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. Here's the latest in the ongoing advocacy efforts in three states.
Virginia: Expanded Exemption
Many military retirees and surviving spouses in Virginia will see a larger tax exemption for service-connected income in the new tax year under the state’s 2024 budget.
The budget removes age requirements attached to state tax exemptions for these payments – previous law required beneficiaries to be age 55 or older to receive a $20,000 exemption in the 2023 tax year, $30,000 in 2024, and $40,000 in 2025 and beyond. So starting in 2024, retirees of any age will be eligible for the $30,000 tax exemption, increasing to $40,000 in 2025, regardless of age.
MOAA’s Virginia Council of Chapters (VCOC) supported the legislation; removing the age requirements was one of the top 2023 legislative priorities for the Joint Leadership Council of Veterans Service Organizations, which includes VCOC.
The change does not apply to members of the commissioned corps of the U.S. Public Health Service or NOAA. The 2024 legislative session begins in January and Col. Monti Zimmerman, USA (Ret), vice president of legislative affairs for MOAA’s Virginia Council of Chapters, said he is working with elected leaders on a provision to include the services. A bipartisan bill is pending for the State Senate, Zimmerman said. If you are a USPHS or NOAA officer living in Virginia and would like to help, email Zimmerman: email@example.com.
California: Bill Remains Alive
A California bill providing a full tax exemption on military retirement passed the state assembly floor and multiple committees without a single “No” vote, but will not advance out of the legislature in 2023.
[MORE FINANCIAL RESOURCES: MOAA.org/Finance]
AB 46, introduced by Assemblymember James Ramos, was one of hundreds of bills considered in the legislature’s “suspense file” – a twice-a-year process where legislation can be moved forward, delayed, or stalled as part of budget considerations. The bill, supported by MOAA’s California Council of Chapters (CALMOAA), was granted “two-year bill” status, meaning it can be reconsidered in the 2024 legislative session.
The legislation includes benefits for surviving spouses, as well as USPHS and NOAA commissioned corps personnel. The state assembly passed it 77-0 in May, and it cleared Senate committees in June and July before the appropriations committee voted unanimously in August to send it to the suspense file.
CALMOAA, with support of fellow veteran advocacy organizations, have fought hard for this legislation, and AB 46 has come closer than any other attempt in the past decade.
Ramos has reached out to Gov. Gavin Newsom's administration to enter into discussions for funding options for AB 46 in the 2024 budget.
Maryland: Top 2024 Priority
A May bill signed by Maryland Gov. Wes Moore more than doubled the state’s military retirement tax exemption for those under 55 ($12,500, up from $5,000) and increased the over-55 exemption to $20,000, up from $15,000.
Members of the Maryland Military Coalition, which includes MOAA’s Maryland Council of Chapters, have higher ambitions for next year. The coalition recommends a phased-in approach and will seek support when the Maryland General Assembly convenes in January.
The coalition recommends the following:
- For Tax Year 2024, eliminate the current 55-year-old age restriction so all retirees are eligible for a $20,000 exemption. meaning all military retirees in Maryland would be able to subtract $20,000 from the state income tax.
- For Tax Year 2025, allow military retirees to subtract 50% of their military retirement income, but not less than $20,000, from the state income tax.
- For Tax Year 2026, allow military retirees to subtract 100% of their military retirement income from the state income tax.
Virginia is not the only nearby state to improve taxation policies for military retirees. A July 2022 law increased the military pension exclusion for Delaware residents under age 60 to $12,500, up from $2,000. All Delaware residents over 60 already can exclude that amount of pension, whether from military retirement or another source.
The coalition also looks to improve licensure, certification, and registration processes for servicemembers, military spouses, and veterans, as well as expand the property tax credit for severely disabled veterans.
Have news of upcoming changes to your state's tax code in 2024 that may affect those who serve or have served, their families, and/or their survivors? Have a change to our State Report Card we should know about? Reach out to MOAA and help us keep our members informed.