States That Don’t Tax Military Retirement

 

When you’re a military service member, chances are you’ve lived in quite a few different states throughout your career. You’ve also probably noticed that each state can have widely different tax laws.

It can be difficult to wrap your head around your tax benefits as an active duty service member or as a veteran. They’re also an important part of financial planning, whether you’re just getting started in your military career or you’re looking to retire in the next few years.

That’s why we’ve broken things down for you to give you a better understanding of which states tax military retirement benefits and why. These numbers are based on 2019 information and are subject to change. Make sure to sit down with a tax professional to go over your personalized tax plan based on your residence.

Keep reading to find a complete list of states that don’t tax military retirement – as well as the ones that do. It should also be noted that this list refers to state taxes, not federal taxes, and your military retirement income will likely be subject to taxes on a national level.

States That Don’t Tax Military Retirement Pay (Due to No State Income Tax)

The following states don’t earn taxes on military retirement because the entire state doesn’t require state income taxes from anyone. Since military retirement is considered a form of income, these states won’t take anything from your military pension:

  • Alaska
  • Florida
  • Nevada
  • New Hampshire (you will be taxed on dividends and interest)
  • South Dakota
  • Tennessee (you will be taxed on dividends and interest)
  • Texas
  • Washington
  • Wyoming

States That Don’t Tax Military Retirement Income (But They Do Have State Income Tax)

Some states don’t put a tax on military retirement payments even though they do require a state income tax. These states are:

  • Alabama
  • Arkansas
  • Connecticut
  • Hawaii
  • Illinois
  • Iowa
  • Kansas
  • Louisiana
  • Maine
  • Massachusetts
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • New Jersey
  • New York
  • Ohio
  • Pennsylvania
  • West Virginia
  • Wisconsin

Additionally, the following states do tax military retirement pay:

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

List of States That Don’t Tax Military Retirement

To compile all the information, here is a complete list of how each state treats military retirement including special provisions and other circumstances that might apply to you. Some states do require taxes on military retirement and others have specific rules.

Alabama – No tax on military retirement
Alaska – No state income tax
Arizona – No tax on military retirement up to $2,500
Arkansas – No tax on military retirement
California – Tax on military retirement
Colorado – No tax on military retirement up to $20,000 (ages 55-64) or $24,000 (ages 65+)
Connecticut – No tax on military retirement
Delaware – No tax on military retirement up to $2,000 (under age 60), $12,500 (ages 60+)
Florida – No state income tax
Georgia – Tax deductions on military retirement of up $65,000
Hawaii – No tax on military retirement
Idaho – No tax on military for up to $47,934 based on age and filing status
Illinois – No tax on military retirement
Indiana – Tax deductions on military retirement of up to $5,000 for ages 60+
Iowa – No tax on military retirement
Kansas – No tax on military retirement
Kentucky – No tax on military retirement if you retired before 1997. Tax on military retirement if it exceeds $41,110 after 1997.
Louisiana – No tax on military retirement
Maine – No tax on military retirement
Maryland – No tax on the first $5,000 (or first $15,000 if over age 55) of military retirement
Massachusetts – No tax on military retirement
Michigan – No tax on military retirement
Minnesota – No tax on military retirement
Mississippi – No tax on military retirement
Missouri – No tax on military retirement
Montana – Tax on military retirement
Nebraska – Special provisions on military retirement taxes of up to 40%
Nevada – No state income tax
New Hampshire – No tax on military retirement
New Jersey – No tax on military retirement
New Mexico – Tax exemptions on military retirement for low-income retirees
New York – No tax on military retirement
North Carolina – No state income tax on up to $4,000
North Dakota – Tax on military retirement
Ohio – No tax on military retirement
Oklahoma – No tax on military retirement up to $10,000 or 50%, whichever is greater
Oregon – Tax on military retirement if retired after 1991
Pennsylvania – No tax on military retirement
Rhode Island – Tax on military retirement
South Carolina – No tax on military retirement up to $17,500 (ages 65 and under) or $30,000 (ages 65+) per year
South Dakota – No state income tax
Tennessee – No state income tax
Texas – No state income tax
Utah – Tax exclusions on military retirement up to $900
Vermont – Tax on military retirement
Virginia – Tax on military retirement
Washington – No state income tax
Washington D.C. – No tax on military income up to $3,000 if over age 62
West Virginia – Tax exclusions on military retirement up to $2,000
Wisconsin – No tax on military retirement
Wyoming – No state income tax

As you can see, most of these special circumstances are anything but straightforward, so, again, it’s important to consult a tax professional before making your final decisions about financial planning.

If you’re planning to move as a military retiree and you’re torn between two states, perhaps you found this list of states that don’t tax military retirement helpful.

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