Military Retirement Pay State

If you served in the military and now collect a retirement pension, how much state tax you owe on that income depends entirely on where you live. Some states tax military retirement pay like any other income. Others exempt it fully or partially. And nine states have no income tax at all, which means your military pension isn't taxed there either.

Knowing where your state falls on this list can save you hundreds or even thousands of dollars each year. Below is a breakdown of every state's current approach, along with practical steps to claim what you're owed.

What does a military retirement pay state tax exemption actually mean?

A state tax exemption for military retirement pay means your state does not require you to report some or all of your military pension as taxable income on your state return. This is separate from your federal tax obligation, which is handled by the IRS regardless of where you live.

Each state sets its own rules. Some exclude military retirement pay entirely. Others allow a partial deduction or cap the amount of pension income you can exclude. A handful offer no special treatment and tax it at the full state income tax rate.

This matters because military retirement pay is a significant, long-term income source. The difference between living in a state with full exemption versus one with no exemption can add up to tens of thousands of dollars over a retiree's lifetime.

Which states have no income tax at all?

Nine states levy no personal income tax, which means your military retirement pay isn't subject to state income tax in these locations:

Alaska
Florida
Nevada
New Hampshire taxes only interest and dividend income, not retirement pay (and you may qualify for additional veteran tax credits there)
South Dakota
Tennessee
Texas
Washington
Wyoming

Living in one of these states means you don't need to worry about a specific military retirement exemption because there's no income tax to exempt you from. However, these states may generate revenue through higher property taxes, sales taxes, or other fees, so the overall cost of living still matters.

Which states fully exempt military retirement pay from state income tax?

The following states do not tax military retirement income at all. If you live in one of these states and file a state return, you can subtract your military pension from your taxable income:

Alabama
Arkansas
Hawaii
Illinois
Iowa fully exempt after a phase-in that completed in recent years
Kansas full exemption for retirees age 55 and older, or those with a service-connected disability
Louisiana
Michigan
Mississippi
New York exempts up to a set dollar amount of pension income, which may cover many retirees' full pension (see New York veteran tax exemptions for related property tax benefits)
Ohio
Pennsylvania
West Virginia

Always verify the current exemption amount with your state's Department of Revenue or a tax professional, since legislatures update these rules frequently.

Which states offer a partial exemption on military retirement pay?

Several states let you exclude a portion of your military pension from state taxes but still tax the rest. The structure varies some use a flat dollar cap, some offer a percentage exclusion, and some tie the benefit to your age or total income:

Colorado allows a pension exclusion based on age
Connecticut partial exemption depending on income level
Delaware allows a military pension exclusion up to a set amount
Georgia offers a retirement income exclusion that applies to military pensions
Kentucky partial exclusion of retirement income
Maryland partial exemption with age-based thresholds
Massachusetts offers a limited pension deduction
Missouri has moved toward broader exemption in recent legislative sessions
New Jersey partial exemption, often based on income limits
Oklahoma partial exemption with specific eligibility criteria
Oregon partial federal pension subtraction
Rhode Island partial exemption for certain retirement income
South Carolina partial deduction of retirement income
Virginia offers an age-based income subtraction
Wisconsin partial exclusion of retirement income

In partial-exemption states, the actual tax savings depend on your total income, filing status, and age. Two veterans with the same pension can see very different results depending on these factors.

Which states tax military retirement pay with no special exemption?

A smaller group of states offer no specific exemption or deduction for military retirement income. Your pension is taxed the same as wages or other income:

Arizona
California
Idaho
Indiana
Maine
Minnesota
Montana
Nebraska
New Mexico
North Carolina
North Dakota
Utah
Vermont

If you live in one of these states and military retirement pay is a major part of your income, it's worth understanding the full tax picture including whether your state offers disability-related veteran exemptions that could reduce your tax burden through a different route.

How do I actually claim a military retirement pay exemption on my state return?

The process depends on your state, but the general steps look like this:

Report your full military retirement income on your state return, even if it will be fully exempt. Most states still require you to list it.
Claim the exemption or subtraction in the section for retirement income, pension exclusions, or military-specific deductions. This is usually a separate line or schedule on the state form.
Attach proof if required. Some states ask for a copy of your DD Form 214, your Retiree Account Statement (RAS), or a 1099-R.
File on time. Missing the filing deadline can delay or forfeit your exemption for that tax year.

If you're unsure about your state's specific form or process, check the veteran tax exemption renewal process by state for guidance on how to file and when to reapply.

What mistakes do veterans make with military retirement pay state taxes?

A few common errors cost veterans money:

Assuming "exempt" means you don't have to file. In most states, you still need to file a state return and claim the exemption. If you don't file, the state won't know to give you the benefit.
Moving and not updating your state of residence. If you retire and relocate, your new state's rules apply. Veterans sometimes continue filing in a former state out of habit.
Confusing federal and state rules. Your federal return treats military retirement pay as taxable income (unless you have VA disability offsets). State exemptions are a completely separate matter.
Not checking annual updates. States regularly adjust exemption amounts, income thresholds, and eligibility rules. A partial exemption one year may increase the next.
Missing combined veteran benefits. If you also receive VA disability compensation, own property, or have a service-connected condition, you may qualify for additional state-level veteran tax relief beyond the pension exemption alone.

Does changing my state of legal residence affect my military retirement taxes?

Yes. Your state of legal residence sometimes called your domicile or state of legal home determines which state's tax rules apply to your retirement pay. Active-duty servicemembers can maintain a legal residence under the Servicemembers Civil Relief Act (SCRA) even while stationed elsewhere, but once you retire, your physical presence and intent to remain in a state typically establish your domicile there.

If you're considering a move, compare the tax treatment of military pensions across states. Relocating from a state with no exemption to a state with full exemption could mean meaningful savings each year.

Practical checklist before you file your state return

Confirm whether your state fully, partially, or does not exempt military retirement pay
Check the current dollar amount or percentage of the exemption these change by legislative session
Gather your 1099-R, DD 214, and Retiree Account Statement
Look for additional veteran benefits in your state, including property tax relief and disability-related exemptions
If your state requires annual renewal, verify that you've submitted the required paperwork for the current year
Consider whether relocating to a different state could meaningfully reduce your annual tax burden on military pension income
Consult a tax professional who works with military retirees if your situation involves multiple income sources, VA disability, or a recent move