State Tax Recap: Updates From 3 States on Exempting Military Retirement Pay

State Tax Recap: Updates From 3 States on Exempting Military Retirement Pay
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By MOAA Staff


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 and surviving spouses in New Mexico will benefit from a tax bill signed into law March 6, while lawmakers in Maryland and Oregon considered increases to tax exemptions on military retirement pay but did not pass changes before the end of their respective sessions.


Here’s a look at some of the details. For a state-by-state review of a range of tax laws, including military retirement and other tax policies related to the uniformed services community, visit MOAA’s Military State Report and Tax Guide.


New Mexico

A new law will make permanent a $30,000 exemption of military retirement pay from state taxes – an exemption already in place, but which had been scheduled to expire after the 2026 tax year.


HB 252, signed by Gov. Michelle Lujan Grisham on March 6, also makes the exemption available to surviving spouses, who were not covered under the temporary measure.


MOAA members in New Mexico have advocated for this tax break since 2008, said Lt. Col. Richard Goodyear, USA (Ret), president of MOAA’s Roadrunner Chapter. It has been a team effort alongside a number of fellow service organizations that banded together to form the New Mexico Military & Veterans Leadership Council.


“Bottom line, New Mexico benefits economically by attracting and retaining skilled military retirees in the state,” he said.


Goodyear noted that enlisted retirees, surviving spouses, and officers ranked O-4 and below will receive the tax break on 100% of their retirement income.


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Eliminating state taxes on retirement pay for those who served in uniform remains a top priority for the Maryland Military Coalition, a group of veterans organizations which includes MOAA’s Maryland Council of Chapters. Bills considered by the state House and Senate in the recent legislative session, which ended April 8, would have moved Maryland closer to that goal, but they did not clear the legislature.


The Keep Our Heroes Home Act (HB 952 | SB 346) would have established an incremental path toward a full exemption:

  • Through the 2024 tax year, the first $20,000 of military retirement income would be exempt.
  • For tax year 2024 and 2025, either $20,000 of the income or 50% of the total military retirement pay, whichever is greater, would be exempt.
  • For tax year 2026 and beyond, all military retirement income would be exempt.


The bill would have removed age-based exemptions now in place. It would also apply to surviving spouse payments, and to all uniformed services, to include the U.S. Public Health Service Commissioned Corps and NOAA Corps.


We are disappointed. Just as last year, the Board of Revenue Estimates revised estimates for FY 24 and FY 25 were released just as the bills were being heard.” said Capt. Lynn Nash, USPHS (Ret), legislative director of the Maryland Council of Chapters. “In the face of a $250 million deficit, neither bill advanced, nor did HB 713, a standalone bill to remove the age restriction only.


“We’ll be back at it next year,” Nash said. “You can count on it”.


[RELATED: Lawmakers Push for Cost-of-Living Boost in Veterans Benefits Next Year]



A bill introduced Feb. 5 in the Oregon Senate would have exempted up to $17,500 in military retirement pay from state taxes, but the legislative session closed after only 35 days and with no further discussion on the bill. The bipartisan effort also ran out of time in the last legislative session.


SB 1549 would not apply to U.S. Public Health Service or NOAA retirees; the legislation does not mention surviving spouses. Current Oregon state exemptions for military retirement pay are limited to service performed before Oct. 1, 1991, and only cover a portion of retirement income under a federal pension exclusion; taxpayers can consult this online calculator for details.


MOAA’s Oregon State Council of Chapters supports the legislation, as it did last session, said Council President Lt. Col. Tom Majchrowski, USAF (Ret).


“There will be another attempt at restarting the same law during the next long session,” he said. “We will collaborate with the United Veterans Groups of Oregon on the next bill.”


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