2 More States Exempt Military Retirement Pay From State Income Tax

2 More States Exempt Military Retirement Pay From State Income Tax
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Is your state still fully taxing retirement pay? MOAA National serves in an advisory capacity for state-specific issues such as income tax exemption. Please contact your local MOAA council as state legislation must originate at the state level.

 

Military retirees in Arizona scored a victory June 30 when Gov. Doug Ducey signed the state’s budget legislation into law, totally exempting military retirement from state income tax.

 

“MOAA across our state has been in the lead here,” said Lt. Gen. John Regni, USAF (Ret), a member of MOAA’s board of directors. “A huge success that will surely lure even more military retirees to Arizona for second careers and eventually retirement.”

 

The exemption went into effect July 1 and is retroactive to Jan. 1.


Regni said MOAA members dialed up the pressure by meeting with lawmakers and the governor (and with then-Gov. Jan Brewer and her staff earlier in previous years) to discuss the legislation. He lauded several MOAA members who led efforts, including Lt. Col. Darren Venters, USAF (Ret), who energized members to meet with lawmakers and persistently led efforts over the last decade, and Col. Pete Kloeber, USAF (Ret), state MOAA chair, who organized chapter involvement.

 

Arizona first cut a break to military retirees – and first responders – on state income tax in 1989 by offering exemptions up to $2,500. In FY 2019, the exemption increased to $3,500.

 

The exemption was proposed in the state’s 2020 budget but was not included in the final version of the budget.

 

[RELATED: MOAA’s Military State Report Card and Tax Guide]

 

News from other states on retiree and other exemptions:

 

Nebraska

Arizona retirees aren’t the only ones to receive good news regarding their tax bills in recent months: Military retirees in Nebraska will receive a total tax exemption beginning in 2022.

The bill, which Gov. Pete Ricketts signed in May, follows a partial exemption signed by the governor last year.

Efforts to get an exemption date back to 2000, when MOAA members Col. Joe DeCarlo, USAF (Ret), Lt. Col. Mark Dreiling, USAF (Ret), and CW5 Dean Kenkel, USA (Ret), began researching the economic impact it could have on Nebraska.

Col. Dan Donovan, USAF (Ret), president of MOAA’s Heartland of America Chapter, has led recent efforts to push the legislation. He has previously testified before the state’s revenue committee.

MOAA members worked with the Nebraska Commission on Military and Veteran Affairs to request the University of Nebraska conduct studies and gather data on retirees. The Nebraska Veterans Coalition, which MOAA is part of, met with senators to advocate for the exemption.  

“I think all the members and non-members who over the years have written their legislators, visited them or testified on this retired pay issue,” Donovan said. “Finally, we have a governor who fully understood this issue and vowed to resolve it before his first election.”

 

[RELATED: Find Your Local MOAA Chapter | Virtual Chapters]

 

Delaware

State lawmakers in Delaware have introduced legislation that would phase in a total exemption of military retired pay over four years. Senate Bill 188 would begin with a 25% exemption in 2022 and increase incrementally until 100% is reached in 2025.

 

The Senate Banking, Business and Insurance Committee is considering the legislation.

 

“Our chapter has been extremely active,” said Col. Ronald Sarg, USAF (Ret), president of MOAA’s Delaware Council of Chapters. “It’s a fantastic achievement in having Delaware recognized as being a military-friendly state.”

 

Since 2001, Col. Eugenia “Gene” Thornton, USA (Ret), president of MOAA’s Dover Chapter, has led efforts with members to advocate for the exemption, Sarg said. Momentum for the exemption picked up when the Delaware Commission of Veterans Affairs, which is made up of veteran service organizations including MOAA, began meeting with lawmakers.

 

“You couldn’t do it independently,” Sarg said. “You get a lot done working with the Commission of Veterans Affairs.”

 

Military retirees in Delaware under age 60 can exempt up to $2,000 from state tax, increasing to $12,500 for retirees older than 60.

 

Pennsylvania and New Jersey, which border Delaware, offer full exemptions on military retiree pay. The exemptions in neighboring states put Delaware at a disadvantage as veterans consider taxes when selecting a home to retire.

 

Enticing veterans to stay or move to Delaware will benefit the state because it will boost the local economy and workforce, Sarg said. Veterans typically look for a second career after the military, so they will be spending paychecks locally and also enhancing the workforce through their skills and education.  

[RELATED: Military Officer Live and Play 2021]

 

North Carolina

Military retirees in North Carolina are one step closer to a total exemption on state income taxes after the state’s House advanced legislation in June to exempt taxes.

Col. Ihor “Iggi” Husar, USAF (Ret), first vice president of MOAA’s North Carolina Council of Chapters, said all 15 state chapters have advocated for the exemption. Members set up virtual meetings with lawmakers in their district to build meaningful connections, Husar said.

If approved, the total exemption would mean a revenue loss of about $32 million for the state, according to the North Carolina Center for Public Policy Research. However, Husar said it would be counterbalanced by an influx of veterans who would retire in North Carolina and pay other taxes and boost the local economy.

 

The North Carolina Senate referred the bill to committee on June 21.

 

Louisiana

MOAA chapters in Louisiana worked together to secure a tax exemption for surviving spouses.

 

Gov. John Bel Edwards signed House Bill 200 in June. The bill exempts the military survivor benefit plan from state income tax payments and is retroactive to Jan. 1, 2021.

 

Col. Mike Dilda, USAF (Ret), president of MOAA’s Ark-La-Tex chapter, had been advocating for the exemption since 2019. He partnered with Col. Fred Palmer, USA (Ret), president of the Greater Baton Rouge Chapter, and other state chapter members to discuss the tax exemption with state lawmakers.

 

Dilda has led efforts to prepare MOAA’s Louisiana Council of Chapters to lead advocacy efforts with state lawmakers.

 

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About the Author

Amanda Dolasinski
Amanda Dolasinski

Dolasinski is MOAA’s staff writer and covers issues important to veterans and their families, including health care, pay, and benefits. She can be reached at amandad@moaa.org. Follow her on Twitter: @AmandaMOAA