By the MyArmyBenefits Staff
As tax season looms near, it is a good time to look at the state income tax requirements for retired Soldiers. In the past several years, many states have passed legislation affecting taxes on military retired pay both to show appreciation to Veterans and to attract them to settle in their state after leaving the military.
In 2021, Arizona, Nebraska, North Carolina, and Utah eliminated state taxes on military retirement pay. The state of Louisiana passed a tax exemption for surviving spouses. Delaware and Vermont considered but did not pass legislation. The table linked below compiles all the information on which states fully tax, fully exempt or partially exempt military retired pay. For information on additional state tax benefits, such as property tax relief offered to Veterans, visit our state/territory fact sheets for all 50 states. You may find additional benefits that will help you this tax season.
Go here to view the Table of2021 State Taxes and Military Retired Pay.
FAQs
Indeed, California is home to more active-duty troops and veterans than any other state in the union. Yet the Golden State is hemorrhaging military retirees, and has been for years, because California is the only state in the Union that fully taxes military pensions.
What is the best state to retire with a military pension? ›
Florida moved to the front of the line on a popular annual ranking of the best states for military retirees by the financial advice website WalletHub, while Oregon slid into the last spot.
How do you know what state to file taxes in for military? ›
From a tax standpoint, your State of Legal Residency (SLR) is considered your "domicile" or "resident" state as long as you are on active duty.
What are the most tax friendly states for retirees? ›
Some states do not tax Social Security or income, which could appeal to retirees. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming stand out for their tax-friendly policies and other amenities that retirees may enjoy.
Why is my military retirement pay not taxed? ›
Military retirement pay based on age or length of service is considered taxable income for Federal income taxes. However, military disability retirement pay and Veterans' benefits, including service-connected disability pension payments, may be partially or fully excluded from taxable income.
Do you pay federal taxes on military retirement? ›
A Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 5a and 5b of Form 1040 or Form 1040-SR.
What state is the cheapest for veterans to live in? ›
Mississippi. With the lowest cost of living, low property taxes and the second lowest median home price in the United States, along with mild winters, Mississippi is an extremely affordable and comfortable state for fixed income veterans living on military retirement pay.
What is the most veteran-friendly state? ›
Texas is the #1 overall state for veteran benefits because of its generous property tax exemptions for disabled veterans rated at 10% or more along with no state income tax and free in-state college tuition for veterans and their dependents via the Hazelwood Act.
Where is the best place for military veterans to live? ›
However, 45% of military members think the U.S. does not care for its veterans financially." Topping WalletHub's list once again is 2022's No. 1 city for veterans, Raleigh, North Carolina, while Austin, Texas and Orlando, Florida, are a close second and third.
Can states tax military retirement? ›
California is the only state that fully taxes both military retirement pay and Survivor Benefit Plan payments – all other 49 states have recognized that military retirees should not be taxed twice on this income.
H&R Block partnership with Military OneSource
No income restrictions apply. Additional products and services, such as Tax Identity Shield and Online Assist, are not available. Learn more about Military OneSource and log-in to access services at Military OneSource.
Can I live in one state and claim residency in another military? ›
Military service members are not required to change their legal residence when they move to a new state solely because of military orders; they may maintain their legal residence in a state where they have previously established it.
What state has the lowest tax burden for retirees? ›
Alaska. Alaska is the most tax-friendly state for retirees because it has no state income tax or tax on Social Security.
What is the #1 retirement state? ›
1. Iowa. Iowa ranks as the number one state to retire to. It offers an affordable cost of living and home prices and a strong economy, making it an attractive place to make retirement savings last longer.
Which states don t tax retirement withdrawals? ›
Alaska, Florida, Nevada, New Hampshire*, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax income.
Is California going to stop taxing military retirement? ›
California: AB 46, a State Assembly bill which would exempt all military retirement pay and surviving spouse benefits, remains active after being placed in the “suspense” file at the end of the state's 2023 legislative session.
Is military retirement taxable if 100% disabled? ›
Military retirement pay based on age or length of service is considered taxable income for Federal income taxes. However, military disability retirement pay and Veterans' benefits, including service-connected disability pension payments, may be partially or fully excluded from taxable income.
Does Hawaii tax military retirement? ›
Hawaii Income Taxes on Military Retired Pay: Military retired pay is exempt from Hawaii Income taxes. Thrift Savings Plan (TSP) does not withhold taxes for state or local income tax, but it is reported annually on IRS Form 1099-R.
