Military Pension Tax Rates By State

There are several websites with plenty of information on which states tax military pensions, and which ones don’t.  However, when you’re making your post-military decision, taxes on military pensions are only one part of the tax equation.  It’s also important to consider taxes on the rest of your income.

Since I couldn’t find a website with detailed, state-by-state tax information on the whole income picture, I decided to create my own.   Where applicable, I try to include links to the relevant state website, so you can double check this information whenever you want.

Many states have multiple tax brackets, based upon taxable income.  However, this article only contains the highest marginal individual tax bracket.  For a true side-by-side comparison on tax liability, you might want to run the numbers yourself.  If you are planning a more complex post-retirement career, such as owning your own business, you may want to sit down with a tax professional or fee-only financial planner for more detailed tax planning.

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

Florida

  • No state income tax.
  • No taxes on military retirement pay.

Georgia

  • Highest marginal tax rate:  6.0% for income above $7,000 (single) or $10,000 (married filing jointly)
  • Military pensions are fully taxable.

Hawaii

Idaho

  • Highest marginal tax rate:  7.4% for income above $10,905 (single) or $21,810 (married filing jointly)
  • Military pensions are partially exempted according to the following table:
    • Married Filing Jointly (must be either 65+ or 62+ and disabled):  $47,934
    • Single (must be either 65+ or 62+ and disabled):  $31,956

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

  • Highest marginal tax rate:  6.84% for income above $29,460 (single) or $58,920 (married filing jointly).
  • Military retirees who retire after July 18, 2012 are allowed to exclude pension income according to one of the following two schedules:
    • An individual must make the election on or after July 18, 2014 and within two years after his or her retirement from the uniformed services, even if he or she does not begin receiving military retirement benefits immediately upon retirement. The individual may elect:

      Option 1: To exclude 40% of his or her military retirement benefit income for seven consecutive taxable years, beginning with the year in which the election is made; or

      Option 2: To exclude 15% of his or her military retirement benefit income for all taxable years, beginning with the year in which he or she turns 67 years of age.

Nevada

  • No state income tax.
  • No taxes on military retirement pay.

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

  • Highest marginal tax rate: 9.9% for income above $125,000 (single) or $250,000 (married filing jointly).
  • You may subtract your pension from Oregon income tax to the extent it was earned before October 1, 1991.  If all of your service was after October 1, 1991, your entire pension is taxable.

Pennsylvania

Rhode Island

South Carolina

  • Highest marginal tax rate: 7.0% for income above $14,700 (single) or $15,400 (married filing jointly).
  • Military pensions can be deducted in the following amounts:
    • Under 65:  $17,500 per year
    • Age 65+:  $30,000 per year

South Dakota

  • No state income tax.
  • No taxes on military retirement pay.

Tennessee

  • No state income tax on earnings or pensions.  There is a 5% tax on interest & dividend income above $1,250 (single) or $2,500 (married filing jointly).
  • No taxes on military retirement pay.

Texas

  • No state income tax.
  • No taxes on military retirement pay.

Utah

Vermont

Virginia

Washington

  • No state income tax.
  • No taxes on military retirement pay.

West Virginia

Wisconsin

Wyoming

  • No state income tax.
  • No taxes on military retirement pay.

I hope this article helps you to find the tax information you need as you look to make your relocation decision.  Just remember, taxes are only a small factor in your relocation decision.  You should take a look at all the different priorities in your life and make the relocation decision that best suits you.

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About Forrest Baumhover

I'm a career naval officer, and a fee-only financial planner. Half-way through my career, I discovered that I had a passion for financial planning, and have pursued this as my second career. My specialty is working with military professionals who are looking to separate or retire from the service, and who feel they need some professional guidance to make sure they're on track.
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3 Responses to Military Pension Tax Rates By State

  1. Thanks for putting this together! Ever see this resource? – it does a fairly detailed job on military and taxes

    http://myarmybenefits.us.army.mil/Home/Benefit_Library/State__Territory_Benefits.html

  2. Pingback: Weekend Wrap-up: Military Personal Finance Articles You Should Read (11/4-11/10) - Military in Transition

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