Military tax exemptions by state fall into four buckets: active-duty pay, retirement pay, property tax for disabled veterans, and personal property like vehicles. What you actually owe depends on your state of legal residence, your duty status, your VA disability rating, and which type of income is on the table. Nine states levy no personal income tax at all, most of the remaining states now fully or partially exempt military retirement pay, and federal law prevents the state where you are stationed from taxing your military wages if you are domiciled somewhere else.
Nine States With No Personal Income Tax
Keeping your legal residence in a no-income-tax state is the cleanest way to avoid state tax on military pay. The nine states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. New Hampshire repealed its interest and dividends tax effective for tax years beginning after December 31, 2024, so it now imposes no individual income tax of any kind.1New Hampshire Department of Revenue Administration. Interest and Dividends Tax Washington taxes capital gains on stocks and bonds but does not tax wages, so military pay earned there is not subject to state tax.
Once you have established domicile in one of these states, that domicile follows you from duty station to duty station. No state withholding comes out of your paycheck and, absent other state-source income, there is no state return to file.
SCRA Protection for Your Home of Record
The Servicemembers Civil Relief Act locks in your state of legal residence for tax purposes no matter where the military sends you. Under 50 U.S.C. § 4001, a service member does not lose or acquire a domicile just by being present in a state under military orders, and the state where you are stationed cannot treat your military compensation as locally sourced income if you are not domiciled there.2Office of the Law Revision Counsel. 50 USC 4001 – Residence for Tax Purposes A service member domiciled in Florida who gets orders to Virginia owes Virginia nothing on military pay.
Domicile itself is not just a box on a form. States and courts look at the overall picture: voter registration, driver’s license, vehicle registration, mailing address, and property ownership all contribute, and no single factor is usually enough on its own.3Space Base Delta 1 Legal Office. Domicile and Residency Requirements
Spouse Protections and the Election Option
Military spouses have their own protections, and they have expanded. The Military Spouses Residency Relief Act of 2009 let a spouse who moved to a new state solely to accompany a service member keep their existing domicile and avoid the new state’s income tax on their earnings.4Military OneSource. The Military Spouses Residency Relief Act
The Veterans Benefits and Transitions Act of 2018 went further by adding an election provision at 50 U.S.C. § 4001(a)(3). The service member and spouse can now choose any of three states for tax purposes: the service member’s domicile, the spouse’s domicile, or the service member’s permanent duty station.5Office of the Law Revision Counsel. 50 USC 4001 – Residence for Tax Purposes A spouse who never personally lived in a no-income-tax state can elect the service member’s domicile there and shield their own earned income from state tax. The election is available for any tax year of the marriage regardless of when the marriage took place.
What SCRA Does Not Reach
SCRA’s tax protections cover military compensation and the spouse’s earned income. They do not cover investment income, rental income from property located in another state, or business income tied to a specific state. The statute also does nothing to stop your domicile state from taxing you normally. If you are domiciled in a state with an income tax and that state taxes military pay, you owe that state regardless of where you are stationed.
Active-Duty Pay in States That Tax Income
A growing number of income-tax states fully exempt active-duty military pay. Illinois does not tax military pay at all, and Michigan exempts active-duty military pay from its individual income tax. These full exemptions cover base pay, bonuses, and special pays that appear in your federal adjusted gross income.
Other states offer partial exemptions structured as a subtraction from taxable income. Oregon allows qualifying residents stationed in-state to subtract up to $6,000. The specifics vary: some states tie the amount to whether you are stationed in-state or out-of-state, others apply it either way.
A few states use a residency mechanism to exclude pay entirely. Pennsylvania treats a service member as a nonresident if they spend fewer than 31 days in the state during the tax year and maintain no permanent home there. New York similarly exempts military pay when a domiciled service member meets nonresident conditions.6New York State Department of Veterans’ Services. New York State Income Tax Exemption for Military Pay These rules require careful tracking of your physical presence in the state.
National Guard and Reserve Pay
Guard and Reserve tax treatment turns on the authority under which you were activated. Title 10 federal active duty is generally treated the same as regular active-duty pay for state tax purposes. Title 32 pay, which covers federally funded training and operational support under the governor’s command, gets less consistent treatment: some states exempt all of it, others only annual training or active guard reserve duty. Pay for state active duty ordered solely by the governor falls under state law and may or may not qualify. Keep your orders and paperwork showing the specific activation authority, because you will need it to claim the correct exemption.
Combat Zone Pay
The federal combat zone tax exclusion under 26 U.S.C. § 112 removes qualifying pay from your gross income entirely. Enlisted members and warrant officers exclude all compensation received for any month they served in a combat zone, with no cap. Commissioned officers are capped at the highest enlisted pay rate for that month.7Office of the Law Revision Counsel. 26 USC 112 – Certain Combat Zone Compensation of Members of the Armed Forces Because this pay never enters your federal AGI, states that start their tax calculation from federal AGI exclude it automatically.
Military Retirement Pay
This is the area that has moved the fastest. After 2018, state after state eliminated tax on military retirement pay. As of 2026, well over thirty states either impose no income tax at all or fully exempt military retirement pay. Alabama, Kansas, Ohio, Illinois, New York, and Pennsylvania are among the states where veterans keep their full pension without state income tax.8Soldier for Life. State Tax Breaks Expand for Retired Soldiers and Survivors
Most states that still tax military retirement use a tiered or partial exclusion. Maryland lets taxpayers 55 and older subtract up to $20,000 of military retirement income, and those under 55 up to $12,500.9Department of Veterans and Military Families. Retirement Pay and Pension Tax Deductions and Exclusion California offers a partial exemption of up to $20,000 for military retired pay or Survivor Benefit Plan annuities, available to single filers with federal AGI under $125,000 or joint filers under $250,000. Vermont provides a full exclusion for retirees and survivors with AGI below $125,000 and a proportional partial exemption between $125,000 and $175,000.8Soldier for Life. State Tax Breaks Expand for Retired Soldiers and Survivors
VA Disability Compensation
VA disability compensation is not taxable at the federal level and should not appear in your gross income.10Internal Revenue Service. Veterans Tax Information and Services Because it never enters federal AGI, states that calculate taxable income from that starting point also exclude it. Veterans receiving a mix of taxable retirement pay and tax-free disability pay through Concurrent Retirement and Disability Pay should confirm the split is coded correctly on their 1099-R. An incorrect code can push exempt income onto the taxable line of a state return.
Survivor Benefit Plan Annuities
SBP payments go to a surviving spouse or other designated beneficiary. Some states explicitly include SBP annuities in their military retirement exemption. California’s partial exemption covers both retired pay and SBP annuities, and Vermont’s expanded exemption applies to both retirees and survivors.8Soldier for Life. State Tax Breaks Expand for Retired Soldiers and Survivors Other states may treat SBP as general pension income rather than military retirement pay, which can produce a different result. If you receive SBP, check whether your state’s exemption language names survivor annuities specifically or only the retiree’s own pension.
Property Tax Relief for Disabled Veterans
The largest property tax breaks are almost always tied to a VA disability rating, not to general veteran status. Veterans rated 100% permanently and totally disabled by the VA qualify for a complete property tax exemption on their primary residence in many states. Depending on local tax rates and home values, that can save several thousand dollars a year. The exemption is typically limited to one property used as the veteran’s homestead.11Department of Veterans Affairs. Unlocking Veteran Tax Exemptions Across States and US Territories
Partial disability ratings also carry benefits, usually on a sliding scale. In some jurisdictions, a 10% to 29% rating yields a $5,000 reduction in assessed value, 50% to 69% yields $10,000, and 70% to 99% yields $12,000. Amounts vary widely, and some states use percentage-based reductions instead of flat dollar deductions.
Surviving spouses of veterans who qualified for a property tax exemption often keep the benefit as long as they continue to live in the home and do not remarry. Some states extend the exemption to surviving spouses of veterans who died in the line of duty even if the veteran had not established property tax exempt status during their lifetime.11Department of Veterans Affairs. Unlocking Veteran Tax Exemptions Across States and US Territories
Property tax exemption applications are handled at the county level through the local tax assessor, not the state revenue department. You will need your DD-214 and VA disability award letter. Deadlines often fall in early spring, and missing them typically means losing the exemption for that entire tax year. Many counties also require an annual recertification.
Vehicles and Personal Property
SCRA protects more than income. Under 50 U.S.C. § 4001(d), your personal property, including vehicles, cannot be taxed by a state where you are stationed solely because of military orders. A service member domiciled in Texas but stationed in Virginia is not subject to Virginia’s personal property tax on their car.5Office of the Law Revision Counsel. 50 USC 4001 – Residence for Tax Purposes The protection extends to the spouse’s personal property as well.
To claim the exemption, provide the local tax office a copy of your Leave and Earnings Statement showing your home of record along with a copy of your orders. Some localities require annual renewal. Leased vehicles are more complicated because the leasing company is the registered owner. SCRA may not apply directly in that case, though some states run separate relief programs for leased vehicles used by military members. A handful of states also offer sales tax exemptions or deferrals when service members buy vehicles. Those are not SCRA-based, so the rules of the state where the purchase happens control.
Documents You Need to Claim Exemptions
Getting the exemption right almost always comes down to producing the right paperwork.
- W-2 from DFAS. Your primary tax document for active-duty pay, showing taxable wages and any state withholding. Available electronically through myPay before paper copies arrive.12Defense Finance and Accounting Service. Tax Documents
- 1099-R from DFAS. For retirees and SBP annuitants. Confirm the distribution code correctly reflects taxable retirement pay, tax-free disability pay, or a survivor annuity, because an incorrect code can trigger state tax on exempt income.13Defense Finance and Accounting Service. Getting Your 1099-R
- DD-214. Required for any veteran-specific exemption. The Member 4 copy is preferred because it carries the discharge characterization and service codes state agencies look for.14National Archives. DD Form 214 Discharge Papers and Separation Documents
- VA disability award letter. Needed for disability-related income exclusions and property tax exemptions. It must show your combined rating and whether the condition is permanent and total. You can generate an updated version through the VA’s online portal.
- Leave and Earnings Statement. Useful for proving your home of record on SCRA claims and personal property tax exemptions. Some localities require a current LES each year.
If your W-2 shows withholding for a state where you are not domiciled, file a nonresident return with that state to recover it, and update your state withholding through myPay so future paychecks reflect the right obligation.
Deadlines and Filing Extensions
Service members deployed to a combat zone or contingency operation get an automatic 180-day federal extension for filing and paying taxes, with the clock starting after you leave the combat zone. Many states follow this federal extension automatically, but some require a separate request. If you are deployed and unsure, file the request rather than assume. Missing a state deadline because you counted on federal rules carrying over is avoidable.
Property tax deadlines are set locally and usually fall between January and March. They are separate from your income tax filing deadline and are handled through your county assessor, not the state. If you are deployed during the window, many counties allow a family member or power of attorney to file for you, but the paperwork has to be in place before you leave.
After filing, adjust your withholding so you are not overpaying month after month. Active-duty members change state withholding through myPay, and retirees receiving pension payments through DFAS can do the same to stop unnecessary state withholding from monthly distributions.