Is military retirement taxed in Louisiana?

How it works in Louisiana

Louisiana begins with federal adjusted gross income, and your DFAS or Coast Guard 1099-R is already inside that number, so nothing is exempt until you subtract it. On the 2025 Schedule E, put federal AGI on line 1. Then use one of lines 4A through 4G: write Federal Retirement Benefits as the description, 04E as the code, and the amount. Fill in the month and year the taxpayer, and the spouse if any, retired. Line 4H totals the exempt income, and line 5, Louisiana adjusted gross income, goes to IT-540 line 7 with the Schedule E box marked.

Code 04E reaches beyond military pay. The 2025 instructions define it as retirement benefits received from a Federal Retirement System, and the Department's FAQ says federal retirees, both military and nonmilitary, may exclude them. A retiree who also draws a FERS or CSRS annuity from a second federal career reports that annuity under the same code. The instructions require a copy of each 1099-R for code 05E, the state and local systems code, but say nothing of the kind for 04E; keep yours in case the Department asks.

Worked example with an assumed $30,000 pension: at the flat 3% rate set by Act 11 of the 2024 Third Extraordinary Session, code 04E keeps up to $900 of Louisiana tax off the 2025 return, the whole $900 once other income fills the $12,500 single standard deduction. The Department's 2026 estimated tax instructions compute 2026 tax at the same 3 percent, so the value holds for 2026 on the same pension.

Turning 65 adds a second break that does not compete with the first. Code 06E exempts up to $12,000 per qualifying taxpayer of annual retirement income such as IRA or private pension distributions, an amount the 2025 instructions raised from $6,000. The 06E worksheet subtracts anything already reported under codes 02E through 05E before applying the $12,000, so the military pension never uses up that allowance.

If an earlier return left code 04E off, R.S. 47:1623(A) still allows a refund claim for three years after December 31 of the year the tax became due, or one year after payment if that is later. A 2022 return fell due in 2023, so by that rule its claim stays open through December 31, 2026. Use that year's form, mark the Amended Return box, explain the change, and do not adjust for refunds already received or payments made with the original; the instructions say those are on file.

What trips Louisiana retirees up

• Nothing on the face of the IT-540 subtracts the pension. Line 7 is plain federal AGI unless Schedule E is attached, and the 2025 instructions require any resident who must file a federal return to file a Louisiana one, so a retiree who skips Schedule E pays 3% on every dollar of retired pay.
• The retirement year splits in two. Active-duty months before the retirement date can only use code 10E, which needs 120 consecutive days on active duty, counts only pay earned outside Louisiana, and stops at $50,000. Retired pay received once you are on the retired list goes on code 04E with no limit.
• Survivor annuities have two statutes behind them. R.S. 47:44.2 covers federal retirement income in general, and Acts 2021, No. 185 added the survivor exemption: the enrolled act numbered it R.S. 47:297.16, and the legislature now prints it as R.S. 47:297.17, which names payments under a military survivor benefit plan to a surviving spouse or other named beneficiary. The 2025 instructions send both to the same code, 04E.