State Tax Update: Details on New Virginia Retiree Exemptions and Much More

State Tax Update: Details on New Virginia Retiree Exemptions and Much More
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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 or independent chapter as state legislation must originate at the state level.

 

Virginia military retirees 55 years and older will be able to keep more of their retirement income thanks to language in the state budget passed this spring by the state’s General Assembly.

 

Gov. Glenn Youngkin on June 21 signed the two-year budget, which exempts the first $10,000 in military retirement income in the 2022 tax year. This number will jump to $20,000 in 2023, $30,000 in 2024, and $40,000 in 2025 and beyond. The new law also applies to surviving spouses of military retirees.

 

That’s an estimated $575 in tax relief per $10,000 of exemptions, according to MOAA Virginia Council of Chapters State Legislative Affairs Chair Col. Monti Zimmerman, USA (Ret).

 

Retirees from the U.S. Public Health Service or NOAA will not be eligible for exemptions.

 

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

 

“I would like to thank the entire General Assembly and Gov. Youngkin for making this a reality in the Commonwealth of Virginia,” Zimmerman said. “The whole idea behind the bill is to retain retirees, to get them to stay in the state of Virginia.”

 

More news on exemption efforts in other states:

 

New Mexico 

This spring, New Mexico Gov. Michelle Lujan Grisham signed legislation exempting up to $30,000 in military veteran retirement income by 2024.

 

Under HB 163, all retired armed forces veterans will have $10,000 exempted in tax year 2022 and $20,000 in 2023. From 2024 to 2026, there will be a $30,000 exemption before the law sunsets.

 

MOAA’s New Mexico Council of Chapters (NM CoC) is a member of New Mexico’s Military & Veterans Leadership Council, which is working with legislators to make the $30,000 exemption permanent and to include exemptions for surviving spouses and NOAA and USPHS retirees, said Lt. Col. Walter Paul, USA (Ret), the legislative chair for NM CoC.

 

“We want to thank bill sponsors Sen. Harold Pope, Rep. Harry Garcia, and Sen. Bill Burt, and recognize the hard work put in by the Military & Veterans Leadership Council legislative team for making this legislation a reality,” said NM CoC President Maj. Jason Peete, USARNG.

 

[RELATED: Mid-Year Tax Moves: Retirement and Charitable Giving]

 

Vermont

Vermont military retirees will also see tax relief in 2022, with a $10,000 exemption for residents with gross income of $50,000 or less, or $65,000 or less for those married and filing jointly.

 

The $10,000 exemption is phased out over the next $10,000 in additional retirement income, according to a state-produced summary of the bill, H. 510.

 

“It’s not only the right thing to do for those who serve our country, but it’s also another economic development tool in our toolbox,” Gov. Phil Scott wrote April 18 on his official Facebook page. Scott signed the bill, which included other tax reductions, on May 27.

 

USPHS and NOAA retirees, as well as surviving spouses, are not eligible for the exemption.

 

[RELATED: Does Your State Take This Simple Step to Help Veterans and Military Families?]

 

North Carolina 

An amendment to this year’s state Appropriations Act will exempt retirement benefits from the commissioned corps of both the U.S. Public Health Service and NOAA from state income tax.

 

The exemption takes effect for the 2022 tax year. Last year, the 2021 Appropriations Act provided an exemption from state taxes on military retirement benefits for all military retirees and surviving spouses, but not USPHS or NOAA.

 

MOAA board member and North Carolina resident Col. Jeri Graham, USA (Ret), was instrumental in the amendment’s passage. She became aware of the issue after a phone from a soon-to-be-retiring USPHS physician in Georgia – his ailing elderly father living in North Carolina needed his assistance, and he didn’t want to move to a state where his retirement would be taxed.

 

After learning of this, Graham began to work with fellow MOAA board member Rear Adm. Scott Deitchman, USPHS (Ret), and encouraged the Commissioned Officers Association of the USPHS to engage with state legislators. Their efforts came to fruition when Gov. Roy Cooper signed the bill July 11.

 

California

A bill that would have eliminated California retirement income taxes on all uniformed servicemembers over the age of 60 with 20 years of service died in the State Assembly Appropriations Committee this spring.

 

Lt. Cmdr. Jeff Breiten, USN (Ret), Legislative Vice-President for MOAA’s California Council of Chapters, said he believes the uncertainty of the proposed bill’s cost is what ultimately sunk it. Had the legislation passed, it would have taken effect in 2023 and ended after the 2033 tax year.

 

“We are reviewing this year's efforts to see what we can do different next year to gain more support from the state legislators,” Breiten said.

 

Breiten said the bill had the backing of 28 veterans service organizations (VSOs) and that some assembly members have already reached out to him about introducing similar legislation in 2023. He hopes to garner even more support from organizations and individuals outside military circles.

 

“We believe that the voters in California support this,” Breiten said. “We just need to do a better job of showing that they support this.”

 

Later this month, Breiten will be presenting a certificate of appreciation and a plaque to Assemblymember James C. Ramos for introducing the 2022 bill.

 

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About the Author

Kipp Hanley
Kipp Hanley

Hanley is MOAA's staff writer. He has spent the last 26 years working in  journalism and public relations.