Retiring from the military is not just a job change. The military life is just that – a lifestyle. It comes with a long list of acronyms one must know and understand to PCS (and that’s just one acronym), it requires patience and understanding through work-ups, deployments, long training. Because of the unique challenges of military life, it also creates a community of those who understand and live it. When you leave the military, you are potentially leaving behind the community you know and understand.
After 20+ years of traveling the country, and perhaps the world, it is now time to choose where to live. When you haven’t chosen a job or location for two decades, it can be an overwhelming choice. One factor for many military families looking to make the decision on where to retire is a financial one. Many states do not charge income tax on military retirement pay, but some limit the amount of pay that is tax-free. Get to know the options when weighing your military retirement move.
Alabama: Retiree pay is tax-free
Alaska: There is no state income tax for the state of Alaska, so retiree pay is tax-free!
Arizona: Retiree pay is tax-free after the 2021 bill was passed.
Arkansas: Retiree pay is tax-free
California: Following federal rules, California does not currently offer tax exceptions on military retiree pay.
Colorado: Retiree pay under the age of 55 can exclude up to $10,000 income from their taxable income, those age 55064 can exclude up to $20,000, and those age 65 and up can exclude $24,000 of income
Connecticut: Retiree pay is tax-free
Delaware: Up to $2,000 of military retirement is excluded for those under age 60 and $12,500 for those 60 and older
District of Columbia: Following federal rules, DC does not currently offer tax exemptions on military retiree pay.
Florida: There is no state income tax for Florida, so retiree pay is tax free.
Georgia: Retirees who are over 62 or permanently disabled may be eligible for an exclusion of retiree pay.
Hawaii: Retiree pay is tax-free
Idaho: Retiree pay is tax-free for those over age 65, and over 62 for disabled retirees.
Illinois: Retiree pay is tax-free
Indiana: Retiree pay is tax-free as of 2022.
Iowa: Retiree pay is tax-free
Kansas: Retiree pay is tax-free
Kentucky: Up to $31,110 is tax-free.
Louisiana: Retiree pay is tax-free
Maine: Retiree pay is tax-free
Maryland: The first $5,000 is tax-free and once age 55 or older $15,000 is tax-free.
Massachusetts: Retiree pay is tax-free
Michigan: Retiree pay is tax-free
Minnesota: Retiree pay is tax-free
Mississippi: Retiree pay is tax-free
Missouri: Retiree pay is tax-free
Montana: Following federal rules, Montana does not currently offer tax exemption on military retiree pay. Additionally, up to $4370 is tax-free if the adjusted gross income is below $36,420 and the amount tax-free decreases for funds above this.
Nebraska: As of 2022, all military retirement is tax-free.
Nevada: There is no state income tax in Nevada.
New Hampshire: There is no state income tax in New Hampshire, there is tax on interest and dividends.
New Jersey: Retiree pay is tax-free. Honorably discharged veterans qualify for a one-time $6,000 tax deduction in the year after discharge.
New Mexico: Following federal rules, does not offer tax exemption currently.
New York: Retiree pay is tax-free
North Carolina: Retiree pay is tax-free as of 2021.
North Dakota: Retiree pay is tax-free
Ohio: Retiree pay is tax-free
Oklahoma: The greater of 75% of retirement pay or $10,000 is tax exempt.
Oregon: Any military service before October 1, 1991 may be able to deduct a portion of retirement pay. Any military retirement for service after that is taxed normally.
Pennsylvania: Retiree pay is tax-free
Rhode Island: Retiree pay is tax-free
South Carolina: Those under the age of 65 can deduct up to $17,000 of retirement pay while those 65 and older can deduct up to $30,000. However, there must be other income outside of military retirement to qualify for this.
South Dakota: There is no state income tax in South Dakota.
Tennessee: There is no state income tax in Tennessee, there is tax on interest and dividends.
Texas: There is no state income tax for the state of Texas.
Utah: Retiree pay is tax-free as of 2021.
Vermont: Retiree pay is taxed based on federal rules.
Virginia: Retiree pay is taxed based on federal rules.
Washington State: There is no state income tax for the state of Washington.
West Virginia: Retiree pay is tax-free
Wisconsin: Retiree pay is tax-free
Wyoming: There is no state income tax for the state of Wyoming.
While taxes aren’t the only thing that is a deciding factor for military families retiring, it certainly is part of the equation for long-term financial stability. Where are you looking at retiring after the military?
Y’all need to take another look at Montana.
Thanks Darryl. It passed my editing and the editor’s review. It is now corrected and updated.