States That Don't Tax Military Retirement
Start with the Army's tax-year 2025 baseline, then verify every filing-year exclusion for age, income, dollar, benefit-type, and filing conditions before relying on it.
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By Bryan Martin, CPA, MBA | Updated July 21, 2026
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The Current Published Baseline
The Army article published in January 2026 reports a tax-year 2025 baseline: 9 states with no income tax, 28 that fully exempt military retired pay, 13 with partial treatment, and Washington, DC as fully taxable. The article's publication year does not turn those figures into a complete tax-year 2026 classification.
Those categories answer only one line of a retirement return. A state can exempt military pay while taxing a spouse's wages, private pension, IRA withdrawals, business income, or investment income. A no-income-tax state can still have meaningful property, sales, insurance, and housing costs.
9
No broad income tax
The state does not impose a broad individual income tax; this is not a military-specific exclusion.
28
Full exemption
Army tax-year 2025 baseline; verify qualifying-pay definitions and filing-year changes.
13
Partial treatment
Army tax-year 2025 baseline; a cap, age rule, income test, or other condition can leave part taxable.
No-Income-Tax States and the Verification Gap
No broad individual income tax
These jurisdictions do not need a military-specific retirement subtraction because they do not impose a broad individual income tax.
Why the full-exemption list is not labeled “2026”
The Army source gives a 28-state full-exemption count for tax year 2025, but filing-year legislation can move a state between full and partial treatment. Before relying on a state, open its current revenue-department form or instructions and confirm the definition of qualifying military retired pay.
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Recent Changes Need a Line-by-Line Read
Partial can mean a dollar exclusion, income phaseout, age requirement, limited benefit type, coordination with another pension break, or a temporary provision. Use the summary to identify the question, then verify the current state form and instructions.
| State | Army-identified change | Effective period |
|---|---|---|
| California | Up to $20,000 of military retired pay, subject to AGI limits | Tax years 2025 through 2029 unless extended |
| Vermont | Full exemption at AGI of $125,000 or less; partial treatment above $125,000 and below $175,000 | Beginning tax year 2025 |
| Virginia | Military-retirement subtraction reaches $40,000 and no longer has an age requirement | Tax year 2025 and later |
| New Mexico | $30,000 military-retirement exemption made permanent | Permanent under the 2024 change identified by the Army |
| Georgia | Military-retirement exclusion increased to $65,000 and age requirements removed | Beginning tax year 2026 |
These changes illustrate why the filing year matters. Use the Army summary to identify the issue, then confirm the applicable amount, income definition, filing status, benefit type, and effective date in the state's current form and instructions.
How to Compare States Before You Move
1. Classify every payment
Separate military retired pay, survivor benefits, disability-related amounts, VA benefits, wages, pensions, account withdrawals, business income, and investment income.
2. Model the entire household
Include the retiree and spouse, filing status, ages, expected withdrawals, work plans, housing, and property ownership.
3. Compare tax systems
Estimate income, property, sales, estate or inheritance, and local taxes instead of stopping at the military exclusion.
4. Prove domicile
Build a move calendar and update legal, financial, voting, licensing, vehicle, housing, and filing facts consistently.
5. Fix withholding
Compare projected liability with DFAS withholding, pension withholding, wage withholding, and estimated payments.
6. Refresh annually
State rules change. Recheck the filing-year form before the first payment of the year and before a move.
DFAS permits eligible retirees to start, stop, or change state withholding through myPay or its written process, but DFAS can withhold for only one state at a time and not every jurisdiction participates. Withholding is a payment mechanism; it does not determine the return's legal tax result.
Primary-source workflow
Start with the current Soldier for Life / MyArmyBenefits comparison, open the state revenue department's filing-year form and instructions, and use DFAS for withholding mechanics.
Military Retirement State Tax FAQ
What does the current Army comparison report?
The Army article published in January 2026 reports a tax-year 2025 baseline of 9 states with no income tax, 28 that fully exempt military retired pay, 13 with partial treatment, and Washington, DC as fully taxable. Filing-year state guidance still controls.
Does no tax on military retirement mean the whole household is tax-free?
No. Wages, a spouse pension, IRA and 401(k) withdrawals, investment income, business income, property taxes, and sales taxes can follow different state rules.
Does California tax military retirement pay?
The current table treats California as partial because its temporary exclusion has a dollar cap, income limits, and a scheduled end date. Verify the current form and instructions before filing.
How do I change state withholding on military retired pay?
DFAS says eligible retirees can use myPay or the applicable written process to start, stop, or change state income-tax withholding. Withholding availability does not determine whether the income is taxable.
Should I move based on this exemption alone?
Usually not. Model every household income stream, property and sales taxes, housing, insurance, benefits, estate rules, and the legal steps required to establish a new domicile.
Comparing states after military retirement?
We can model military pay, a spouse's income, retirement withdrawals, residency timing, and the rest of the household tax picture together.
Tax planning slots are limited before year-end.
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