State Taxes on Military Retired Pay Explained

Federal treatment is settled: military retired pay is taxable income, while VA disability compensation is not.

State treatment is not settled, and it is genuinely moving. Most states now fully exempt military retired pay from state income tax. A handful tax it in full. Several sit in between, with exemptions capped by amount, by age, or by adjusted gross income.

Changes in recent years include South Carolina moving to a full exemption, New Hampshire completing an income-tax phase-out, Georgia expanding its exemption, and Vermont adding a full exemption below an AGI threshold.

We are not publishing a 50-state table here, and that is deliberate.

Reputable sources currently disagree on the count — including on how many states exempt retired pay, and on how to classify states with partial or conditional exemptions. A table assembled from those sources would look authoritative and be wrong in specific cells. On a page about how much tax you owe, a wrong cell is worse than no table.

What we will say is the part that holds: the answer depends on your state of legal residence, and residence is a decision you may be able to make deliberately as you separate.

Who is eligible?

Everyone receiving military retired pay pays state income tax according to their state of legal residence — or does not, if that state exempts it.

The lever worth understanding is residence itself. Where you establish legal residence on separation can change your tax position for the rest of your retirement, and it is far easier to get right at the point of moving than to change later.

If you hold both retired pay and VA disability compensation, only the retired pay is potentially state-taxable. The compensation is excluded federally and generally follows at state level, but that is another thing to confirm locally.

How do I apply?

  • Start from your state's department of revenue: It is the only source that is authoritative for your own liability, and it states the current tax year.
  • Check the exemption's shape, not just whether one exists: Capped by amount, by age, or by AGI are all common, and each produces a different answer for you.
  • Confirm the tax year: Several states have changed recently, and guidance written a year ago may describe a superseded position.
  • Think about legal residence before you move: This is the decision that drives everything else, and it is easiest to get right at separation.
  • Take advice if the numbers are large: A retiree comparing two states can be looking at a meaningful lifetime difference, which justifies an hour of professional time.

Common questions

Do all states tax military retired pay?

No. Most now fully exempt it, a few tax it in full, and several exempt it partially — capped by amount, age or adjusted gross income.

Why isn't there a state-by-state table on this page?

Because reputable sources currently disagree on the classifications, and a table that looks authoritative while being wrong in specific cells is worse than none on a page about tax owed. Your state revenue department is the source that binds.

Which state's rules apply to you?

Your state of legal residence, which is a decision worth making deliberately as you separate rather than by default.

Is VA disability compensation taxed by states?

It is excluded federally and generally follows at state level, but confirm that locally alongside your retired pay position.

Learn More