What States Tax Military Retirement: Understanding the Financial Implications
The United States is home to a significant number of military personnel who, after serving their country, often retire to various states across the nation. One important aspect that military retirees need to consider is the taxation of their retirement income. The question “What states tax military retirement?” is a crucial one for many veterans and their families. This article aims to provide an overview of the states that tax military retirement income and the implications it has on financial planning for military retirees.
Introduction to Military Retirement Taxation
Military retirement income is generally not taxed at the federal level. However, the taxation of military retirement income varies by state. Some states exempt military retirement income entirely, while others tax it at a reduced rate or tax it in a specific manner. Understanding the tax implications of military retirement income is essential for veterans to make informed decisions about their retirement destinations and financial planning.
States That Tax Military Retirement Income
1. Alabama: Alabama taxes military retirement income at the same rate as other income, which is progressive. This means that the more income you earn, the higher the tax rate will be.
2. Arizona: Arizona does not tax military retirement income, making it an attractive destination for military retirees looking to minimize their tax burden.
3. Arkansas: Arkansas provides a partial exemption for military retirement income. Retirees can exclude up to $6,000 of their military retirement income per year.
4. California: California taxes military retirement income, but it is subject to a flat tax rate of 1% on the first $20,000 of income.
5. Colorado: Colorado does not tax military retirement income, making it another state that is favorable for veterans.
6. Connecticut: Connecticut taxes military retirement income, but it is subject to a reduced rate of 3.07% for retirees over the age of 65.
7. Delaware: Delaware does not tax military retirement income, which is beneficial for veterans considering relocation.
8. Florida: Florida is known for not taxing military retirement income, making it a popular choice for retirees looking to reduce their tax liability.
9. Georgia: Georgia does not tax military retirement income, which is a significant advantage for veterans in the state.
10. Idaho: Idaho provides a partial exemption for military retirement income, allowing retirees to exclude up to $6,000 per year.
Conclusion
Understanding which states tax military retirement income is vital for veterans to make informed decisions about their retirement plans. While some states offer tax advantages for military retirees, others may impose taxes on this income. By considering the tax implications of their retirement destinations, veterans can ensure they are making the most of their military service and planning for a comfortable retirement.
