Military Retirement Income and State Income Tax

You want to know what states do not tax U.S. government military retirement income (pension).

Thirteen of the 42 jurisdictions that levy an income tax do not tax U.S. government military pension. They include Massachusetts, New Jersey, New York, and Pennsylvania in the Northeast.

Another 20 of the 42 jurisdictions, provide state tax exclusion for military pension. Three states—Kentucky, North Carolina, and South Carolina—fully exempt some military retirees' pension from tax and allow other military retirees an income exclusion (see Table 1).

Connecticut is among six states that do not exclude any portion of military retirement income from taxes. The others are: California, Nebraska, Ohio, Rhode Island, and Vermont.

Table 1 shows how all 50 jurisdictions treat military pension for tax purposes. In some cases, the retiree must meet a minimum age requirement or other criteria to qualify for exemptions.

*State*	*Military Retirement Pension Exempt from State Taxation*	*Amount of Exemption or Exclusion*
Montana	Income exclusion *	There is a $3,600 exclusion, if adjusted gross income is less than $30,000. (Montana Department of Revenue at http://discoveringmontana.com/revenue/forindividuals/individualincome/calculationiit.asp)
Nebraska	No	Follows federal rules
Nevada	No state income tax	NA
New Hampshire	No state income tax	NA
New Jersey	Yes	Full exemption (N.J. Stat. Ann § 54A:6-26)
New Mexico	Income exclusion *	Taxpayers age 65 or older may exclude up to $8,000 of income from any source ($16,000 for joint filers), if they earn less than $28,000 in any year)
New York	Yes	Full exemption (Tax Law § 612)
North Carolina	Yes/Income exclusion *	Full exemption for persons with five years of creditable service as of August 12, 1989; otherwise a deduction of up to $4,000 ($8,000 for joint filers) is allowed (N.C. Gen Stat. § 105-134.6 and North Carolina Department of Revenue at http://www.dor.state.nc.us/taxes/individual/benefits.html)
North Dakota	Income exclusion	An exclusion of up to $5,000 is allowed for people at least age 50; the amount must be reduced by any Social Security benefits the person gets (North Dakota state tax commissioner at http://www.state.nd.us/taxdpt/misc/faq/indincome/#mp4
Ohio	No	$200 retirement credit available (Ohio Department of Taxation at http://tax.ohio.gov/)
Oklahoma	Income exclusion	Up to $5,500 (Okla. Stat. Ann. Tit. 68 § 2358)
Oregon	Yes	Pre 1991 retirees fully exempt; post October 1, 1991 retirees may exclude a portion of their income using a specified formula (additional information from the Department of Revenue at http://egov.oregon.gov/DOR/PERTAX/faq-military.shtml)
Pennsylvania	Yes	Full exemption (72 P.S. § 7301(d)(i) & (iii). 72 P.S. § 7301(d)(iii); additional information at (more information at Department of Revenue at http://www.revenue.state.pa.us/revenue/cwp/view.asp?a=238&q=171013)
Rhode Island	No	Follows federal rules
South Carolina	Yes/ Income exclusion	Military retirement for service in the National Guard and Reserves for state or federal service is fully exempt; up to $10,000 is exempt for service in any other military component for taxpayer over age 65 and $3000 for tax payers under age 65 (South Carolina Department of Revenue at http://www.sctax.org/default.htm
South Dakota	No state income tax	NA
Tennessee	No state income tax	NA (State income tax only for dividends and interest income) (Tennessee Department of Revenue at http://www.state.tn.us/revenue/misc/hallfaq.htm#hall6)
Texas	No state income tax	NA
Utah	Income exclusion	Up to $7,500 for single filers and $15,000 (joint filers) over age 65; $4,800 for single filers and $9,600 for joint filers under age 65, depending on age (Utah Code Ann. § 59-10-114))
Vermont	No	Follows federal tax rules
Virginia	Income Exclusion *	$6,000 for taxpayer age 62 – 64; $12,000 for tax payer age 65 or older
Washington	No state income tax	NA
West Virginia	Income exclusion	$2,000 or more depending on years of service (W. VA. Code § 11-21-12)
Wisconsin	Yes	Full exemption (Wisconsin Department of Revenue, Publication 126 (11/04)). http://www.dor.state.wi.us/pubs/pb126.pdf
Wyoming	No state income tax	NA


February 4, 2005		2005-R-0131
MILITARY RETIREMENT INCOME AND STATE INCOME TAX

By: Veronica Rose, Principal Analyst

*State*	*Military Retirement Pension Exempt from State Taxation*	*Amount of Exemption or Exclusion*
Alabama	Yes	Full exemption (Alabama Department of Revenue at http://www.ador.state.al.us/)
Alaska	No state income tax	NA
Arizona	Income exclusion	Up to $2,500 exclusion (Ariz. Rev. Stat. § 43-1022) (additional information at http://usmilitary.about.com/gi/dynamic/offsite.htm?site=http://www.revenue.state.az.us/)
Arkansas	Income exclusion *	Up to $6,000 (Ark. Code Ann. § 26-51-307) http://usmilitary.about.com/gi/dynamic/offsite.htm?site=http://www.ark.org/dfa/
California	No	Follows federal rules
Colorado	Income exclusion *	Up to $20,000 for those age 55 to 65; up to $24,000 for those age 65 or older (Colo. Rev. Stat. § 39-22-104)
Connecticut	No	Follows federal rules (Connecticut Department of Revenue Services)
Delaware	Income exclusion *	Up to $2,000 of any pension income for people under age 60; up to $12, 500 for people age 60 or older. http://www.state.de.us/revenue/PIT_FAQ.shtml
District of Colombia	Income exclusion	The lesser of $3,000 or the military retirement pay for people age 62 or older (D.C. Code Ann. § 47-1803.02)
Florida	No state income tax	NA
Georgia	Income exclusion *	Up to $15,000 for those age 62 or older and are totally disabled (GA. Code Ann. § 48-7-27)
Hawaii	Yes	Full exemption (Hawaii Rev. Stat. § 235-7(a)(3))
Idaho	Income exlusion	Taxpayers age 65 and older or age 62 and disabled may exclude $19,920 (single filers) or $29,880 (joint filers) (Idaho State Tax Commission at http://www.tax.idaho.gov/Conformity_to_%20IRC_%202004.htm)
Illinois	Yes	Full exemption (35 ILCS 5/203) additional information at http://www.iltax.com/LegalInformation/letter/rulings/it/2000/ig000073.pdf
Indiana	Income exclusion	Up to $2,000 for retirees age 60 or over (single filers) and up to $4,000 for joint filers (additional information at http://www.in.gov/dor/individual/deductions.html#lottery)
Iowa	Income exclusion *	Exclusion of up to $12,000 (joint returns), and up to $6,000 (other returns) of military retired pay (Iowa Department of Revenue at http://www.state.ia.us/tax/educate/faqinc.html#13)
Kansas	Yes	Full exemption (Kansas Department of Revenue at http://usmilitary.about.com/gi/dynamic/offsite.htm?site=http://www.ink.org/public/kdor/)
Kentucky	Yes/Income exclusion *	Full exemption for people who retire before January 1,1998 ; for those who retire after this date, partial exemption
Louisiana	Yes	Full exemption (Louisiana Department of Revenue at http://www.rev.state.la.us/forms/publications/20162(6_04).pdf)
Maine	Income exclusion *	Up to $6,000 exclusion; amount reduced by Social Security benefits and railroad retirement benefits (Me. Rev. Stat. Ann. Tit. 36 § 5122(2)(M)) (Additional information at http://mainegov-images.informe.org/revenue/publications/alerts/oct00ta.pdf)
Maryland	Income exclusion *	Up to $2,500; must be at least age 55 on last day of taxable year and an enlistee at time of retirement. Amount is reduced by 50% of the amount by which federal adjusted gross income exceeds $17,500 (Md. Code Ann. Tit. 10 § 207) (additional information from Department of Revenue at http://usmilitary.about.com/gi/dynamic/offsite.htm?site=http://www.marylandtaxes.com/
Massachusetts	Yes	Full exemption (Mass. Gen. Laws Ann. Tit. 62 § 2(a)(2)(E) (additional information from Massachusetts Department of Revenue at http://www.dor.state.ma.us/)
Michigan	Yes	Full exemption (Mich. Stat. Ann. 206 § 30) (additional information from Department of Treasury at http://www.michigan.gov/treasury/0,1607,7-121-24321-6440--F,00.html)
Minnesota	Income Exclusion *	$14,500 (single filers) and $18,000 (joint filers); taxpayer must be age 65 or older
Mississippi	Yes	Full exemption (Miss. Code Ann. § 27-7-15)(additional information from Mississippi State Tax Commission at http://www.mstc.state.ms.us/taxareas/individ/rules/ireg704.pdf)
Missouri	Income exclusion	A $6,000 pension exclusion for single filers and $12,000 for joint filers is allowed for people earning below certain income limits (Missouri Department of Revenue at http://dor.mo.gov/tax/personal/faq/indiv.htm#q11)