States With No Income Tax for Veterans

There are currently nine states with no state income tax at all, which means veterans living there owe zero state tax on military retirement pay, VA disability compensation, or any other income:

Alaska
Florida
Nevada
New Hampshire (eliminated its interest and dividends tax as of January 2025)
South Dakota
Tennessee
Texas
Washington
Wyoming

On top of that, several other states exempt military retirement pay from state income tax even though they do collect income tax from most residents. So the total number of states where veterans can avoid state tax on retirement income is much larger than nine.

What Does "No Income Tax" Actually Mean for Veterans?

A state with no income tax doesn't tax any type of income wages, retirement pay, investment gains, or VA benefits. For veterans, this means:

Military retirement pay is not taxed at the state level.
VA disability compensation is already tax-free at the federal level, and these states don't add any state tax either.
Civilian income earned after leaving the military is also untaxed by the state.

This matters most for veterans drawing military retirement pay. In states with a normal income tax, that monthly check could lose 3–10% to state taxes depending on the rate and your bracket. Over a 20- or 30-year retirement, that adds up to tens of thousands of dollars.

Which States Exempt Military Retirement Pay From Income Tax?

Beyond the nine no-income-tax states, a growing number of states have passed laws specifically shielding military retirement income from state taxation. Some exempt it fully; others offer partial exclusions.

States That Fully Exempt Military Retirement Pay

These states do collect income tax from most residents, but veterans don't pay state tax on their military retirement income:

Alabama
Hawaii
Illinois
Iowa
Louisiana
Massachusetts
Michigan
Mississippi
Missouri
Pennsylvania

Pennsylvania, for example, fully exempted military retirement pay from state income tax starting in 2024. Veterans living there also benefit from additional breaks like the Pennsylvania real estate tax exemption for veterans, which reduces property tax burdens.

States With Partial or Conditional Military Retirement Exemptions

Some states exclude a portion of military retirement income or set age and service requirements:

Colorado Excludes a set amount of military retirement income (amount varies by age).
Georgia Exempts up to $35,000 of military retirement income for those 62 or older (or younger with certain conditions).
Kansas Exempts military retirement income for veterans with 20+ years of service.
Kentucky Exempts up to $31,110 of military retirement income (threshold adjusts periodically).
Missouri Exempts up to 100% of military retirement income as of recent legislative updates.
New York Excludes up to a set dollar amount of military retirement pay.
North Carolina Allows a significant deduction on military retirement income.
South Carolina Offers a large deduction for military retirement income, with full exemption available at age 65+.
Wisconsin Exempts military retirement income for veterans meeting specific service and age criteria.

Note: Tax laws change frequently. Always verify current rules with your state's department of revenue or a tax professional before making a move.

Are VA Disability Payments Taxed by Any State?

No. VA disability compensation is tax-free at both the federal and state level in all 50 states. No state taxes this benefit. This is true whether you receive a 10% or 100% VA disability rating.

However, many veterans don't realize they may qualify for additional state-level tax relief based on their disability status. For instance, veterans with service-connected disabilities can often access state tax exemptions designed for disabled veterans that go well beyond just income tax relief.

Does No Income Tax Mean Lower Overall Tax Burden?

Not necessarily. States that don't charge income tax often make up the difference through higher property taxes, sales taxes, or other fees. Before choosing a state based solely on income tax, consider the full picture:

Property taxes Texas and New Hampshire, both no-income-tax states, have among the highest property tax rates in the country. But veterans in states like Nevada can offset that through programs like the Nevada veteran property tax abatement.
Sales taxes Tennessee and Washington have high combined state and local sales tax rates.
Veteran-specific exemptions Some states with income tax offer such generous veteran benefits that the total tax package is more favorable than a no-income-tax state. Arizona, for example, offers a property tax exemption for 100% disabled veterans that can save thousands each year.

Common Mistakes Veterans Make When Evaluating State Taxes

Looking only at income tax rates. A state with no income tax but high property and sales taxes might cost more overall than a state with moderate income tax but strong veteran exemptions.
Assuming all military income is treated the same way. Some states tax military retirement pay but exempt VA disability pay. Others exempt both. A few exempt retirement pay only up to a certain dollar amount.
Not checking residency rules. Moving to a no-income-tax state for tax purposes requires establishing genuine residency not just claiming it on paper. States have gotten more aggressive about auditing residency claims.
Forgetting about property tax relief. Income tax gets all the attention, but property tax exemptions for veterans can be just as valuable. Vermont, for example, offers a veteran property tax exemption based on income thresholds that can significantly lower annual costs.
Ignoring changes in state law. States regularly update their veteran tax benefits. Missouri, Pennsylvania, and Iowa all recently expanded military retirement income exemptions. What wasn't available two years ago might be now.

How Do I Choose the Best State for My Tax Situation?

The right state depends on your specific income sources, disability rating, age, and property ownership. Here's a practical way to narrow it down:

Identify your income sources. Military retirement pay, VA disability, civilian job income, investment income each may be taxed differently.
Calculate your annual income tax savings. Compare your current state's tax rate on your total income against what you'd pay (or not pay) in a no-income-tax state.
Add up property and sales tax differences. Use your actual spending and property values, not averages.
Research veteran-specific exemptions. Check whether you qualify for disability-based or age-based tax relief in states you're considering.
Factor in cost of living. Housing, healthcare access, and proximity to VA facilities all matter alongside tax savings.

Quick Checklist: Veterans Evaluating Tax-Friendly States

Confirm which of your income sources are taxable in your target state
Check if your state of interest exempts military retirement pay fully, partially, or not at all
Compare property tax rates and look into veteran property tax exemptions
Verify your VA disability rating qualifies you for additional state-level benefits
Review sales tax rates for states on your shortlist
Establish genuine residency if relocating update your driver's license, voter registration, and mailing address
Consult a tax professional who specializes in military or veteran tax planning before filing in a new state

Next step: If you already live in a state with income tax, check your state's department of revenue website for veteran-specific exemptions you might be missing. Many veterans leave money on the table simply because they don't know what's available in their state.