States That Don't Tax Military Retirement (2026)

Thirty-four states take nothing from a military pension, but they get there two different ways, and the difference matters more than the headline count. Nine have no individual income tax at all. Twenty-five levy one and then subtract military retired pay out of it. Most lists of states that don't tax military retirement blend those two groups into a single number, which hides the only thing about this list that can change: a subtraction is a line in a tax code, and a legislature can narrow it next session.

The states that don't tax military retirement, in two lists

IRS Publication 525 settles the federal question in one line: "Military retirement pay. 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." Nothing a state does changes that. The only question left is what your state adds on top.

A state can decline to tax your pension in two ways, and they are not equally durable:

• No individual income tax. Texas is the clearest case: its constitution, at Article VIII, Section 24-a, says "The legislature may not impose a tax on the net incomes of individuals." The Comptroller's own Field Guide to the Taxes of Texas puts it plainly — "Texans pay federal income taxes but not state or local income taxes."
• An income tax with a military subtraction. Arizona taxes income, then removes military retired pay from it. A.R.S. § 43-1022(26)(c) allows a subtraction for retired or retainer pay of the uniformed services in "the full amount received," for taxable years beginning after December 31, 2020.

Both land on zero. Only one of them is a policy choice that can be revisited.

Washington is the live example of why the distinction is worth keeping. It is a no-income-tax state today, but its Department of Revenue now states that "Beginning Jan. 1, 2028, a new 9.9% income tax will apply to individuals and married couples filing jointly with annual adjusted gross income exceeding $1 million." Almost no retiree is near that threshold, and it does not bite until 2028 — but "this state will never tax your pension" was never a safe sentence to write.

Military retirement taxes by state: all 50 and D.C.

Tax year 2026, as enacted on 22 September 2026. Most states have not published their TY2026 forms yet — returns for 2026 are filed in 2027 — so where a rule is fixed in statute this table follows the statute, and where it is a published dollar amount it follows the most recent official instructions, which are usually the 2025 edition. State tax law changes every session. Confirm your own state before you act.

Where the flat lists get it wrong

Five entries account for most of the errors we found while checking this.

California is not the lone hold-out any more. The Franchise Tax Board still says "If you're a resident, your military retirement pay is taxable," and that sentence is what most roundups quote. The same FTB page now continues: "For taxable years beginning on or after January 1, 2025, and before January 1, 2030, California allows qualified taxpayers to exclude from gross income up to $20,000 of retirement pay from the federal government for service in the uniformed services." The cap is $20,000 whether you file singly or jointly, and federal AGI must stay at or under $125,000 — $250,000 for a joint return or a surviving spouse.

Georgia's $65,000 exclusion is real but not yet. From tax year 2027, House Bill 266 lets retirees under 65 exclude up to $65,000 of military retirement, and drops the earned-income test that governs today. Its own Section 3(b) says that part takes effect on 1 January 2027, for tax years beginning on or after that date — so none of it reaches a 2026 return. Georgia's Department of Revenue summarises the bill under a 2026 heading, which reads as though it applies now. For tax year 2026 the rule is still $17,500, plus a second $17,500 if you have more than $17,500 of Georgia earned income.

North Carolina is conditional, not exempt. NCDOR limits the deduction to a retiree who "served at least 20 years" or was "medically retired under 10 U.S.C. Chapter 61," and notes it "does not apply to severance pay received by a member due to separation." A veteran who separated at twelve years with no Chapter 61 retirement, and who is not covered by the older Bailey settlement, gets no deduction at all.

The District of Columbia's $3,000 break is long gone. D.C. Code § 47-1803.02 still contains the exclusion for "pension, military retired pay, or annuity income" at 62 or older, capped at "the lesser of $3,000 or the actual amount" — followed by the words that matter: "provided further, that this sub-subparagraph shall apply for taxable years beginning before January 1, 2015." Survivor benefits at 62 or older are still excluded; retired pay is not.

Utah gives a credit, not an exemption. Utah taxes the pension and then hands back a nonrefundable credit equal to 4.45% of it for 2026 — the state's own income-tax rate, so it cancels out for most filers. Watch that number: the credit is pegged to "the percentage listed in Subsection 59-10-104(2)," and S.B. 60 of the 2026 session cut that rate from 4.5% to 4.45% with retrospective effect for tax years beginning on or after 1 January 2026. Utah's own TC-40A instructions still say to multiply by 0.045, because the form has not rolled over yet. But it is capped at your total tax liability, cannot be carried forward, and cannot be combined with Utah's Retirement Credit. Lists that file Utah under "exempt" are describing the effect, not the mechanism, and the mechanism is what bites in an unusual year.

Moving states: the part that actually decides this

Choosing a state is a domicile question before it is a tax question. Federal law helps, but only once the move is real.

4 U.S.C. § 114(a) says "No State may impose an income tax on any retirement income of an individual who is not a resident or domiciliary of such State (as determined under the laws of such State)," and subsection (b)(1) closes by confirming that retirement income "includes any retired or retainer pay of a member or former member of a uniform service computed under chapter 71 of title 10, United States Code." So your former state cannot reach your pension after you genuinely leave.

The trap is the parenthetical. Residency is determined "under the laws of such State," and states with an income tax apply their own tests — where you vote, register vehicles, keep a driver's licence, hold a homestead exemption, spend your days. Buying the house is usually the strongest single fact in that analysis, which is why this decision and the mortgage decision are really one decision.

One thing that does not carry over: the Servicemembers Civil Relief Act shield. 50 U.S.C. § 4001(a)(1) protects a servicemember, who "shall neither lose nor acquire a residence or domicile for purposes of taxation … by reason of being absent or present in any tax jurisdiction of the United States solely in compliance with military orders." That protection is tied to serving under orders. The day you retire, your domicile is decided by ordinary state-law tests like anyone else's. A spouse's parallel shield, and the 2023 election to pick the servicemember's state, the spouse's state or the duty station, is covered in our Military Spouse Residency Relief Act guide.

Pick the state, then price the house

Whatever your state leaves in the pension, it only buys a house against the county loan limit and the property tax bill where you are actually buying. A specialist can size both before you commit to the move.

Start the 2-minute check

What the tax treatment is worth against a mortgage

Start with what a state break does not do: it does not raise your qualifying income. Lenders underwrite on gross, and gross is the same in all fifty states. Our guide to VA loan income requirements covers how retired pay gets documented, and if you plan to buy before your retirement date, see timing a VA loan before retirement from the military.

What it does move is residual income, and almost nobody mentions this. VA's residual test asks what is left each month after the shelter payment, recurring debts and withholding — and 38 CFR § 36.4340 has the lender subtract state income tax among those items, alongside federal tax and Social Security. A state that takes less of your pension therefore improves the number your file is measured against, while the threshold itself varies by region of the country and family size. Our VA residual income guide has both tables.

Be careful not to double-count, though. Retired pay and VA disability compensation are separate payments with separate rules, and the disability side is already federally tax-free everywhere. If you receive both, only the retired-pay column is affected by anything on this page.

The state you choose also sets your county loan limit and your property tax bill. Run yours with the county loan limit calculator, and sketch the payment in each candidate state with the home affordability calculator. If you are weighing specific states, we publish local guides for Texas, Florida, Tennessee, Arizona, North Carolina, Ohio, Pennsylvania, Virginia, Georgia and California. And if you hold a disability rating, the bigger annual number is often local rather than federal: a disabled veteran property tax exemption can remove an entire homestead from the tax roll in some states.

Bottom line

Thirty-four states take nothing from a military pension — nine because they tax no income at all, twenty-five because they specifically exempt military retired pay. Thirteen more give you part of it, the District of Columbia gives you nothing, and Rhode Island, Idaho and Massachusetts are the three entries we could not verify at their source and would not guess at. If you are choosing where to retire, check which of the two mechanisms your shortlist relies on, confirm the current year's numbers with the state directly, and remember that the pension is only one line of the budget: the house, the county loan limit and the property tax bill are the rest of it. When you are ready to price the housing side, start with the 2-minute eligibility check.