DD Form 2868 is the one-page Department of Defense form military retirees use to start, change, or stop state income tax withholding from their retired pay. You fill in your name, Social Security number, pay grade, a whole-dollar amount of at least $10, and the state you want it withheld for, sign it, and send it to the Defense Finance and Accounting Service in Indianapolis. Most retirees can skip the paper entirely and make the same change in myPay in a few minutes.
What the Form Does and Does Not Cover
DFAS does not automatically withhold state income tax from military retired pay. If you want money set aside each month for your state tax bill, you have to ask for it, and DD Form 2868 is one way to make that request. The same form starts withholding, changes the amount, switches the designated state, or shuts withholding off.1DFAS. Supplemental Instructions DFAS R&A Pay DD Form 2868 Request Withhold State Tax
Two limits matter before you file. DFAS can withhold for only one state at a time, and that state must have a signed withholding agreement with the Department of Defense. If you owe tax to two states in the same year, you will need to cover the second through estimated payments to that state’s revenue department. The form also does not apply to survivor benefit annuitants; it is for retirees receiving retired pay directly.2DFAS. How to Start, Stop or Change State Income Tax Withholding from Your Military Retired Pay
Federal income tax withholding is a separate matter. That change runs through IRS Form W-4P, not any DD form.
How to Fill Out DD Form 2868
The form is seven fields on a single page and can be downloaded from the Defense Department’s Executive Services Directorate site.3Department of Defense. DD Form 2868
- Block 1, Name: last name, first name, and middle initial, exactly as they appear on your retired pay account.
- Block 2, Social Security number: DFAS uses this to match the request to your account. Providing it is technically voluntary, but leaving it blank will delay processing.4Washington Headquarters Services. DD Form 2868 – Request for Withholding State Tax
- Block 3, Pay grade: your retired pay grade.
- Block 4, Amount for withholding: the dollar amount you want withheld each month. The form requires at least $10 in whole dollars, no cents.4Washington Headquarters Services. DD Form 2868 – Request for Withholding State Tax
- Block 5, Designated state: the state you want the withholding applied to.
- Block 6, Retiree’s signature: DFAS will not process an unsigned request.
- Block 7, Date: the date you signed.
To stop withholding rather than start or change it, write “$0” or a clear statement that you want withholding discontinued. The same form handles all three actions.
Where to Send It
Mail the signed form to:
Defense Finance and Accounting Service
U.S. Military Retired Pay
8899 E 56th Street
Indianapolis, IN 46249-12001DFAS. Supplemental Instructions DFAS R&A Pay DD Form 2868 Request Withhold State Tax
Fax is also accepted at 1-800-469-6559.2DFAS. How to Start, Stop or Change State Income Tax Withholding from Your Military Retired Pay DFAS does not publish a specific turnaround for DD Form 2868, so a mailed form may not affect your pay statement for several weeks. Plan accordingly.
The Faster Route: myPay
DFAS recommends myPay as the fastest and most secure way to manage state withholding, and for most retirees it removes the need to touch the paper form at all. Sign in to your Military Retiree account at mypay.dfas.mil, click “State Withholding” in the left column, click the green tab to add or change the amount, enter at least $11 (the online minimum sits a dollar above the paper form’s $10 floor), click “Continue,” review, and submit.2DFAS. How to Start, Stop or Change State Income Tax Withholding from Your Military Retired Pay Changes made in myPay generally process faster than mailed forms.
When You Probably Do Not Need to File It
Nine states impose no state income tax at all. If you live in one of them, there is no reason to set up state withholding from your retired pay. On top of that, a growing number of income-tax states now fully exempt military retirement pay. Roughly 30 states either have no income tax or fully exempt military retired pay from state taxation.
Check your state’s current treatment of military retirement income before filing DD Form 2868. Your state department of revenue website will have the current rules, and DFAS publishes periodic guidance in its retiree newsletters.5Soldier for Life. Check State Taxes Before Moving
Picking the Right Dollar Amount
Block 4 wants a flat monthly dollar amount, not a percentage. You have to estimate your state tax liability yourself and divide it across twelve payments. Withhold too little and you owe the balance at filing time, with possible underpayment penalties depending on the state. Withhold too much and you shrink your monthly retired pay in exchange for a refund later.
A workable starting point: pull last year’s state return, take what you owed, divide by twelve, and round up to the next whole dollar since the form does not accept cents. If your circumstances shift during the year, such as a spouse starting or stopping work, revisit the number and submit an updated form or make the change in myPay.
If You Are Also Moving
DFAS also accepts DD Form 2866, “Retiree Change of Address/State Tax Withholding Request,” which combines an address change with a state withholding request on one form. If you are relocating and need to update both at once, DD Form 2866 handles them together. If you only need to adjust the withholding amount or designated state, DD Form 2868 is the more focused option. Both go to the same DFAS address in Indianapolis.2DFAS. How to Start, Stop or Change State Income Tax Withholding from Your Military Retired Pay