How States Tax Military Pay
Military pay taxation varies dramatically by state. Some states fully exempt all military income, while others treat it like regular earned income. Understanding these differences can save servicemembers and veterans thousands of dollars per year.
There are three categories of military income that states may tax differently:
- Active-duty pay — Base pay, special pay, and allowances for active-duty servicemembers
- Military retirement pay — Pension received by retired military personnel
- Combat zone pay — Federally exempt from income tax; most states follow federal treatment
50-State Military Tax Table
This table shows how each state treats active-duty military pay and military retirement pay as of 2026:
| State | Active-Duty Pay | Retirement Pay | Notes |
|---|---|---|---|
| Alabama | Taxed | Exempt | Military retirement fully exempt |
| Alaska | No tax | No tax | No income tax |
| Arizona | Taxed at 2.5% | $3,500 exemption | Flat 2.5% rate benefits military |
| Arkansas | Taxed | $6,000 exemption | |
| California | Taxed | Taxed | No military exemptions; highest rates in nation |
| Colorado | Taxed at 4.4% | $40,000 exempt (age 55-64); $24,000 (under 55) | Generous retirement exemption |
| Connecticut | Taxed | 50% exempt | Phasing in full exemption |
| Delaware | Taxed | $12,500 exemption (age 60+) | |
| Florida | No tax | No tax | No income tax. #1 most popular state for military |
| Georgia | Taxed | $17,500 exempt (age 62-64); $65,000 (65+) | |
| Hawaii | Taxed | Exempt | Military retirement fully exempt |
| Idaho | Taxed | Taxed | |
| Illinois | Taxed at 4.95% | Exempt | All retirement income exempt |
| Indiana | Taxed at 3.05% | Exempt | Military retirement exempt since 2022 |
| Iowa | Taxed | Exempt | Military retirement fully exempt since 2023 |
| Kansas | Taxed | Exempt | Military retirement exempt since 2022 |
| Kentucky | Taxed at 4.0% | $31,110 exemption | |
| Louisiana | Taxed | Exempt | Military retirement fully exempt |
| Maine | Taxed | $6,000 exemption | |
| Maryland | Taxed | $12,500 exemption (age 55+) | |
| Massachusetts | Taxed at 5% | Exempt | Military pension fully exempt |
| Michigan | Taxed at 4.25% | Exempt | Public pension exemption covers military |
| Minnesota | Taxed | Taxed | High rates; no military exemption |
| Mississippi | Taxed | Exempt | Military retirement fully exempt |
| Missouri | Taxed | Exempt | Military retirement exempt since 2024 |
| Montana | Taxed | Partial exemption | |
| Nebraska | Taxed | Exempt | Military retirement exempt since 2022 |
| Nevada | No tax | No tax | No income tax |
| New Hampshire | No tax | No tax | No income tax since 2025 |
| New Jersey | Taxed | Taxed | $10,000 veteran exemption; high rates |
| New Mexico | Taxed | Exempt | Military retirement exempt since 2022 |
| New York | Taxed | Exempt | Military pension fully exempt |
| North Carolina | Taxed at 4.5% | $4,000 exemption | Bailey Settlement: pre-1989 vested exempt |
| North Dakota | Taxed | Exempt | Military retirement exempt since 2024 |
| Ohio | Taxed | Exempt | Military retirement fully exempt |
| Oklahoma | Taxed | 75% exempt | |
| Oregon | Taxed | Taxed | High rates; limited exemptions |
| Pennsylvania | Taxed at 3.07% | Exempt | All retirement income exempt |
| Rhode Island | Taxed | Partial exemption | |
| South Carolina | Taxed | $17,500 exemption | Working toward full exemption |
| South Dakota | No tax | No tax | No income tax |
| Tennessee | No tax | No tax | No income tax |
| Texas | No tax | No tax | No income tax. #2 most popular for military |
| Utah | Taxed at 4.65% | $25,000 exemption | |
| Vermont | Taxed | Taxed | High rates; no military exemption |
| Virginia | Taxed | $40,000 exempt (age 55+) | Large military population (Norfolk, Pentagon) |
| Washington | No tax | No tax | No income tax |
| West Virginia | Taxed | Exempt | Military retirement exempt since 2022 |
| Wisconsin | Taxed | Exempt | Military retirement fully exempt |
| Wyoming | No tax | No tax | No income tax |
Best States for Military Tax Benefits
Based on overall tax treatment of military income, these are the top 10 states for servicemembers and veterans:
- Florida — No income tax, no estate tax, homestead exemption, largest military population
- Texas — No income tax, constitutional ban, major military bases (Fort Cavazos, Fort Sam Houston, Joint Base San Antonio)
- Nevada — No income tax, growing veteran community, Nellis AFB
- Wyoming — No income tax, lowest overall tax burden in the nation
- South Dakota — No income tax, low cost of living, Ellsworth AFB
- Tennessee — No income tax, low cost of living, Fort Campbell
- Washington — No income tax (7% capital gains tax on $250K+ gains)
- Alaska — No income tax, Permanent Fund Dividend, JBER
- New Hampshire — No income tax since 2025
- Pennsylvania — Low 3.07% flat rate, all retirement income exempt
SCRA: Servicemembers Civil Relief Act
The SCRA provides critical tax protections for active-duty servicemembers:
- State of legal residence: You only owe state income tax to your state of legal residence (domicile), not the state where you are stationed
- Spouse protection: Under MSRRA, military spouses can elect to use the servicemember's state of legal residence for tax purposes
- Interest rate cap: Pre-service debts capped at 6% interest during active duty
- Tax deadline extensions: Automatic extensions for filing and payment during active duty
How to Change Your State of Legal Residence
If you want to change your domicile to a more tax-friendly state, follow these steps:
- File DD Form 2058 (State of Legal Residence Certificate) with your military finance office
- Obtain a driver's license in the new state
- Register to vote in the new state
- Register your vehicle in the new state
- Update your LES (Leave and Earnings Statement) to reflect the new state
- Open a bank account in the new state (optional but supporting evidence)
- File taxes in the new state for the applicable year
Important: Simply filing DD Form 2058 is not enough. You must demonstrate intent to make the new state your permanent home through multiple actions.
Frequently Asked Questions
Which states do not tax military pay?
The 9 no-income-tax states (AK, FL, NV, NH, SD, TN, TX, WA, WY) do not tax any income. Additionally, over 30 states exempt military retirement pay partially or fully.
What is the SCRA?
The Servicemembers Civil Relief Act protects active-duty military from being taxed by the state where they are stationed. You only owe tax to your state of legal residence.
How do I change my state of legal residence?
File DD Form 2058, get a driver's license and voter registration in the new state, register your vehicle, and update your LES.
Does my spouse have to pay tax where we are stationed?
Under MSRRA, military spouses can elect to use the servicemember's state of legal residence for tax purposes.
Are combat zone wages taxable?
No. Combat zone pay is exempt from federal income tax. Most states follow the federal treatment and also exempt combat pay.
Do states tax VA disability compensation?
No. VA disability compensation is exempt from both federal and state income tax in all 50 states.