The states that won’t tax military retirement in 2022

The states that won't tax military retirement in 2022

The states that won’t tax military retirement in 2022

If you’re retiring from the military, you may not be done giving back to your country.

The amount of retirement income you’ll lose in taxes over the coming years depends on what state you live in. Some states don’t tax military retirement income, while some lucky Americans live in a state with no income tax at all.

Other states tax all types of income or have varying, sometimes complicated rules. The best tax software can help guide you, though you may also want personalized help planning your retirement.

Scroll down for a quick list of states and their key benefits. And remember that no matter where you live, veterans can take advantage of another reward from Uncle Sam: a no-money-down VA home loan.

9 states do not tax personal income

Ketchikan, Alaska.

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Ketchikan, Alaska

Alaska

Florida

Nevada

New Hampshire doesn’t tax wages but does tax dividends and interest

South Dakota

Tennessee stopped taxing dividends and interest in 2021

Texas

Washington

Wyoming

25 states exempt military retirement income

Huntsville, Alabama

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Huntsville, Alabama

Alabama

Arizona stopped taxing military retirement in 2021

Arkansas

Connecticut

Hawaii

Illinois

Iowa

Kansas

Louisiana

Maine

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Nebraska stopped taxing military retirement in 2022

New Jersey

New York

North Carolina stopped taxing military retirement in 2021

North Dakota

Ohio

Pennsylvania

Utah stopped taxing military retirement income in 2021

West Virginia

Wisconsin

2 states (plus D.C.) fully tax retirement income

Beautiful sunset of Los Angeles

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Los Angeles, California

California

Vermont

Washington, D.C. ended a $3,000 exclusion for military pensions in 2015

7 states spare a portion of military retirement income

Vail, Colorado, USA Drone Village Skyline Aerial.

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Vail, Colorado

Colorado

If you’re a veteran between the ages of 55 and 64, you can exclude up to $20,000 from your taxable income.

Those 65 and over can exclude up to $24,000. Those under 55 can exclude $10,000 in the 2021 tax year.

Indiana

In the 2021 tax year, up to $6,250 of military retirement income is exempt off the top, plus 75% of retirement pay over that.

Starting with the 2022 tax year, military retirement benefits will be fully deductible.

Kentucky

Military pensions are fully exempt for service members who retired before 1997.

Otherwise, up to $31,110 in public pension income is tax-free (down from $41,110 before 2018).

Maryland

The first $5,000 of military retirement income is tax-free, and that amount increases to $15,000 when you turn 55.

Those over age 65, or who are totally disabled or who have a spouse who is totally disabled, may get additional tax breaks. For 2021, the maximum deduction for pensions is $34,300, minus any Social Security benefits.

Oklahoma

Either 75% or $10,000 of your retirement pay is tax free, whichever is greater.

Oregon

You may be eligible to deduct a portion of your retirement pay if you served before Oct. 1, 1991. If you didn’t, your military retirement is taxed normally.

South Carolina

If you’re under 65, your deduction is limited to $17,500. You need to be earning other income to get this deal; otherwise only $3,000 will be exempt.

If you’re 65 or older, you can deduct $30,000, without any need for additional income.

7 states spare a portion of general retirement income

Santa Fe, New Mexico, USA downtown skyline at dusk.

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Santa Fe, New Mexico

Delaware

If you’re under the age of 60, you can exclude up to $2,000.

Those over the age of 60 can exclude up to $12,500.

Georgia

The state offers no special exemption for veterans but allows anyone who is permanently disabled or between the ages of 62 and 64 to exempt $35,000 of their retirement income. That number is $65,000 for those over age 65.

Idaho

If you’re 65 or older — or disabled and at least 62 — your public pension may be partially exempt.

Up to $34,332 may be exempt for single filers (or $51,498 for joint filers), but those figures will be reduced by other retirement benefits you receive, like Social Security. The limits change each year.

Montana

This state does provide an exemption for pensions, but only for a few thousand dollars and only if your income is relatively low.

For the 2020 tax year, single filers with a federal AGI below $38,605 (or $40,790 for joint filers) were able to spare up to $4,370.

New Mexico

All seniors 65 and older can get a tax deduction of up to $8,000, depending on their income level. (Those 100 or older who are not dependents are fully exempt.)

Seniors can also get thousands in exemptions and credits for unreimbursed medical expenses.

Virginia

This state fully taxes military retirement income, with an exception for Congressional Medal of Honor recipients.

However, it provides seniors born before Jan. 1, 1939 with a tax deduction of $12,000. For anyone 65 or older born after that date, the deduction is reduced by $1 for every $1 of their federal AGI that exceeds $50,000 (or $75,000 for married couples).

Rhode Island

The Ocean State offers some residents who have reached their full Social Security retirement age a $15,000 exclusion for retirement plans.

For the 2021 tax year, single filers with a federal AGI above $87,200 (or $109,050 for married couples) are not eligible.

Not getting the savings you need?

Adult man hands count money dollars

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Living on a fixed income can be a real challenge, even if you are getting a significant tax break. Make sure you’re not paying more than you need to.

Good tax software can hunt down all kinds of deductions you might not know about, and you can save even more money by picking it up early.

If that’s not enough to make a difference in your budget, you can always try some of these fundamental money-saving and money-making strategies:

  • Land a better mortgage rate. Interest rates are still historically low, but they may not stay that way for long. A mortgage refinance can save a borrowers hundreds of dollars a month and thousands over time.

  • Consolidate high-interest debt. With interest rates as bad as 20% — or even worse — credit cards make it easy to fall into debt. Combining balances into one loan with a lower interest rate can cut the cost of debt and make it go away faster.

  • Turn pennies into a portfolio. A person without much money to spare can still earn big returns from today’s runaway stock market. A popular app helps people invest “spare change” from everyday purchases.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Source: https://finance.yahoo.com/news/states-wont-tax-military-retirement-160000618.html