States That Don’t Tax Military Retirement in 2024
You will receive a service-connected disability rating, providing you with benefits, if you are disabled now or get hurt in the military, or if you are discharged due to a medical condition that makes it hard to work. This benefit helps make a military career more attractive.
income from other sources.
Here is what you need to know.
You can begin this week.
Who Receives Military Retirement?
Typically, members of the U.S. military, including those in the Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force, require at least 20 years of active service to qualify for a military pension. However, individuals who are forced to retire due to medical reasons or disability may still be eligible to receive a military pension, even if they haven't completed the full 20 years of service.
Reservists can also become eligible for military retirement at age 60 after finishing 20 years of service. People who work for the military but haven't served themselves may be able to get retirement benefits through the federal civil service system.
Understanding Military Retirement Benefits
The company's pension plan also has a generous matching contribution feature, where the government will match the employee's contributions up to 5%. The pension plan is structured as a defined benefit plan, which entitles retirees to receive a consistent monthly payment for the remainder of their lifetime.
The military predominantly uses one of three methods to calculate retirement pay, each method differed by the date the individual started their active duty service.
- If you joined the military before September 8th, 1980, you qualify for the Final Pay plan. You'll receive 50 percent of your base pay, plus a 2.5 percent increase for each year served after 20 years.
- If you started your military career between September 8, 1980, and July 31, 1986, your benefits will be calculated using the High-36 model, based on the average of your 36 highest-paying months. Retirees will receive 50 percent of this amount, along with an additional 2.5 percent for each year they served after meeting the 20-year minimum requirement.
- If you started your career on or after August 1, 1986, your benefit is calculated using the REDUX plan. According to this plan, your retirement pay is based on 40% of your highest 36 months of pay plus an additional 3.5% for each year you've served after 20 years.
Will I Be Required to Pay Federal Taxes on My Military Pension?
on retirement income.
Which US States Do Not Tax Military Retirement Pay?
There are nine states that have no state tax on personal income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. In these states, no one is required to pay state income tax.
There are twenty-six states that impose personal income tax but exempt military retirement income. These states are: Alabama, Arizona, Arkansas, Connecticut, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, and Wisconsin.
Eleven US states partially tax military retirement benefits: Colorado, Delaware, Georgia, Idaho, Kentucky, Maryland, New Mexico, Oregon, South Carolina, Virginia, and West Virginia. Additionally, the District of Columbia also partially taxes these benefits.
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This map indicates which states exempt military retirement pay from taxation.
These states do not tax military retirement pay, although they do tax other forms of income:
- Alabama
- Arizona
- Arkansas
- Connecticut
- Hawaii
- Illinois
- Indiana
- Iowa
- Kansas
- Louisiana
- Maine
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Nebraska
- New Jersey
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Pennsylvania
- Rhode Island
- South Carolina
- West Virginia
- Wisconsin
The exemption can help you reduce the amount of tax you have to pay.
Final Take
Preparing for retirement involves planning your taxes, and it's crucial to know which sources of retirement income are subject to federal and state taxes. Understanding the tax implications of your military retirement benefits can inform your decisions about when to stop working and where to live, all while trying to minimize your tax burden and make the most of your savings.
FAQ
- What are the top states for military retirees to live in?
- What states are known to have the most favorable laws and resources for veterans receiving VA benefits?
- Is my military retirement pay non-taxable if I'm disabled?
- Do retired individuals have to file tax returns?
Supported the reporting of this article.
No States That Tax Military Retirement in 2024
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