States That Don't Tax Military Retirement Pay: 37 of 51, Arizona 100%

Thirty-seven of the 51 state-level tax jurisdictions take nothing from a military retirement check: nine have no income tax, and 28, Arizona among them, subtract every dollar of it. Thirteen exempt part of it under a dollar cap, an age line, an income test, or, in Oregon, the share of service before October 1991, or, in Utah, a credit that leaves the pay in income, and the District of Columbia taxes all of it for the retiree, though a survivor 62 or older subtracts survivor benefits on D-40 line 12. Every row below was read on the state’s own tax agency page, form instructions, or statute on the date in its Checked column: September 2, 2026 for the first pass, and October 2026 for the states re-read with their own pages. Several list sites are wrong; corrections follow the table. The stakes: a $40,000 check in a state that taxes it at 5% is $2,000 a year for life.

The ledger: every state and DC, read September 2, 2026

“Fully exempt” means the full amount on your 1099-R comes back off the state return. Two rows carry a gate: North Carolina requires 20 years or a Chapter 61 medical retirement; South Carolina’s full deduction is for armed forces retirees only. Utah moved to partial on October 10, 2026: its credit cancels the flat tax on the pension, but the pay stays in income and shrinks the taxpayer tax credit and the Social Security credit. “Partially exempt” rows state the cap or test. Where an agency site blocked the first read (Massachusetts, New Hampshire), the statute was read instead; Massachusetts DOR’s pages were read in a browser on October 10, 2026; no row is marked “Not verified today.”

Your state, in depth

Where to claim it, the year the current rule began, survivor annuities, and a calculator for your own pension.

• Alabama (not taxed)
• Arizona (not taxed)
• Arkansas (not taxed)
• California (partly taxed)
• Colorado (partly taxed)
• Connecticut (not taxed)
• Delaware (partly taxed)
• District of Columbia (taxed)
• Georgia (partly taxed)
• Hawaii (not taxed)
• Idaho (partly taxed)
• Illinois (not taxed)
• Indiana (not taxed)
• Iowa (not taxed)
• Kansas (not taxed)
• Kentucky (partly taxed)
• Louisiana (not taxed)
• Maine (not taxed)
• Maryland (partly taxed)
• Massachusetts (not taxed)
• Michigan (not taxed)
• Minnesota (not taxed)
• Mississippi (not taxed)
• Missouri (not taxed)
• Montana (partly taxed)
• Nebraska (not taxed)
• New Jersey (not taxed)
• New Mexico (partly taxed)
• New York (not taxed)
• North Carolina (not taxed)
• North Dakota (not taxed)
• Ohio (not taxed)
• Oklahoma (not taxed)
• Oregon (partly taxed)
• Pennsylvania (not taxed)
• Rhode Island (not taxed)
• South Carolina (not taxed)
• Utah (partly taxed)
• Vermont (partly taxed)
• Virginia (partly taxed)
• West Virginia (not taxed)
• Wisconsin (not taxed)

What changed, and what the web still gets wrong

California is no longer a full-tax state. The Franchise Tax Board’s military page still says a resident’s military retirement pay is taxable, then adds that for taxable years 2025 through 2029 a qualified taxpayer may exclude up to $20,000 of uniformed services retirement pay (and separately up to $20,000 of an SBP annuity) if federal AGI is $125,000 or less, $250,000 joint.

The District of Columbia’s $3,000 exclusion is gone. D.C. Code § 47-1803.02 limits it to “taxable years beginning before January 1, 2015.”

Two states are moving, and one already has. Delaware’s SB 219, signed August 17, 2026, lifts the military amount to $15,000 for 2027, $20,000 for 2028, and $25,000 from 2029, while the age-60 general exclusion stays $12,500, and it adds a three- or five-year Delaware domicile requirement for filers 60 and over without saying from which tax year it applies; the Division of Revenue’s FAQ still describes the old $2,000 under-60 rule. Georgia’s HB 266 lets under-65 retirees exclude up to $65,000 from January 1, 2027, but not on top of the general retirement exclusion, and HB 463 (signed May 11, 2026) raises the age-65 exclusion to $70,000 the same year. Vermont’s Act 71 (2025) already applies to 2025 returns: a full exemption at AGI of $125,000 or less, phasing to zero at $175,000, in place of a $10,000 exclusion that phased out above $50,000 ($65,000 joint).

Stale agency pages. Oklahoma’s Tax Commission Help Center contradicts itself: its Exemptions page still shows the pre-2022 “greater of $10,000 or 75%” rule, while its Income Tax page and the 2025 Form 511 instructions say 100%. Maryland’s Administrative Release No. 23 still says $5,000; the statute says $12,500 under 55 and $20,000 at 55. Virginia Tax’s Military Tax Tips page still shows the 2024 figure of $30,000; the cap is $40,000 from 2025, with no age test.

Arizona: 100% exempt since tax year 2021, and active-duty pay too

A.R.S. § 43-1022(26) subtracts “benefits, annuities and pensions received as retired or retainer pay of the uniformed services of the United States” in three steps: not more than $2,500 through 2018, not more than $3,500 for 2019 and 2020, and “for taxable years beginning from and after December 31, 2020, the full amount received.” The Department of Revenue’s Military Tax Filing page lists that pay among income Arizona does not tax, “tax year 2021 and forward.” The 2025 Form 140 instructions put it on line 29b: “you may subtract 100% of the amount you received,” each spouse separately on a joint return, and a surviving spouse may exclude 100% as well. Not line 29a, the $2,500 public pension subtraction; the instructions send this pay to 29b. All three read September 2, 2026.

The other half of “does Arizona tax military pay” is active-duty pay, and the answer is also no. § 43-1022(11) subtracts “compensation received for active service as a member of the reserves, the national guard or the armed forces of the United States, including compensation for service in a combat zone,” and the Department’s page dates that rule to 2006. A full-year resident takes it on Form 140, not on 140A or 140EZ. Arizona tax paid on retired pay for 2022 or later can still come back on an amended return; the four-year window for 2021 closed in April 2026 for on-time filers. Arizona’s SCRA add-ons are on the Arizona SCRA page.

Divorcing before or after retirement? A state court can divide this same retired pay as property, within federal limits: the military divorce retirement pay guide has the frozen benefit calculator and the 10/10 rule.

The federal side: retired pay is taxed, VA disability is not

IRS Publication 525 (read September 2, 2026): “If your retirement pay is based on age or length of service, it’s taxable and must be included in your income as a pension on lines 5a and 5b of Form 1040 or 1040-SR.” Three things come off first. The Survivor Benefit Plan reduction is not income (Publication 525, and 26 U.S.C. § 122(a)). VA disability compensation is not income under any law administered by the VA. Combat-Related Special Compensation is excludable: 10 U.S.C. § 1413a(g) says those payments “are not retired pay,” and Publication 525 says so by name. CRDP is different: 10 U.S.C. § 1414(a)(1) restores retired pay itself, so it is taxed like the rest of the check. CRDP also has a threshold: § 1414(a)(2) requires a disability “or combination of service-connected disabilities” rated at 50 percent or more, and VA reaches that combined number with the 38 CFR 4.25 table, not by adding percentages. A combined rating calculator that shows each step tells you whether your ratings clear 50. (DFAS’s tax pages were unreadable to automated checks today; the cites are the statute and the IRS.) A retroactive VA rating reaches back: Publication 525 excludes retired pay for that period up to the VA amount (a VA back pay calculator estimates that amount month by month), claimed on a 1040-X per year with the VA letter attached, inside a window extended one year from the determination but not past tax years that began more than five years before it.

The SCRA does not follow you into retirement. § 4001(b) shields “compensation of a servicemember for military service,” and § 3911 defines a servicemember as a member of the uniformed services and military service as active duty. The state election, the residence rule, and the combat zone exclusion are pay rules; a pension is not pay. The spouse’s MSRRA election ends the same day, since it attaches to a servicemember. What does survive is in does the SCRA cover veterans.

Moving in retirement: December 31 decides, and the car tax comes back

Once the shield is gone, your domicile state taxes the check, and a move splits the year. Most states tax a part-year resident on the retired pay received while resident, so a July move to a no-tax state still leaves six months of the old state’s tax. From the next January 1, the state you live in on December 31 owns the whole year. Change what an auditor checks: driver’s license, voter registration, vehicle title and registration, the homestead filing, the address DFAS holds, and the state withholding on your retired pay. File a final part-year return in the old state.

Then look past the income tax. Virginia subtracts $40,000 of retired pay but taxes your cars every year, and the § 4001 vehicle protection you had on active duty ends with the income shield. The military car tax exemption page puts Virginia’s bill on one ordinary sedan at roughly $800 to $1,000 a year, so two cars can hand a third of the income tax saving back. Texas and Florida tax neither the check nor the car. Add income tax, property tax, and vehicle tax before you pick the state.

Check your own return this week

1. Pull your 1099-R from DFAS myPay. Box 1 is gross retired pay, box 2a is the taxable amount after the SBP reduction.
2. Find your state’s row above and the line it names, then confirm last year’s return carries the 1099-R amount on it, or the capped amount in a partial state.
3. If the line is blank for a year you qualified, amend. The federal window under IRS Topic 308 is 3 years from filing or 2 years from payment, whichever is later; state windows vary, so read your state’s amended-return page first.
4. In a partial state, do the math once: the amount above the cap, times your state rate, is what the state still takes.
5. If you moved during the year, file part-year returns in both states and update the state withholding on your retired pay with DFAS.
6. Before choosing a retirement state, add vehicle and property tax; the car tax page shows the bill once the SCRA no longer blocks it.

The law behind this: A.R.S. § 43-1022

Subtractions from Arizona gross income, paragraph 26: retired or retainer pay of the uniformed services: read the statute.