Ian Bronson
Retirement isn’t all porch swings and paperwork—especially for veterans figuring out where the money goes furthest. Some states quietly make life easier by offering hidden savings most folks don’t hear about. Keeping more of that military pension means better control over monthly costs and long-term plans. Here are 10 states turning steady income into real financial breathing room.
Alabama
Veterans receiving military retirement pay owe no state income tax in Alabama. The policy helps create a welcoming environment for former service members. In defense-focused areas like Huntsville, it contributes to a strong community where veterans can build careers and stay connected to military-related opportunities.
Alaska
Thanks to oil revenue, Alaska has never needed a state income tax. That means veterans here have always kept their full military pensions. The policy, combined with no sales tax in many areas, makes Alaska surprisingly attractive for financial independence.
Florida
The Sunshine State doesn’t impose personal income tax on anyone. Warm weather, strong VA healthcare access, and coastal living add to its appeal. Cities like Pensacola and Jacksonville have become hubs where former service members can make the most of their pension value.
Arkansas
To encourage veteran retention and economic growth near bases like Little Rock AFB, Arkansas enacted a total exemption on military pensions in 2018. The policy not only eases retirement burdens but also helps strengthen local stability through consistent, pension-based spending by disciplined former service members.
Arizona
Beginning in 2021, Arizona stopped taxing military pensions. The change came after vocal advocacy from veterans groups and lawmakers concerned about losing residents to neighboring states. As part of a wider package to improve veteran services, the tax break keeps more military families grounded in Arizona.
Texas
Texas exempts all personal income, including military pensions, creating a strong financial base for retirees. Veterans also enjoy discounted hunting and fishing licenses, priority access to state healthcare services, and specialized license plates. These extras complement a lifestyle supported by widespread military-friendly infrastructure.
Tennessee
Income taxes were never part of Tennessee’s playbook, but it wasn’t always a clean slate. The final phase-out of its tax on interest and dividends in 2021 created a fully tax-free climate for military pensions. This simplified tax structure is particularly attractive to veterans settling down.
Mississippi
Easing financial pressure for veterans is central to Mississippi’s tax policy. Along with exempting military pensions, the state provides property tax reductions for disabled veterans and low vehicle registration fees. Combined with a low cost of living, these perks support long-term stability for retired service members.
Connecticut
Connecticut surprised many by fully exempting military retirement income in 2022. Previously burdened by a high-tax reputation, the state aimed to keep veterans from leaving for more tax-friendly places. The shift marks a significant move toward modernizing state tax codes and embracing military communities.
Illinois
Military retirement pay is fully tax-free in Illinois, part of a broader strategy to honor service and address population decline. Veterans also receive property tax exemptions tied to disability ratings and access to military license plates, making the state welcoming for long-term retirement living.
