34 States that Don’t Tax Military Retirement

As a military member, you put your life on the line to protect our country. As such, you are entitled to benefits such as a college education stipend (or loan repayment options), housing loans, and retirement. While most service members who retire from the armed services enjoy a comfortable life financially, you can stretch your money even further by living in a state that doesn’t have a military retirement tax.

States that Have No Income Tax

Several states have no state income tax, so whether you rely solely on your retirement or you pick up a part-time job, you won’t pay state income tax. These states are

Alaska
Florida
Nevada
South Dakota
Tennessee
Texas
Washington
Wyoming
New Hampshire (taxes only dividends and interest income)

States that Don’t Tax Military Retirement

All the other states besides the nine listed above have a state income tax. However, many of them do not have a military retirement tax. You can enjoy your retirement income tax-free at the state level. These states include:

Alabama
Arkansas
Arizona
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
Wisconsin

States that Fully Tax Military Retirement

There are a handful of states that tax military retirement:

California
Georgia
Montana
Rhode Island
Utah
Vermont
Virginia

States that Partially Tax Military Retirement

Finally, the remaining states fall in the middle of the spectrum—they partially tax military retirement:

Colorado
Delaware
Idaho
Kentucky
Maryland
New Mexico
Oregon
South Carolina
West Virginia

In addition, though not a state, the District of Columbia is also included on this list.

Should You Move to Avoid Military Retirement Tax

Upon researching this list, some may conclude that moving to a state that doesn’t tax your retirement would be a smart idea. True, if you move to one of the 34 states that don’t tax military income, you will keep more of your money in your pocket. However, that’s not the only consideration. You’ll also want to consider these factors:

Where Does Family Live?

If you’re close to your family and they live near you, how far are you willing to move to avoid taxes? You may be willing to pay more taxes to remain closer to your family.

What Is the State Sales Tax?

Does the state you’re considering moving to have a state tax? For instance, New York has a state sales tax of 4 percent, but you can pay up to 8.875 percent in some areas. How much do you plan to spend? How frequently will you pay sales tax? Compare that to New Hampshire, which has no state sales tax.

How Much Are Property Taxes?

Finally, if you plan to own a house, consider the price of property taxes. Depending on the price of the house you buy, you may pay more in property taxes than you pay on income tax.

Final Thoughts

If you want to move to a state that does not tax military retirement, first talk to your accountant and tax advisor to ensure you won’t lose those savings in the high cost of state sales tax or property taxes.

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Melissa Batai

Melissa is a freelance writer and virtual assistant. She earned her Master’s from Southern Illinois University, and her Bachelor’s in English from the University of Michigan. When she’s not working, you can find her homeschooling her kids, reading a good book, or cooking.