These States Just Stopped Taxing Military Retirement

Virtually all Americans are grateful to our service members. Regardless of what military branch they belong to, they have the respect and admiration of all the citizens who they protect with their bravery.

Those who are in the military can also retire with a military pension if they serve for long enough and eventually earn an honorable discharge. If you’re in the military, you’re probably counting on that money being there when you end your service time.

When you retire, though, you’ll have to consider military taxes. The money you get when you retire is generally regarded as being taxable, and the government will be waiting to get their piece of what you’ve made.

You might be interested to hear that some states have stopped taxing the money you get when you retire from the military, though. Several states already had that policy in place, but now, six new ones have stepped up and accepted this practice.

1. Virginia

Virginia has implemented a new policy for military retirees. In 2022, these retirees do not have to pay taxes on up to the first $10,000 they get from their pension plan. The one caveat is that you have to be 55 or older to enjoy this perk.

This amount will keep going up by $10,000 until 2025. At that point, you can get up to $40,000 tax-free from your military pension when you retire.

2. Vermont

Vermont is getting in on the action as well. This state stopped taxing up to the first $10,000 in income from military pensions for retired persons in 2022. That is only true, however, for individuals making up to $50,000 per year filing singly or up to $65,000 for couples filing jointly.

3. South Carolina

South Carolina’s policy is going to be even more generous for military retirees. A recent press release from the state’s government mentioned that all military retirement income is about to become tax-free, and that policy starts this year.

4. Rhode Island

In Rhode Island, the state’s government will let all military retirees keep their entire pension starting this year. The governor sent out a press release stipulating the new policy would go into effect for anyone retiring from the military starting in 2022.

5. New Mexico

In New Mexico, military retirees can keep up to the first $10,000 of their military pension tax-free starting in 2022. That amount will go up to $20,000 in 2023 in just a few weeks. In 2024, that number will increase to $30,000. It should stay that way up to at least 2026 when the policy will be examined again.

6. Oklahoma

The last state to allow tax-free military pensions is Oklahoma. Like Rhode Island and South Carolina, the entire pension for retiring military personnel can stay right in the pockets of the recipients.

Consider Moving if You’re Retiring from the Military

You might want to think about moving to one of the states that we mentioned if you’re in the military and are close to wrapping up your career. You can enjoy completely tax-free retirement benefits if you live in Oklahoma, South Carolina, or Rhode Island. The policies in New Mexico, Virginia, and Vermont are generous as well and will only become more favorable as the years pass.

We should mention that at this point, the only parts of the country where you still have to pay taxes on your entire pension if you retire from the military are the District of Columbia and California. With so many states letting up on taxing military pensions either totally or partially, you’d think it’s probably only a matter of time before they follow suit.