Utah retired pay

Is military retirement taxed in Utah?

Partly taxed

Partly. A Credit, Not an Exclusion, Since 2021.

Utah does not subtract military retired pay. Since tax year 2021 it has allowed a nonrefundable credit equal to the flat rate times the taxable pay, 4.5% for 2025, which cancels the flat tax on that pay. Because the pay stays in Utah taxable income, it still shrinks the taxpayer tax credit and can shrink the Social Security credit, so a retiree with other income can owe some Utah tax because of the pension.

The law: Utah Code § 59-10-1043
Current rule since: tax year 2021 (S.B. 11, 2021 General Session, retrospective to January 1, 2021; enacted as § 59-10-1042 and now numbered § 59-10-1043)
Where you claim it: Form TC-40A, Part 3 (apportionable nonrefundable credits), code AJ, Military retirement credit, from the Military Retirement Credit Worksheet; the Part 3 total goes on Form TC-40, line 24

Read on Utah’s own sources October 10, 2026

What Utah’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 Utah’s flat 4.5% rate for 2025 (Utah Code § 59-10-104 sets 4.45% from 2026) for tax year 2025; change it to your own bracket if you know it.

One rate applied to the whole amount, not Utah’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 Utah

Report the pension in full. Utah starts from federal AGI on Form TC-40, line 4, and none of the subtraction codes on TC-40A, Part 2 covers military retired pay, so it stays in Utah taxable income on line 9 and is taxed at 4.5% on line 10.

Complete the Military Retirement Credit Worksheet once for each person who receives the pay: line 1 is the taxable military retirement pay and line 2 multiplies it by 0.045. Add the line 2 amounts and enter the total on TC-40A, Part 3, with code AJ. The Part 3 total goes on TC-40, line 24, where it can reduce the tax to zero but cannot create a refund or carry to another year.

Worked example, assumed figures: a single filer under 65 with a $30,000 pension, $60,000 of wages and the $15,750 federal standard deduction. Line 9 is $90,000 and line 10 is $4,050. The $945 initial credit loses $933 to the phase-out, leaving a $12 taxpayer tax credit and $4,038 on line 22. Code AJ subtracts $1,350, so the tax is $2,688.

Rerun that return as though the pension were subtracted: line 9 falls to $60,000, line 10 to $2,700, the phase-out to $543, and line 22 to $2,298. The $390 gap is 1.3% of the pension. It comes from keeping the pay in line 9, where lines 17 to 20 cut the taxpayer tax credit by 1.3 cents for every dollar above $18,213 single or $36,426 joint.

A retiree whose only income is the pension always ends at zero, because the AJ credit equals the entire line 10 tax. With the $30,000 pension alone, the same single filer has $558 of tax after the taxpayer tax credit, and the $1,350 AJ credit erases it. The unused $792 is simply lost, because § 59-10-1043(3)(a) bars carrying it forward or back.

Survivor Benefit Plan annuities

Same credit. Utah Code § 59-10-1043 defines military retirement pay to include survivor benefits, meaning the retired pay portion of the benefits in 10 U.S.C. 1447 through 1455. When the member died on active duty or in training rather than after retiring, the 2025 instructions send survivors to the Military Survivor Benefits Credit, code AA, also 4.5% of the benefits.

Active-duty pay in Utah

Taxed for residents. Publication 57 (rev. 10/24) says all of a Utah resident's income is taxable in Utah and a resident's active-duty pay is taxable only in Utah; nonresidents stationed in Utah subtract it with code 82.

Missed it in an earlier year?

To get a refund, file within three years from the original return due date (plus extensions) or two years from the payment date (UCA §§ 59-1-1410 and 59-10-529, as the 2025 TC-40 instructions state). Amend on the TC-40 for that year with a reason-for-amending code.

What trips Utah retirees up

Social Security recipients can lose more. The Social Security benefits credit, code AH, shrinks by 2.5% of Utah taxable income above $54,000 single or $90,000 joint, measured from TC-40, line 9. The military pension sits inside that figure, so a couple near the $90,000 line can lose up to 2.5 cents of AH credit per pension dollar on top of the taxpayer tax credit phase-out.
Pick AJ or the old retirement credit, not both. Filers born on or before December 31, 1952 may take the retirement credit, code 18, of up to $450 each, but § 59-10-1043(3)(b) bars the military credit on a return that claims code 18. For a single retiree, any pension above $10,000 makes AJ the larger credit. AJ may sit on the same return as the Social Security credit.
The credit moves with the rate. Section 59-10-1043 multiplies the pay by the percentage in § 59-10-104(2), and that section reads 4.45% effective January 1, 2026 (Chapter 250, 2026 General Session), so the 2026 credit is 4.45% of the pay. The Tax Commission's rate page still listed 4.5% as current when read on October 10, 2026.
Coverage stops at the armed forces. The statute reaches retirement pay for service in the armed forces or the reserve components listed in 10 U.S.C. 10101, and the instructions exclude non-military federal retirement. NOAA Corps and Public Health Service pensions are not named in either text (read October 10, 2026).

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. Utah’s other servicemember protections are on the Utah SCRA page.

Frequently asked questions

Does Utah tax military retirement?

Utah taxes it, then gives most of the tax back. The pay stays in Utah taxable income, and since tax year 2021 Utah Code § 59-10-1043 has allowed a nonrefundable credit equal to the flat rate times the taxable military retirement pay: 4.5% for 2025, claimed on TC-40A, Part 3 with code AJ. That cancels the 4.5% tax on the pay itself. Because the pension still counts on line 9, it shrinks the taxpayer tax credit, so a retiree with other income in the phase-out range pays about 1.3% of the pension, per the 2025 TC-40 instructions.

Is SBP taxed in Utah?

SBP gets the same credit as retired pay. Section 59-10-1043 of the Utah Code counts survivor benefits, meaning the retired pay portion of the benefits in 10 U.S.C. 1447 through 1455, as military retirement pay. A surviving spouse claims 4.5% of the taxable annuity with code AJ for 2025. If the member died on active duty or in inactive duty training rather than after retiring, the 2025 instructions send the survivor to the Military Survivor Benefits Credit, code AA, figured the same way at 4.5%.

Can I take the Utah military retirement credit and the Social Security credit?

Yes. The 2025 TC-40 instructions bar code AJ only when you or a joint-filing spouse claim the retirement credit, code 18, which is limited to people born on or before December 31, 1952. The Social Security benefits credit, code AH, may sit beside AJ. AH is 4.5% of taxable Social Security, reduced by 2.5% of Utah taxable income above $54,000 single or $90,000 joint, and the military pension counts in that income, so a large pension can shrink the AH credit.

When did Utah start the military retirement credit?

Tax year 2021. S.B. 11 of the 2021 General Session created the credit as § 59-10-1042, with retrospective operation for taxable years beginning on or after January 1, 2021, and it now sits at Utah Code § 59-10-1043. Before that, the retirement credit in § 59-10-1019 reached only people born on or before December 31, 1952. A refund claim must come within three years of the original due date plus extensions, or two years from payment, so a 2021 return is outside that window for most filers.

Sources, read October 10, 2026

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