Adrian Berlutti
Not all retirement destinations treat veterans equally. Some states still include military pensions in their tax base, quietly reducing take-home pay. This detail is often overlooked until the bills arrive. That’s why veterans planning their next chapter might want to keep an eye on this list of states that haven’t completely backed off taxing retirement pay.
Colorado
Despite a strong veteran presence, Colorado still taxes a portion of military retirement pay. Younger retirees under 55 can only exclude $15,000, which barely offsets the state’s rising living costs. Even the $24,000 cap for seniors doesn’t eliminate the tax burden. Full exemptions remain out of reach.
Delaware
The rules depend on the candles on your birthday cake. Those under 60 can only exclude $2,000, while turning 60 unlocks $12,500. In Wilmington, a local income tax adds to the state-level burden. Delaware’s tax setup for veterans remains more cautious than generous.
Georgia
Military retirees in Georgia aren’t fully off the hook. Although exclusions reach up to $65,000 for those over 65, veterans under 62 face notable tax exposure. The state rewards older, working retirees, but anyone retiring early or without other income may find the structure less forgiving than it appears.
Idaho
Idaho’s exemptions for military pensions sound generous but are harder to qualify for than they seem. Only veterans 65+ or 62+ and disabled can apply, and other retirement income reduces the benefit. Navigating the math can be confusing, and full relief is rarely straightforward.
Kentucky
It all hinges on the year you left the service. Retirees before 1997 are fully exempt, while newer ones can shave off $31,110. That’s one of the higher partial breaks nationwide. The rest depends on factors like combat pay or service zone, making Kentucky’s rules layered but competitive.
Maryland
Maryland doesn’t go all in. Veterans under 55 get a $5,000 break, which jumps to $20,000 after that. Some seniors may also snag a $31,100 general pension exemption. One-time discharge perks exist, but high state tax rates often cancel out any meaningful long-term relief.
New Mexico
This state taxes military retirement pay above $30,000, placing a cap that impacts higher-ranking or long-serving veterans. While low-income seniors gain added relief, most retirees still pay. The 2024 law marked progress, but advocates argue it doesn’t go far enough in addressing the full tax load veterans face.
Oregon
Only older paychecks count here. Military retirement earned before October 1991 is tax-free, but anything after that gets taxed like any other income. A proposed fix failed in the 2024 legislature. Oregon’s still stuck in the past, which means most modern retirees walk away with little.
Virginia
Virginia still taxes a significant portion of military retirement pay. Although a phased exemption is underway—$20,000 in 2024, rising to $40,000 by 2026—retirees must still pay taxes on amounts above the cap. Eliminating age restrictions helped more veterans qualify, but a full exemption has yet to materialize.
Vermont
Vermont draws the line at the income level. Those under $50,000 (or $65,000 jointly) get a $10,000 break. Earn more, and you’re out of luck. It’s a modest offer meant for modest means. For many veterans, especially officers, the tax bill remains largely unchanged.
