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. 

Bills to expand or create new income tax exemptions for uniformed services retirement pay have been introduced in several states at the beginning of annual legislative sessions. In some states where the legislative season is short, advocates already are looking toward next year.

Here’s a look at some of this legislation; find out more about exemptions in your state, along with other tax policies, at MOAA’s Military State Report Card and Tax Guide.

Connecticut

HB 5231 would expand the state’s full exemption for military retirement pay and survivor benefits to cover pay earned by retired members of the commissioned corps of both the U.S. Public Health Service and NOAA.

The bill was referred to the Joint Committee on Finance, Revenue, and Bonding on Feb. 18.

Delaware

SB 219, introduced Jan. 8, would expand the existing exemption beginning in the 2027 tax year. Current rules allow for a $12,500 military retirement exemption for those 60 and over; the bill would create a $15,000 exemption for military retirement pay regardless of age in the 2027 tax year, which would rise to $20,000 in 2028 and $25,000 in 2029.

All uniformed services retirees would be eligible for the increased exemptions.

“We appreciate the efforts of Sen. Eric Buckson, who not only introduced this bill a second time, but who included the uniformed services in it,” said Col. Gene Thornton, USA (Ret), president of the MOAA Dover Chapter, which has fought to expand the exemption. “We remain hopeful that other legislators can appreciate that youthful, healthy, drug-free, and hard-working military retirees are the answer to the aging population in Delaware.”

Maryland

A House bill would increase the state’s exemption on military retirement pay and would remove existing age qualifications.

The state allows for a $12,500 exclusion for those under age 55 and a $20,000 exclusion for those age 55 and over. HB 761, the Keep Our Heroes Home Act, would establish a $25,000 exclusion for the 2026 tax year and a $40,000 exemption thereafter.

Another bill, HB 857, would remove the age requirement and establish a $20,000 exclusion for all military retirees. USPHS and NOAA Commissioned Corps retirees and all surviving spouses would be covered under both pieces of legislation.

New Mexico

Two bills filed in New Mexico earlier this year failed to advance out of committee.

S 116 would have removed the $30,000 exemption cap and would have extended the benefit to all members of the uniformed services, to include USPHS and NOAA Commissioned Corps retirees, merchant mariners, and National Guard members.

A separate bill (S 117) would have extended the state’s exemption for salaries earned by currently serving members to cover the above groups.

These two bills were presented Jan. 29 to the Senate Tax, Business and Transportation Committee, where USPHS and National Guard representatives testified.

The hope was to include these in a larger tax bill, said Capt. Nina F. Dozoretz, USPHS (Ret), a member of the MOAA Albuquerque Chapter.

“Regrettably, these two bills did not pass out of committee as planned,” she said, adding she had received assurances from State Sen. Jay Block, a sponsor of both bills, that he would reintroduce the measures for next year’s legislative session.

South Carolina

H 4812, prefiled in December in advance of the 2026 session, would include USPHS and NOAA Commissioned Corps retirement alongside other services’ state retirement tax exemption, which became law in 2022 (applying to the 2021 tax year and beyond). The Senate introduced a companion bill , SB 771, on Jan. 13.

The bill would apply to tax years after 2025 and would also cover survivor benefits.

“We have been actively involved in this effort since the state approved full state income tax exemption for the six military services back in 2022,” said Lt. Col. James R. Albert, USAF (Ret), president of MOAA’s South Carolina Council of Chapters. “We are cautiously optimistic the state will approve the extension for USPHS and NOAA in the next legislative session.”

Virginia

Three bills in Virginia were tabled until the next legislative session.

HB 47, prefiled Dec. 29, and SB 148, prefiled Jan. 7, would have expanded existing exemptions to cover USPHS and NOAA Commissioned Corps retirees and their survivors.

“Our top priority in the MOAA Virginia Council of Chapters is to add the commissioned corps of USPHS and NOAA to our existing $40,000 income tax break,” said Col. Monti Zimmerman, USA (Ret), third vice president and legislative chair of MOAA’s Virginia Council of Chapters. “This will protect the 358 additional Commissioned Corps Virginia residents.  We have educated the General Assembly of Virginia and feel good about our chance of success in this regard.”

The House version of the bill was tabled by a House Finance subcommittee on Jan. 26. The Senate version was continued to 2027 by the Senate Finance and Appropriations Committee on Jan. 28.

Zimmerman thanked State Sen. Jeremy McPike and State Delegate David Reid for their efforts this year and said meetings are already underway to strategize a 2027 passage.

Another bill – HB 137, prefiled Jan. 4 – would raise the state’s military retirement pay exemption (now $40,000 a year) by the following amounts:

• $60,000 for tax year 2028.
• $80,000 for tax year 2029.
• Full exemption from tax year 2030 forward.

The measure did not advance. While it would be a boon for military retirees in the state, Zimmerman said advocates were surprised to see the bill, which was not initially presented to the state’s Joint Leadership Council of Veterans Service Organizations, whose mission is to provide advice and assistance to the governor, General Assembly and the Department of Veterans Services. MOAA’s Virginia Council is represented in this advisory group.