States That Don’t Tax Military Retirement Income in 2025

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If you’re a retired service member, knowing which states don’t tax military retirement can make a huge difference in how far your pension goes.

Some states fully exempt military pensions from income tax, while others partially tax them and a few still tax them in full. Choosing the right state can mean keeping thousands more in your pocket each year.

In 2025, more than 35 states fully exempt military retirement pay from income tax, and several others offer partial relief.

Below, we break down the full list of tax-free states, recent law changes and other factors to consider before relocating.

Quick Answer: States That Don’t Tax Military Retirement

If you’re looking to avoid taxes on your hard-earned military retirement, you have plenty of options to consider. Here’s a comprehensive look at those states:

States With No Personal Income Tax

These nine states have no personal income tax at all, so your military pension is automatically tax-free:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

According to the U.S. Census Bureau, over 22% of all military retirees live in states with no income tax, largely for this reason.

States With Full Military Retirement Exemptions

These states have an income tax but fully exempt military retirement pay:

• Alabama
• Arizona
• Arkansas
• Connecticut
• Hawaii
• Illinois
• Indiana
• Iowa
• Kansas
• Louisiana
• Maine
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Nebraska
• New Jersey
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Pennsylvania
• Virginia
• Wisconsin

The Department of Veterans Affairs reports that more than 1.7 million veterans live in states that fully exempt military pensions, making them some of the most veteran-friendly places in the U.S.

States With Partial Exemptions

These states tax only part of your pension or offer capped exclusions:

• Colorado
• Delaware
• Georgia
• Idaho
• Kentucky
• Maryland
• New Mexico
• Oregon
• South Carolina
• West Virginia
• District of Columbia

Example: Georgia excludes up to $17,500 of military retirement pay, with higher limits if you meet certain income requirements.

States That Fully Tax Military Retirement Pay

Only five states fully tax military pensions in 2025:

• California
• Montana
• Rhode Island
• Utah
• Vermont

Recent Changes to Military Retirement Tax Rules

Several states have updated their laws to give military retirees more favorable treatment:

• North Carolina (2021): Fully exempts retirement pay for veterans with 20+ years of service.
• Indiana (2022): Finished phasing in a 100% exemption for military pensions.
• Nebraska (2024): Completed its phaseout of military retirement taxes.
• South Carolina (2022): Increased the annual exemption for retirees under and over 65.

The National Conference of State Legislatures notes that over a dozen states have expanded veteran tax benefits since 2020, signaling a trend toward more exemptions nationwide.

Full Military Retirement Tax Chart by State

Other Factors to Consider Besides Income Taxes

While tax savings are important, they aren’t the only factor when choosing where to live in retirement. The Council for Community and Economic Research reports that the cost of living can vary by more than 50% between the most and least expensive states, which can outweigh tax savings for some retirees.

Here’s a breakdown of those key factors:

• Cost of living: Some no-tax states, like Alaska, have higher housing and goods costs.
• Property tax relief: Many states, including Virginia and Ohio, offer property tax exemptions for disabled veterans. The National Association of Counties found that over 30 states offer full or partial property tax exemptions to disabled veterans, which can save homeowners thousands annually.
• Healthcare access: Being near VA hospitals or military bases can reduce medical expenses.
• Lifestyle fit: Climate, proximity to family and recreational opportunities should all factor into your decision.

The VA reports that Florida, Texas and California have the largest veteran populations, but only two of those states offer tax-free pensions

Best States for Military Retirees in 2025

According to the U.S. Department of Veterans Affairs, nearly 50% of all U.S. veterans live in just 10 states, with Florida, Texas and California leading the list. Based on taxes, veteran benefits and quality of life:

• Florida: No income tax, warm weather, veteran discounts.
• Virginia: Full exemption, strong healthcare infrastructure, veteran job programs.
• Texas: No income tax, large veteran community, affordable housing in many areas.
• South Carolina: Generous exemption, mild winters, coastal living options.
• Alaska: No income tax, additional retirement perks, but higher cost of living.

Can You Move and Keep Your Military Pension Tax-Free?

Yes! Your tax obligation depends on your state of legal residence, not where DFAS sends your payments. To ensure your pension remains tax-free when moving:

• Update your voter registration and driver’s license
• Establish domicile in your new state
• Notify DFAS of your address change and tax status

Final Take to GO: Pick a State That Fits Your Full Retirement Plan

Living in one of the states that don’t tax military retirement can help you keep more of your hard-earned pension, but taxes are just part of the equation. Consider the overall cost of living, access to healthcare, property tax relief and the lifestyle you want in retirement.

With careful planning, you can choose a state that not only saves you money but also supports the life you’ve worked so hard to build.

For more strategies, check out our guides on the most tax-friendly states for retirees and how to maximize your savings while serving.

Karen Doyle contributed to the reporting of this article.

Information is accurate as of Aug. 12, 2025.

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