Minnesota retired pay

Is military retirement taxed in Minnesota?

Not taxed

Fully Subtracted Since 2016.

No, for a retiree who takes the subtraction. Minn. Stat. § 290.0132, subd. 21 subtracts military retirement pay computed under 10 U.S.C. 1401 to 1414 or 12733, and Survivor Benefit Plan payments under sections 1447 to 1455, in full since tax year 2016. The condition that matters: you cannot also claim the Credit for Past Military Service, worth up to $750, so pick one.

The law: Minn. Stat. § 290.0132, subd. 21
Current rule since: tax year 2016 (Laws 2016, chapter 189, article 13, section 57: taxable years beginning after December 31, 2015)
Where you claim it: 2025 Schedule M1M, line 25 (Subtraction for military pensions or other military retirement pay)

Read on Minnesota’s own sources October 10, 2026

What Minnesota’s rule is worth on your retired pay

Enter your annual taxable retired pay (box 2a of your DFAS or Coast Guard 1099-R). The rate starts at Minnesota’s 6.8% rate on 2026 taxable income around $75,000 (single); the top 9.85% starts over $203,150 for tax year 2026; change it to your own bracket if you know it.

One rate applied to the whole amount, not Minnesota’s full return: brackets, other income, deductions and credits change the real figure. Use it to compare, then check the state’s own form instructions.

How it works in Minnesota

Minnesota starts from federal adjusted gross income, so the retired pay stays taxed until you subtract it. Complete the 2025 Schedule M1M and enter the qualifying pay included in federal AGI on line 25, Subtraction for military pensions or other military retirement pay. The instructions name three qualifying sources: active-component retired pay under 10 U.S.C. 1401 to 1414, Reserve retired pay under section 12733, and survivor benefit plan payments under sections 1447 to 1455.

Subd. 21 limits the subtraction to people who do not claim the Credit for Past Military Service under section 290.0677, a nonrefundable credit of up to $750 on Schedule M1C, line 4, open only when Minnesota AGI is under $37,500. The Department says the subtraction gives the greater benefit when federal AGI is $37,500 or more, and generally an equal or greater one when federal taxable income is below the qualifying pension or qualifying pay is $14,018 or more. That $14,018 figure is roughly where 5.35%, the lowest bracket rate, applied to the pension equals $750.

Worked example with an assumed $39,000 pension: line 25 is worth up to about $2,652 a year at the 6.8% rate a single filer pays on 2026 taxable income from $33,311 to $109,430. The credit could never pass $750 on the same pension. The 9.85% top rate starts above $203,150 for single filers in 2026, a level few retirees reach.

A civil service annuity that includes bought-back military time gets partial treatment. The Department says that when your military pension is combined with other federal or civilian pensions, you subtract the percentage tied directly to qualifying military service, using the Office of Personnel Management retirement booklet that lists military years and months against total creditable service. Pensions earned exclusively as a dual-status technician do not qualify.

Form M1X must reach the Department within 3½ years of the original due date to produce a refund. The 2022 M1X instructions put that year's original due date at April 15, 2023 for most filers, so a 2022 refund claim runs out in mid-October 2026. Starting with tax year 2025, the Department accepts M1X electronically when your software offers it. M1X is also the route for a retiree who claimed the credit in an open year and now finds the subtraction worth more.

Survivor Benefit Plan annuities

Subtracted. Subd. 21 covers pay computed under 10 U.S.C. 1447 to 1455, and the Department of Revenue says survivor benefit plan payments qualify, including payments to a former spouse as part of a court order (Military Pension Subtraction page, last updated December 16, 2025, read October 10, 2026).

Active-duty pay in Minnesota

Subtracted for residents: Schedule M1M line 20 takes federal active-duty military pay received while a Minnesota resident, and line 21 takes Minnesota National Guard and Reserve pay for training, state active service and AGR service.

Missed it in an earlier year?

To claim a refund, file Form M1X within 3½ years of the original due date for the return (Minnesota Department of Revenue, Amending an Income Tax Return, read October 10, 2026).

What trips Minnesota retirees up

Public Health Service officers qualify only if they receive retired pay computed under chapter 71 of Title 10, sections 1401 to 1414, according to the Department. Subd. 21 does not mention the NOAA Corps, and the Department's page does not address it (read October 10, 2026).
A former spouse can subtract too. The Department says a divorcee who receives part of a military pension through a divorce settlement may subtract it to the extent it is in federal AGI, and SBP paid to a former spouse under a court order also qualifies.
Line 25 also takes any Post-9/11 Veteran Service Bonus payment included in federal AGI, according to the 2025 M1M instructions, so a retiree who received that bonus in the same year adds it to the pension amount on the same line.

Federal side: DFAS reports retired pay on Form 1099-R, and the IRS taxes it as a pension. VA disability compensation is not taxable income under federal law (IRS Publication 525). The SCRA’s tax-home rule (50 U.S.C. § 4001) protects servicemembers on orders, not retirees, so where a retiree lives decides which state taxes the pension. Compare every state on the 51-state ledger. Minnesota’s other servicemember protections are on the Minnesota SCRA page.

Frequently asked questions

Does Minnesota tax military retirement pay?

Not if you take the subtraction. Minn. Stat. § 290.0132, subd. 21 lets you subtract, to the extent it is in federal AGI, military retirement pay computed under 10 U.S.C. 1401 to 1414 (active component) or 12733 (Reserve), plus survivor benefit plan payments under sections 1447 to 1455. Laws 2016, chapter 189 made it effective for tax years beginning after December 31, 2015. Claim it on 2025 Schedule M1M, line 25. You cannot claim it in the same year as the Credit for Past Military Service (Minnesota Department of Revenue, read October 10, 2026).

Should I take Minnesota's military pension subtraction or the Credit for Past Military Service?

For most retirees, the subtraction. The credit is nonrefundable, tops out at $750, and requires Minnesota adjusted gross income under $37,500. The Minnesota Department of Revenue says the subtraction gives the greater benefit when federal AGI is $37,500 or more, and generally an equal or greater benefit when qualifying military pay is $14,018 or more or exceeds your federal taxable income. Subd. 21 bars anyone who claims the credit from also taking the subtraction, so compare both before filing Schedule M1M or Schedule M1C (read October 10, 2026).

Is SBP taxed in Minnesota?

No, if you claim the subtraction. Subd. 21 of Minn. Stat. § 290.0132 covers pay computed under 10 U.S.C. 1447 to 1455, the Survivor Benefit Plan, and the Minnesota Department of Revenue lists survivor benefit plan payments as qualifying, including payments to a former spouse as part of a court order. Enter the annuity included in federal AGI on 2025 Schedule M1M, line 25. A survivor who instead claims the Credit for Past Military Service cannot take the subtraction (Military Pension Subtraction page, read October 10, 2026).

Sources, read October 10, 2026

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