirement pay early based on deployments. You can use this information to help plan your post-military career or your post-military retirement plans.

Alabama

• Highest marginal tax rate:  5% for income above $3,000 (individuals) or $6,000 (married filing jointly). (more info).
• Exempt from taxes on military retirement pay.

Alaska

• No state income tax.
• No taxes on military retirement pay.

Arizona

• Highest marginal tax rate:  4.54% for income above $150,000 (individuals) or $300,000 (married filing jointly). (more info).
• Up to $2,500 in military retirement pay can be exempted from taxable income.

Arkansas

• Highest marginal tax rate:  7.0% (for income above $35,300–as of 2015). (more info).
• No taxes on military retirement pay. Up to $6,000 in other retirement pensions can be exempted from taxable income.

California

• Highest marginal tax rate:  13.3% for income above $537,498 (single) and $1,074,996 (married filing jointly).
• Military pension is fully taxable.

Colorado

• Highest marginal tax rate:  4.63% for all income, regardless of filing status. (more info).
• The following military pension amounts can be excluded from Colorado income, based upon age:
  • $20,000 (55-64)
  • $24,000 (65+)

Connecticut

• Highest marginal tax rate:  6.99% for income above $500,000 (single) and $1,000,000 (married filing jointly). (more info).
• Military pension is fully exempt from taxes.

Delaware

• Highest marginal tax rate:  6.6% for income above $60,000 regardless of status. (more info).
• The following military pension amounts can be excluded from Delaware income, based upon age:
  • $2,000 (Under 60)
  • $12,500 (60+)

Florida

• No state income tax.
• No taxes on military retirement pay.

Georgia

• Highest marginal tax rate:  6.0% for income above $7,000 (single) or $10,000 (married filing jointly). (more info).
• Military pensions are fully taxable.

Hawaii

• Highest marginal tax rate:  11.0% for income above $200,000 (single) or $400,000 (married filing jointly).
• Military pensions are fully exempt.

Idaho

• Highest marginal tax rate:  7.4% for income above $10,905 (single) or $21,810 (married filing jointly). (more info).
• Military pensions are partially exempted according to the following table:
  • Married Filing Jointly (must be either 65+ or 62+ and disabled):  $47,934
  • Single (must be either 65+ or 62+ and disabled):  $31,956

Illinois

• Highest marginal tax rate:  4.95% for all taxpayers. (more info).
• Military pensions are fully exempt.

Indiana

• Highest marginal tax rate:  3.3% for all taxpayers. (more info).
• Military retirees are allowed to deduct up to $6,2500 of their pension.
• The state of Indiana will phase out income taxes on military retirement pay over a 4 year period, starting with 2019 taxes. 25% of the amount above $6,250 will be tax-exempt in 2019, followed by 50% in 2020, 75% in 2021, and the full amount in 2020.
• This exemption does not extend to retirees of the U.S. Public Health Service or the National Atmospheric and Oceanic Administration.

Iowa

• Highest marginal tax rate:  8.98% for income above $95,600, regardless of filing status. (more info).
• Military pensions are fully exempt.

Kansas

• Highest marginal tax rate:  4.6% for income above $15,000 (single) or $30,000 (married filing jointly). (more info).
• Military pensions are fully exempt.

Kentucky

• Highest marginal tax rate:  6% for income above $75,000 regardless of status. (more info).
• Military pensions are fully exempt if you retired before 1997.  Personnel retiring after 1997 are subject to taxation to the extent their pension exceeds $41,110.

Louisiana

• Highest marginal tax rate:  6% for income above $50,000 (single) or $100,000 (married filing jointly). (more info).
• Military pension benefits may be excluded from taxable income.

Maine

• Highest marginal tax rate:  7.95% for income above $20,900 (single) or $41,850 (married filing jointly). (more info).
• Military pension benefits are exempt from Maine income tax.

Maryland

• Highest marginal tax rate:  5.75% for income above $250,000 (single) or $300,000 (married filing jointly). (more info).
• Retirees are able to exclude the first $5,000 ($15,000 if 55 and older) of their military pension benefits.

Massachusetts

• Highest marginal tax rate:  5.1% for all income, regardless of tax bracket or status. (more info).
• Military pensions are exempt from Massachusetts income tax.

Michigan

• Highest marginal tax rate:  4.25% for all income, regardless of tax bracket or status. (more info).
• Military pensions are exempt from Michigan income tax.

Minnesota

• Highest marginal tax rate:  9.85% for income above $154,950 (single) or $258,261 (married filing jointly). (more info).
• Military pensions are exempt from Minnesota income tax.

Mississippi

• Highest marginal tax rate:  5.0% for income above $10,000 regardless of status. (more info).
• Military pensions are exempt from Mississippi income tax.

Missouri

• Highest marginal tax rate:  6.0% for income above $9,000 regardless of status. (more info).
• Military pensions are exempt from Missouri income tax.

Montana

• Highest marginal tax rate:  6.9% for income above $17,100 regardless of status. (more info).
• Military pensions are subject to Montana state tax.

Nebraska

• Highest marginal tax rate:  6.84% for income above $29,460 (single) or $58,920 (married filing jointly). (more info).

Military retirees who retire after July 18, 2012, are allowed to exclude pension income according to one of the following two schedules:

An individual must make the election on or after July 18, 2014, and within two years after his or her retirement from the uniformed services, even if he or she does not begin receiving military retirement benefits immediately upon retirement. The individual may elect:

• Option 1: To exclude 40% of his or her military retirement benefit income for seven consecutive taxable years, beginning with the year in which the election is made; or
• Option 2: To exclude 15% of his or her military retirement benefit income for all taxable years, beginning with the year in which he or she turns 67 years of age.

Nevada

• No state income tax.
• No taxes on military retirement pay.

New Hampshire

• Highest tax rate: 5% on interest and dividend income. There is no individual income tax on W-2 pay. (more info).
• Military pensions are exempt from New Hampshire income tax.

New Jersey

• Highest marginal tax rate: 8.97% regardless of filing status. (more info).
• No taxes on military retirement pay in New Jersey.

New Mexico

• Highest marginal tax rate: 4.9% for income above $16,000 (single) or $24,000 (married filing jointly). (more info).
• Exemption may be allowed for low-income retirees.

New York

• Highest marginal tax rate: 8.82% for income above $1062,650 (single) or $2,125,450 (married filing jointly). (more info).
• No taxes on military retirement income in New York.

North Carolina

• Highest marginal tax rate: 5.85% for all taxpayers, regardless of status. (more info).
• Military retirees with 5 years of creditable service before August 12, 1989, are exempt from state income taxes on military retirement pay or military survivors benefits.
• Military retirees without 5 years of military service before August 12, 1989, are exempt from up to $4,000 ($8,000 for joint tax returns) on military retirement pay or military survivors benefits.
• More about North Carolina income tax.

North Dakota

• Highest marginal tax rate: 2.9% for income above $413,000 (single) or $420,000 (married filing jointly). (more info).
• Military pensions are fully exempt, starting in the 2019 tax year.
• This exemption does not extend to retirees of the U.S. Public Health Service or the National Atmospheric and Oceanic Administration.

Ohio

• Highest marginal tax rate: 4.997% for income above $208,500 regardless of status. (more info).
• Military pensions are fully exempt from Ohio income tax.

Oklahoma

• Highest marginal tax rate: 5.25% for income above $15,000 (single) or $27,600 (married filing jointly). (more info).
• Retired servicemembers may deduct the greater of $10,000 or 75% of their retirement income from Oklahoma income tax.

Oregon

• Highest marginal tax rate: 9.9% for income above $125,000 (single) or $250,000 (married filing jointly). (more info).
• You may subtract your pension from Oregon income tax to the extent it was earned before October 1, 1991.  If all of your service was after October 1, 1991, your entire pension is taxable.

Pennsylvania

• Highest marginal tax rate: 3.07% for all income regardless of filing status. (more info).
• Pennsylvania does not tax military pension income.

Rhode Island

• Highest marginal tax rate: 5.99% for income above $137,650 regardless of filing status. (more info).
• Military pensions are fully taxable.

South Carolina

• Highest marginal tax rate: 7.0% for income above $14,700 (single) or $15,400 (married filing jointly). (more info).
• Military pensions can be deducted in the following amounts:
  • Under 65:  $17,500 per year
  • Age 65+:  $30,000 per year

South Dakota

• No state income tax.
• No taxes on military retirement pay.

Tennessee

• No state income tax on earnings or pensions.  There is a 5% tax on interest & dividend income above $1,250 (single) or $2,500 (married filing jointly).
• No taxes on military retirement pay.

Texas

• No state income tax.
• No taxes on military retirement pay.

Utah

• Highest marginal tax rate: 5% for all income regardless of filing status. (more info).
• Utah taxes military pensions.  People over 65 may be eligible for a $450 (single) or $900 (married filing jointly) exclusion.  However, income phaseouts apply.

Vermont

• Highest marginal tax rate: 8.95% for income above $411,500 regardless of filing status. (more info).
• Military pensions are fully taxable.

Virginia

• Highest marginal tax rate: 5.75% for income above $17,000 regardless of filing status. (more info).
• Military pensions are fully taxable.

Washington

• No state income tax.
• No taxes on military retirement pay.

Washington D.C.

• Highest Marginal Tax rate: 8.95% for income above $1,000,000. (more info).
• Military retirees 62 and older are allowed to deduct up to $3,000 of their public pension. Private pensions are not exempt from deductions.

West Virginia

• Highest marginal tax rate: 6.5% for income above $30,000 (married filing separately) or $60,000 (single or married filing jointly). (more info).
• The first $2,000 in pension income can be excluded.

Wisconsin

• Highest marginal tax rate: 7.65% for income above $244,750 (single) or $326,330 (married filing jointly).
• Military pensions are fully exempt.

Wyoming

• No state income tax.
• No taxes on military retirement pay.

Other Notes About Military Retirement Pay & Taxes

Military retirees pay federal taxes on retirement pay. However, there are situations that may impact your retirement pay. One common situation is receiving VA disability compensation due to a service-connected disability rating. Va disability compensation is a non-taxable 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 non-taxable. 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, or CRSC.

I hope this article helps you to find the tax information you need as you look to make your relocation decision.  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.