Which States Don’t Tax Military Retirement?

Determining where to retire can have a huge impact on your financial future as a military veteran. Learn which states might offer better tax treatment, and more about how you can fully leverage your service and the benefits you’ve earned as a vet.

Key Takeaways:

• Nine states don’t have income taxes and won’t touch your military retirement pay
• Another 25 states have an income tax, but they don’t tax military retirement pay
• 11 states and Washington D.C. offer some income tax reduction for military retirement pay
• Five states fully tax military retirement pay
• There are broader considerations for veterans to think about beyond tax treatment
• Tax planning can save you plenty and ultimately enhance your retirement
• Texas is a great example of a veteran-friendly state when considering where to retire

Introduction

As a U.S. military veteran you no doubt heard about (maybe participated in) recent celebrations honoring the 250th birthday of the U.S. Army this past June. The Navy and Marines each celebrate their 250th birthdays this coming October and November, respectively.

Proud moments in our nation’s history and for the countless men and women who have served and sacrificed for the sake of our country. This rings even truer as we approach the 250th anniversary marking the founding of our country.

With this in mind, we thought it worthwhile to take a look at some of the states that offer important financial benefits to veterans, enabling them to enjoy the fruits of their years of service, sacrifice and hard work more fully.

This is no small matter, as identifying states that allow their hard-earned military retirement pay to stretch further can make a world of difference to today’s vet. Those benefits range widely, as some states fully exempt military retirement pay from taxation and others offer partial or even no relief. As such, understanding your options is important and can prove critical when it comes to planning and securing your future in retirement.

In this article we seek to inform you regarding what’s out there in order to help you navigate the available opportunities, with a goal of helping you maximize your retirement income and making the most of your golden years.

Qualifying for military retirement pay

Qualification for military retirement pay involves meeting certain minimum requirements. According to USAGov, you should qualify for military retirement pay if you served on active duty in the United States Army, Navy, Air Force, Marine Corps, or Coast Guard for 20 years or longer.

You would also qualify if you retired earlier due to medical reasons. Additionally, you should be eligible if you’ve accrued 20 or more qualifying years of service and reach age 60. (Note – there is a potential exception if you’re under age 60,  based on the amount of time you spent on active duty)

Of note, there are two main retirement systems available, depending on when you joined the military:

1. Legacy High-3 (High-36) System – pays 2.5-percent for each year served multiplied by the average of your highest 36-months of basic pay.
2. Blended Retirement System (BRS) – provides access to matching contributions in the Thrift Savings Plan, mid-career retention bonuses, and a monthly annuity based on 2-percent of your pay for each year served.

States that don’t tax military retirement pay

Assuming you are eligible for military retirement pay, there are currently 34 states that fully exempt military retirement pay. This list includes states with no income tax at all and those that specifically exempt military pensions even though they do have a state income tax.

• States with no income tax. According to H&R Block, there are nine states that don’t impose “income tax” (including income from qualified retirement accounts and pensions) on their citizens, including those who are military veterans. This enables those vets to keep more of their retirement pay. The list includes: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming and New Hampshire

• States with full exemptions for military retirement pay. There are 25 states that do tax the income of their citizens at the state level, but who offer full exemptions for military retirement pay. This list includes: Alabama, Arizona, Arkansas, Connecticut, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, West Virginia and Wisconsin

11 states with partial tax benefits for military retirees

In addition to the aforementioned states offering tax-free retirement pay to qualified veterans, another eleven, plus the District of Columbia, do provide partial tax relief, depending on your personal (e.g., minimum age requirements) and/or financial situation, according to Intuit. Although they vary considerably, each offers some sort of exemption or deduction on military retirement pay.

This list includes: Colorado, Delaware, Georgia, Idaho, Kentucky, Maryland, New Mexico, Oregon, South Carolina, Virginia, West Virginia and Washington D.C.

States that fully tax military retirement pay

It might surprise you to learn that there are actually some places where vets don’t catch a break when it comes to paying taxes on their military retirement income. Hmmm. That’s even despite their past service to the country.

In fact, there are five states that fully tax the military retirement pay of their veterans and offer scant tax benefits to those individuals. Those states are California, Montana, Rhode Island, Utah and Vermont.

Savings benefits in tax-free states and those offering full exemptions

When you consider the rates for states that do charge their citizens income tax (California is the extreme on the low and high end, with a range of one-percent to more than 13-percent), it becomes clear that avoiding paying income tax on your military retirement pay is a big issue. NerdWallet provides a list of state rates in their 2025 article, “2025 State Income Tax Rates and How They Work.”

Fact is that tax-free military retirement pay is a major financial perk if you’re a veteran. It can represent thousands of dollars in your pocket each year. That’s no small matter and definitely something to consider when exploring your options when it comes to where you want to spend your golden years. Here are just a few of the key financial benefits you can gain living in tax-free states and those offering full exemptions:

1. Increased disposable income – if you are able to eliminate state taxes on your military retirement pay, that leaves more money for travel, hobbies, and other goals and plans for retirement. For example, a veteran receiving $50,000 annually in military retirement pay could easily save $2,500 to $5,000 or more, depending on their state’s tax rate.
2. Compounding savings – beyond savings on your pension, many tax-friendly states offer additional benefits like property tax exemptions and sales tax reductions for veterans, according to the S. Department of Veterans Affairs.
3. Veteran support services – many of these states have strong veteran support networks, including healthcare facilities, employment services, recreational opportunities and more.

Click to see all the latest retirement videos for your Retirement Planning research.

 

Broader considerations beyond taxes

While tax policies are essential and should be taken into consideration, they shouldn’t be the only factor and need to put into context among many other important considerations. Chief among those are the following:

1. Cost of living – the cost to live comfortably varies considerably across the U.S., with states like Texas and Florida offering a lower overall cost of living compared to states like California or New York. Being able to stretch your dollars further should be a major consideration once in retirement and the area in which you choose to live will have a major impact on your ability to maximize your spending power.
2. Healthcare access – you definitely want to consider VA healthcare facilities and services in any area you are considering for retirement. When you start to do your research you’ll learn that there is major variance in key categories (example – access, staffing and resources) when it comes to the level of care offered within the overall VA ecosphere. This should be an important factor in your consideration, as it can potentially impact your health and quality of life when living out your 2nd act. Examining customer satisfaction surveys among vets regarding VA facilities and services is a great place to start. VA Claims Insider’s, “Top 25 Best VA Hospitals Based on Veteran Satisfaction Scores,” (updated 2025) is one source of such data, but there are others you can find online.
3. Lifestyle preferences – while this sounds like a no-brainer, it can be easy to give this area short shrift when it comes to making a determination as to where you will find the most affordable enjoyment and peace-of-mind in your retirement. Recreational and cultural activities, climate, and proximity to family are just a few of the important considerations you should keep in mind when making the important decision of where to live out your life.

Overall, your ideal retirement location should balance financial benefits, healthcare options and personal preferences to ensure you have the best opportunity of enjoying a fulfilling retirement experience.

Tax planning tips for military retirees

Choosing a tax-friendly state is just one piece of the puzzle. Here are strategies to make the most of your military retirement pay:

1. Maximize tax savings across all retirement accounts – you should work with a retirement planner to ensure you have a comprehensive plan in place to minimize what you pay in taxes once you retire. This should include coordination of distributions from your military retirement pay, as well as qualified accounts such as personal IRAs and civilian employer-sponsored plans, such as 401(k)s. A well-devised tax plan can result in thousands to tens of thousands and more in savings over the course of your retirement.
2. Leverage property tax benefits – be sure to explore exemptions for disabled veterans and/or senior citizens in your state.
3. Plan for relocation costs – better to plan and save ahead of time if there is a good chance you might relocate for retirement. This can be a costly endeavor and result in an untimely and unpleasant taxable event depending on your age and circumstance. Addressing this in advance and over time might save you dollars, frustration and anxiety if properly dealt with in advance.

Texas: A retirement haven for veterans

For veterans who call Texas home or who are considering such a move, the Lone Star State could be a standout choice. Here’s why:

1. No state income tax – the state’s lack of income tax ensures that your military retirement pay is untouched…one of just nine states offering vets this key benefit. This policy alone makes it one of the most financially advantageous states for veterans.
2. Property tax exemptions – disabled veterans in Texas can qualify for significant property tax exemptions. If you have a 100-percent disability rating you’ll receive a full exemption on your primary residence, while those with lower ratings still enjoy partial exemptions.
3. Educational opportunities – Texas boasts a great education benefit for eligible veterans and their dependents. The Hazlewood Act offers up to 150 hours of tuition-free education at state colleges and universities, making the state ideal for families prioritizing higher education.
4. Veteran-friendly communities – there are a fair number of vet-friendly communities offering top flight VA facilities and services, as well as great amenities and a culture of strong military support. Some of the most notable veteran-friendly communities include San Antonio, Austin, Dallas, Fort Worth, Houston, Arlington, Round Rock, Frisco, McKinney, Killeen and more.

Living in Texas combines a plethora of financial benefits with a high quality of life tailored to veterans’ needs and desires. It’s no wonder the state is a top choice for military retirees.

Conclusion

Patriotism, serving one’s country, honor, sacrifice, answering the call… Those are more than catch-phrases to many military vets. Many find that service to their country ends up being one of the most rewarding endeavors undertaken during their lifetimes.

Rightfully so, veterans are bestowed with an array of benefits as partial compensation for that service. As a military vet, you owe it to yourself to fully leverage and maximize those benefits, especially when you move on to retirement. Choosing where you elect to live will play a big role in the quality of the retirement you experience. It can provide significant savings that will impact your golden years.

That said, it’s not all just about avoiding taxes. It’s also about maximizing all of your hard-earned benefits and ultimately living the retirement you’ve always envisioned. With careful planning and the right support, you can enjoy the financial freedom and quality of life you deserve.

As you prepare, it’s important to keep in mind that just as your military service involved myriad challenges and decisions along the way, navigating retirement is no small feat as well. The wrong choice or a false move can negatively impact your retirement. Be sure to explore your options.

At Oak Harvest we can help to ensure you are properly informed and prepared regarding your retirement as a military veteran. Beyond deciding on where to retire, this includes all the other complicated issues surrounding retirement, such as income, spending down your assets, reducing your taxes, setting goals, and more.

We can look at your current retirement plan to determine if it can realistically meet your needs and goals. Or we can assist you by creating a retirement plan capable of helping you do so. We can build a holistic, comprehensive retirement plan addressing relevant issues, utilizing strategies that cover your military retirement pay, other income, Social Security, taxes, spending, healthcare, legacy, and more, customized to your family’s specific needs.

A plan created with the goal of helping you achieve the retirement you and your spouse envision.

If you’re ready to take the next step and talk to a team of financial advisors and retirement planners who can advise on all your retirement needs, contact us today to learn more about your retirement planning options.

Related Content

The Domino Effect of Your Retirement Decisions: How Social Security, IRA, Income, and Taxes Are All Connected

Five Important Steps to Planning a Secure Retirement

Top 10 Affordable, Fun, and Safe Places to Retire in Texas!

The 10 Best Places To Retire In Texas

7 Ways to Make Your Savings Last in Retirement