States That Do Not Tax Military Retirement Pay

Your gross military retirement pay depends on your rank and time in service when you retire. Your net military retirement pay depends in part on the state in which you live. Some states don't tax income at all. Still others don't tax retirement income -- though the U.S. government still collects federal income tax. Military retirees by default don't pay income tax on their retirement pay in those states. Other states offer specific income tax breaks on military retirement pay. All told, there are only eight states that offer no tax breaks on military retirement -- California, Rhode Island, North Dakota, Connecticut, Minnesota, Nebraska, Vermont and Virginia.

States with No Tax on Military Retirement

Seven states have no income tax at all-- Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. In addition, Tennessee and New Hampshire only tax passive income from dividends and interest, which does not directly impact military retirement pay. In all nine states, no military retirement checks will be collected by the tax authorities.

Additionally, 13 states that do have an income tax exempt military retirement pay. These states are Alabama, Hawaii, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, New Jersey, New York, Ohio, Pennsylvania and Wisconsin.

Tax Breaks on Military Retirement Pay

In all other states, you will pay state income tax on your military retirement pay, but with varying levels of tax breaks. The amount of military retirement income exempt from state income tax varies significantly from state to state, ranging from Delaware, which excludes up to $2,000 in military retirement pay from taxes for retirees under 60, to Georgia, which may exclude up to $65,000 in some cases.

Tip

According to a March 2015 report in The Wall Street Journal, 19 states are considering legislation that would create or increase tax breaks on military retirement.