Retirement pay, states of residence and taxes
Edited and sourced from military benefits :
I believe that we all should contribute what is fair to help our military and contribute to the efficient management of our nation. That said, we all know that taxation is out of control in many states, without regard to the military service retiree’s sacrifice during their career. This information should assist a veteran with decisions about where to spend retirement.
Compiled for 2018, a list of all 50 states that exempt (or don’t) all or a portion of military retirement pay. When and where you settle, after retirement, is up to you, but having some current information should help you with “Uncle’s” hand in your pocket.
- NO personal income tax: 9 states
- Full military retirement pay subject to tax: 8 states
- NO tax on military retirement pay: 20 states
- Partial tax on military retirement pay: 13
No state income tax ( no tax on retirement pay):
New Hampshire (dividend and interest taxes only)
Tennessee (dividend and interest taxes only)
8 States That Do Not exclude Military Retirement Pay from tax:
20 States Don’t Tax Military Retirement Pay:
West Virginia (as of 2018)
13 States With “Special Provisions” Or Other Consideration For Military Retirement Pay
Arizona – Military retirement pay may be excluded from state taxation up to $2,500.
Colorado – Depending on age, up to $24,000 of military retirement pay may be exempt from state taxes.
Delaware – Taxpayers up to the age of 60 may exclude up to $2,000 of military retirement pay, military retirees aged 60 or older exclude up to $12,500.
District of Colombia – Military retirement pay may be excluded from state taxation up to $3,000 for individuals 62 or older.
Georgia – has a provision for any retirement income including military retirement pay. Taxpayers who are 62 or older, or permanently and totally disabled regardless of age, may be eligible for a retirement income adjustment on their Georgia tax return. Up to $35,000 ages 62-64 and $65,000 for 65 and older.
Idaho – Retirement benefits to a retired member of the military 65 or older, or disabled and age 62 or older are excluded from state taxes. Such deductions must be reduced by retirement benefits paid under the Federal Social Security Act or the Tier 1 Federal Railroad Retirement Act. The total maximum deductions vary each year.
Indiana – Military retirees may deduct the lesser of actual retirement pay or $5,000, whichever is less. Certain conditions may apply.
Kentucky – All military retirement pay is exempt from state income tax for those who retired prior to 1997. For those who retired after 1997, military retirement pay is subject to state tax when the pay exceeds $41,110.
Maryland – Military retirees don’t pay state income taxes on the first $5,000 of their retirement income. Those over age 65, or who are totally disabled, or who have a spouse who is totally disabled, receive additional state income tax breaks which may vary from year to year.
Nebraska – Retirees must choose (within two years of the retirement date) a seven-year exemption option of 40% or a lifetime exemption option of 15% starting at age 67.
North Carolina – Military retirement pay may not be taxed at all if it meets certain requirements including if the veteran was “vested in the retirement system” for five years as of August 12, 1989. Otherwise, tax exemptions may be applicable up to $4,000 for single returns and $8,000 for joint returns.
Oklahoma – Military retirement pay is exempt either up to 75% or $10,000, whichever is greater, but cannot exceed federal adjusted gross income.
Oregon – Military retirees may qualify for a “federal pension subtraction”. Those considered “special-case” Oregon residents will have their military retirement pay taxed as regular income.
South Carolina – Military retirees with a minimum of 20 years of active duty may exempt up to $3,000 until age 65, after which an exemption of $10,000 applies.