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.
While federal lawmakers sputter toward a budget agreement in early 2024, state legislators across the country face divergent schedules to begin the new year – some will continue a two-year session, others have begun a new annual session, and still more haven’t started the new legislative year.
Here are updates from some of the states where at least a portion of military retirement and/or Survivor Benefit Program (SBP) benefit remains taxed at the state level; check MOAA’s Military State Report Card and Tax Guide for the tax rules in your state.
[FEB. 6 MOAA WEBINAR: What’s New for the Upcoming Tax Season?]
Delaware increased its pension and exclusion to $12,500 for military retirees and SBP recipients under age 60 in 2022, matching the exclusion already available to those age 60 and over. A Senate bill introduced Jan. 4 would increase that exemption in upcoming tax years – to $20,000 in 2025, and to $25,000 in 2026.
Current exemptions do not apply to U.S. Public Health Service or NOAA retirees, and the proposed exemption increase does not address these groups.
[READ THE BILL: SB 201]
A House bill introduced Jan. 3 would exclude all military retirement pay and surviving spouse benefits from state taxation, though it’s unclear when the change would take effect.
Kentucky allows a pension exclusion of up to $31,000 for income received from federal, state, or local government service (to include military service) after Jan. 1, 1998. Servicemembers with a retirement date of 1997 and earlier may be eligible for a larger exclusion.
[MORE DETAILS: Kentucky Military Tax Issues]
HB 123 would require a 100% exclusion “beginning on or after January 1, 2025, but before January 1, 2029,” per the legislation. It would cover active duty and reserve component retirees from the armed forces; the bill does not reference USPHS or NOAA retirees.
- Vermont: Bills introduced in the House and Senate during the early part of the 2023-2024 legislative session would fully exempt military retirement pay and survivor benefits from state taxes. Existing law provides a $10,000 exemption for those with less than $50,000 in income ($65,000 or less for joint tax filers); that exemption is phased out as income levels increase.
- California: AB 46, a State Assembly bill which would exempt all military retirement pay and surviving spouse benefits, remains active after being placed in the “suspense” file at the end of the state’s 2023 legislative session. The bill cleared the Assembly floor and a series of Assembly and Senate committees without a single “Nay” vote, but it was moved to the suspense file – bills which continue to the next session, but don’t become law – by a unanimous Senate Appropriations Committee vote in August 2023. It’s supported by MOAA’s California Council of Chapters (CALMOAA).
[RELATED: MOAA’s State Tax Roundup (December 2023)]
Other states may soon follow suit with exemption legislation in the early days of 2024. MOAA council and chapter members across the nation have been active in such legislation, with these organizations championing recent changes to Maryland and Virginia tax law, for example.
Find out more about your local chapter at this link, which offers contact information, meeting dates/times, websites, and additional information. Click here for more details about MOAA’s councils and chapters, including virtual chapter details.