State Taxes On Veterans

Five new states have just eliminated taxes on military retirement income

by Sam Crawford

This year, the good news for veterans is that five new states have joined a growing list in eliminating state taxes on military retirement income. Arizona and Utah have made the exclusion effective for the tax year 2021, meaning that veterans can see the benefits with this year’s return. Three other states—Indiana, Nebraska, and North Carolina—have made the cut effective for the tax year 2022. In addition, several states like Georgia and South Carolina have pending legislation to eliminate their current partial taxes on military retirement income.

So for now, the total number of states that don’t tax military retirement pay is 35. There are currently eight states, including Florida and Tennessee, that have no income tax at all. And another 22 states have already eliminated their taxes on military retirement income, including Arkansas, Mississippi, Pennsylvania, and West Virginia. A majority of the remaining states only partially tax veterans‘ retirement pay by allowing for some income exemptions and/or credits.

on the passage of a bill eliminating the state income tax on military retirement pay.

In addition, all 50 states—including those that still fully tax military retirement income—have programs that offer assistance to veterans in determining the other benefits for which they may be qualified. Homestead exemptions on real estate taxes is one area where veterans can enjoy significant tax savings. Nearly all states now offer credits or deductions for retirees above a certain age (usually starting at ages 60 through 65). Still, many have specific homestead exemptions for military service veterans, especially retirees who are fully or partially disabled.