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Exploring Veteran Tax Exemptions by State: A Guide

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Understanding veteran tax exemptions by state can feel overwhelming, but it is a critical step for financial wellness after military service. These valuable benefits are a state’s way of thanking you for your sacrifice. This guide breaks down the property tax and income tax exemptions available to veterans across the country, helping you claim the savings you have earned.

Table of Contents:

Why Veteran Tax Exemptions Matter

Veteran tax exemptions are more than just a financial perk. They are a form of recognition from state governments for the dedication and sacrifices made by members of the armed forces. These tax exemptions can significantly ease the financial burden on veterans and their families, especially for a disabled veteran or a surviving spouse.

By reducing the amount owed on property taxes or state income tax, these programs can improve a veteran’s quality of life. They make homeownership more affordable and allow military retirement pay to go further. Each state offers different benefits, so knowing what you qualify for where you live is important.

Veteran Tax Exemptions by State: A Comprehensive List

Alabama

Alabama offers strong support for its veterans through its tax code. The state fully exempts all military retirement pay from state income tax, a considerable advantage for military retirees. This applies to any honorably discharged veteran receiving retirement benefits.

On the property tax front, veterans with a 100% service-connected disability rating are exempt from paying property tax on their primary residence. This important property tax exemption also extends to their un-remarried surviving spouse. Some veterans may also be eligible for exemptions related to specially adapted housing grants.

Alaska

Alaska does not levy a state income tax, which is a major benefit for all residents, including veterans and active duty service members. This means military retirement pay is not taxed at the state level. The financial advantages in Alaska are substantial for all who live there.

For disabled veterans, the state offers a generous property tax exemption. An eligible veteran with a 50% or higher VA disability rating can receive an exemption on the first $150,000 of their primary residence’s assessed value. This can result in significant savings on annual property taxes.

Arizona

In Arizona, the first $3,500 of military retirement pay is exempt from state income tax each year. While not a full exemption, this still provides a measure of relief for retired service members. The state continuously reviews its tax policies for military families.

Veterans with a 100% service-connected disability may qualify for a property tax exemption. The exact value of this tax exemption depends on the total assessed value of the property and can eliminate a large portion of the tax bill. The veteran’s surviving spouse may also be eligible for this benefit.

Arkansas

Arkansas is another state that fully exempts military retirement pay from its state income tax. This makes it an attractive state for military retirees looking to maximize their retirement income. This benefit applies to all retired members of the armed forces.

The state also provides a full property tax exemption on the primary residence for any honorably discharged veteran with a 100% permanent and total disability rating. The unmarried surviving spouse of the veteran can also claim this benefit. The exemption helps reduce the cost of living for those most affected by their military service.

California

California provides a significant property tax exemption for disabled veterans. The amount of the veterans’ exemption varies based on the veteran’s annual income and the level of their service-connected disability. There is a basic exemption and a low-income exemption with a higher value.

This exemption also applies to the principal place of residence owned by the veteran or their unmarried surviving spouse. California does not offer a broad exemption for military retirement pay, which is taxed as regular income. However, some military pay for active duty service members may be exempt under specific conditions.

Colorado

Colorado allows a substantial deduction for military retirement pay for veterans aged 55 and older. The amount of the deduction changes based on age, providing greater relief for older retirees. This helps reduce the state income tax burden.

A property tax exemption is available for veterans with a 100% permanent and total disability rating resulting from their military service. This program exempts 50% of the first $200,000 of the home’s value. The state legislature has made supporting its veteran population a priority.

Connecticut

Connecticut fully exempts federally taxable military retirement pay from the state income tax. This change provides complete relief for military retirees living in the state. This makes Connecticut a more financially viable option for veterans.

The state also offers a base property tax exemption for all veterans who served on active duty during a time of war. Additional exemptions are available for veterans with a VA disability rating. These exemptions vary by municipality but offer a helpful reduction in local property taxes.

Delaware

In Delaware, veterans aged 60 and over can exclude up to $12,500 of their military retirement pay from state income tax. This provides some tax relief, though it is not a full exemption. The state aims to support its aging veteran community.

Property tax exemptions for disabled veterans are administered at the county level. An eligible veteran with a 100% disability rating can receive a credit against their property tax bill. These tax credits can help make homeownership more affordable for permanently disabled veterans.

Florida

As one of several states with no state income tax, Florida is a popular destination for military retirees. All income, including military retirement pay, is free from state taxes. This provides a significant financial advantage.

Florida also offers strong property tax benefits for disabled veterans. A veteran with a service-connected disability of 10% or more receives a $5,000 exemption. Veterans with a 100% permanent and total disability receive a full property tax exemption on their primary residence.

Georgia

Georgia allows a generous exemption for military retirement income for those 62 or older. The specific amount can be up to $35,000, depending on the source of the income. This helps lower the overall state tax liability for many veterans.

Veterans with a 100% disability rating are eligible for a substantial property tax exemption on their primary residence. This exemption extends to certain veterans who have received grants for specially adapted housing. The veteran’s surviving spouse may also qualify for these benefits.

Hawaii

Hawaii does not tax military retirement pay, which is a major benefit for veterans living in the state. All retirement income from the armed forces is exempt from state income tax. This makes the islands an attractive option for retirees.

For property taxes, Hawaii provides a full exemption on the primary residence for veterans who are totally disabled due to a service-connected event. This disabled veterans’ exemption is managed at the county level. The requirements can vary slightly between islands.

Idaho

Idaho provides a deduction for military retirement pay for veterans aged 65 or older, or those who are disabled and 62 or older. The deduction amount varies and is coordinated with Social Security benefits. It helps reduce the overall tax burden.

The state’s property tax benefit program offers a reduction for qualifying disabled veterans. The program reduces the property tax on the primary residence and up to one acre of land. The amount of the reduction is tied to the veteran’s income and disability rating.

Illinois

Illinois fully exempts military retirement pay from the state’s income tax. This is a simple and powerful benefit for any honorably discharged veteran living in the state. All military retirement income is untaxed at the state level.

The state also provides several property tax exemptions for disabled veterans. Veterans with a service-connected disability of 30% or more are eligible for a reduction in their home’s equalized assessed value. A veteran with a rating of 70% or higher receives a full exemption from paying property tax.

Indiana

Indiana offers a partial exemption for military retirement pay from state income tax. The exemption amount is adjusted periodically and provides some relief for retired service members. This helps to lower the taxable income for veterans.

Property tax deductions are available for veterans who served in the armed forces. An additional, larger deduction is available for veterans with a service-connected disability of 10% or more. Veterans with a total disability may qualify for an even greater reduction on their property tax bill.

Iowa

As of 2023, Iowa completely exempts military retirement pay from state income tax. This recent change makes the state much more financially friendly for military retirees. The policy recognizes the value of veteran service.

Iowa offers a property tax credit for honorably discharged veterans. Veterans with a 100% service-connected disability or who are receiving VA unemployability pay are eligible for a full property tax exemption. The veteran’s surviving spouse may also continue to receive this benefit.

Kansas

Kansas fully exempts military retirement pay from its state income tax. This applies to all retired members of the National Guard, reserves, and active components. This policy provides a substantial financial incentive for military retirees to live in Kansas.

The state also offers a property tax exemption for veterans with a 100% permanent and total disability rating. This program provides relief on the primary residence owned by the disabled veteran. This exemption helps reduce the cost of living for those most impacted by their military service.

Kentucky

In Kentucky, all military retirement pay is exempt from the state income tax. This provides a complete tax shield at the state level for this form of income. It’s a significant benefit for veterans who choose to retire in the Bluegrass State.

Veterans with a 100% service-connected disability rating are eligible for a property tax exemption. The exemption applies to a specific amount of the assessed value of their primary residence. This amount is adjusted annually for inflation to maintain its value.

Louisiana

Louisiana exempts military retirement pay from state income tax. This benefit helps veterans keep more of their retirement earnings. It’s a key part of the state’s efforts to support its veteran community.

The state also offers property tax exemptions for disabled veterans. The exemption amounts vary based on the VA disability rating. A totally disabled veteran may receive a larger exemption, reducing their local tax burden considerably.

Maine

Maine provides an exemption for a portion of military retirement pay. The amount of the exemption can change, so it is important for veterans to check the latest state tax laws. This partial exemption helps lower the overall tax bill.

A modest property tax exemption is available for veterans who served during a recognized war period. An additional exemption is available for veterans who have a 100% disability rating. These exemptions help reduce the cost of homeownership for Maine’s veterans.

Maryland

Maryland offers a partial exemption on military retirement pay. The first portion of this income is exempt from state taxes for veterans over a certain age. The state provides different exemption amounts based on age.

A full property tax exemption is available for veterans with a 100% permanent and total disability. This valuable benefit applies to the veteran’s primary residence. The unmarried surviving spouse of the veteran can also continue to receive this exemption.

Massachusetts

Massachusetts fully exempts military retirement pay from the state income tax. This makes it an attractive state for retired service members from a tax perspective. This exemption applies to contributory and non-contributory retirement plans.

The state provides property tax exemptions for veterans with a service-connected disability of 10% or more. The amount of the exemption increases with the disability rating. Additional benefits are available for veterans who have received a grant for specially adapted housing.

Michigan

Michigan offers a partial exemption on military retirement pay, but the rules are based on the retiree’s birth year. Veterans born before 1946 can deduct a larger amount than younger veterans. This tiered system can be confusing for some retirees.

A full property tax exemption is available for a disabled veteran who was honorably discharged and has a 100% disability rating. This also applies to veterans receiving VA benefits for individual unemployability. This significant benefit eliminates the property tax bill on the primary residence.

Minnesota

Minnesota offers a tax credit for past military service rather than an exemption for retirement pay. This nonrefundable credit can reduce a veteran’s state income tax liability. The amount of the credit depends on the length of the veteran’s service.

The state provides a property tax exclusion for disabled veterans. The amount of the exclusion from the home’s market value varies based on the disability rating. A veteran with a 70% or higher rating can receive the maximum exclusion, significantly lowering their property tax.

Mississippi

Mississippi is very friendly to military retirees, as it fully exempts military retirement pay from state income tax. This is a major financial incentive for veterans to settle in the state. All payments from a military retirement plan are untaxed.

Additionally, veterans with a 100% service-connected disability are completely exempt from property taxes on their primary residence. This exemption helps reduce the financial strain on the most severely disabled veterans. The benefit can be transferred to a surviving spouse.

Missouri

Missouri offers a partial exemption on military retirement pay. The deduction is phased in over several years, so the full benefit is not yet realized. Veterans should check with the state’s department of revenue for the current deduction amount.

The state also provides a property tax credit for certain disabled veterans. This credit is based on income and the amount of property tax paid. It is designed to provide relief to lower-income veterans with a total disability.

Montana

Montana provides a partial exemption for military retirement pay. A certain amount of this income can be excluded from state taxes each year. This helps to reduce the overall income tax paid by retired service members.

The state offers a property tax assistance program for veterans with a 100% disability rating. This program can reduce the property tax liability on their primary residence. The reduction amount is tied to both the veteran’s income and their disability status.

Nebraska

Nebraska offers a choice for military retirees regarding their retirement pay. They can either elect to exclude a certain percentage for a number of years or a smaller percentage for life. This choice allows veterans to select the option that best fits their financial plan.

Homestead exemptions are available for certain disabled veterans. The exemption amount is based on the veteran’s household income and disability rating. Veterans with a 100% disability rating may qualify for a full exemption if they meet the income limit.

Nevada

Nevada has no state income tax, which is a significant benefit for all residents, including veterans. Military retirement pay and all other forms of income are not taxed at the state level. This makes Nevada a financially attractive state.

The state also provides property tax exemptions for disabled veterans. The amount of the exemption varies based on the period of service and the veteran’s disability rating. These exemptions help lower the annual cost of owning a home.

New Hampshire

New Hampshire does not have a state income tax on wages, which benefits all residents. The state does tax interest and dividend income, but military retirement pay is not taxed. This makes it a very tax-friendly state for veterans.

The state provides a standard property tax credit for all veterans. An additional, larger tax credit is available for veterans with a 100% permanent and total disability. Municipalities can also vote to adopt a larger credit amount.

New Jersey

New Jersey allows veterans to claim a $6,000 personal exemption on their state income tax return. Additionally, military retirement pay is exempt from state income tax. These policies provide broad tax relief for the state’s veteran population.

The state also offers a $250 property tax deduction for veterans. For those with a 100% service-connected disability, a full property tax exemption is available on their primary residence. This complete exemption is a major benefit for totally disabled veterans.

New Mexico

New Mexico offers a partial exemption on military retirement pay. The amount of the exemption has increased in recent years. This provides some relief from the state’s income tax.

A full property tax exemption on the primary residence is available for any honorably discharged veteran with a 100% disability rating. This exemption completely eliminates the property tax bill. The veteran’s surviving spouse is also eligible for this benefit.

New York

New York exempts all military retirement pay from state and local income tax. This is a significant benefit for military retirees living in a high-tax state. It helps to offset the otherwise high cost of living.

The state offers several property tax exemptions for veterans. The Alternative Veterans’ Exemption is available to veterans who served during wartime. An additional exemption is provided for veterans with a service-connected disability, with the amount tied to their disability rating.

North Carolina

North Carolina does not tax military retirement pay. This full exemption makes the state a popular choice for military retirees. All retirement income from the armed forces is untaxed at the state level.

The state also provides a property tax exemption for disabled veterans. An honorably discharged veteran with a 100% permanent and total disability can receive an exemption on the first $45,000 of their primary residence’s assessed value. This program helps reduce the tax burden for qualifying veterans.

North Dakota

North Dakota provides a partial exemption for military retirement pay. A certain amount of this income is exempt from state income tax. This offers some relief to retired service members.

Property tax credits are available for disabled veterans with a VA disability rating of 50% or higher. The amount of the credit is based on both the disability rating and the veteran’s income. This helps make homeownership more affordable for disabled veterans.

Ohio

Ohio offers a tax credit based on the amount of military retirement pay received. This credit directly reduces the amount of state income tax a veteran owes. It is a valuable benefit for retired service members.

The state also provides a homestead exemption for disabled veterans. Veterans with a 100% service-connected disability are eligible for an increased exemption on the value of their primary residence. This lowers the taxable value of their home, reducing their property tax bill.

Oklahoma

Oklahoma allows a deduction for 75% of military retirement pay from state income tax. While not a full exemption, this is a substantial benefit that greatly reduces the state tax liability for retirees. It makes Oklahoma a financially competitive state for veterans.

A full property tax exemption is available for veterans with a 100% service-connected disability. This exemption applies to the entire value of the veteran’s primary residence. The unmarried surviving spouse can also benefit from this exemption.

Oregon

Oregon does not tax military retirement pay if the service member retired before October 1, 1991. For those who retired after that date, retirement pay is generally taxable. However, the state offers a tax credit for military service performed before that date.

Property tax exemptions are available for disabled veterans with a service-connected disability of 40% or more. The exemption amount increases with the level of disability. The exemption reduces the assessed value of the veteran’s primary residence.

Pennsylvania

Pennsylvania exempts all military retirement pay from its state income tax. This is part of the state’s broader policy of not taxing most forms of retirement income. It provides a significant financial advantage for veterans.

The state also offers a property tax exemption for honorably discharged veterans with a 100% disability. This program provides a full exemption on the primary residence. There are income limits that apply to this program, so not all 100% disabled veterans will qualify.

Rhode Island

In Rhode Island, military retirement pay is subject to state income tax. However, the state has been considering legislation to provide an exemption. Veterans should stay updated on any changes to state tax law.

Property tax exemptions for disabled veterans vary significantly by city and town in Rhode Island. Most municipalities offer some form of exemption, with larger benefits typically reserved for veterans with a 100% disability rating. A qualified veteran must check with their local tax assessor for details.

South Carolina

South Carolina allows for a significant deduction of military retirement pay from state income tax. The amount of the deduction has been increasing over the years. This makes South Carolina an attractive location for military retirees.

The state provides a full property tax exemption on the primary residence for veterans with a 100% permanent and total disability. This benefit also applies to the veteran’s surviving spouse. South Carolina also provides an exemption on up to two vehicles for certain disabled veterans.

South Dakota

South Dakota is another state with no state income tax. This means all income, including military retirement pay, is free from state taxation. This is a major draw for veterans and retirees.

The state also provides property tax relief for disabled veterans. The specific program can reduce the property tax assessment on the primary residence for veterans with a 100% disability rating. The level of benefit may depend on the home’s value.

Tennessee

Tennessee does not have a broad-based income tax on wages. This means military retirement pay is not subject to state income tax. The state does have a tax on some interest and dividend income, but it is being phased out.

The state also offers property tax relief for disabled veterans. This program provides a credit on the property taxes owed on the veteran’s primary residence. The amount of relief is for veterans with a 100% service-connected disability.

Texas

Texas has no state income tax, making it a very popular state for military members and retirees. All military retirement pay and other income are free from state taxes. The lack of an income tax is a major financial advantage.

The state provides generous property tax exemptions for disabled veterans. The exemption amount is based on the disability rating, ranging from $5,000 to $12,000 off the home’s value. A veteran with a 100% disability rating receives a full exemption on their primary residence.

Utah

Utah offers a nonrefundable tax credit based on military retirement pay. The amount of the credit has been updated in recent years to provide more relief. This credit reduces the final state income tax bill for veterans.

The state also provides a property tax exemption for disabled veterans and their unmarried surviving spouses. The exemption amount is a fixed dollar value that reduces the taxable value of the primary residence. The amount is available for veterans with any level of disability.

Vermont

Vermont taxes military retirement pay as regular income. The state does not offer a specific exemption or credit for this type of income. This makes it a less tax-friendly state for military retirees.

Property tax exemptions for disabled veterans are available but vary by town. Some towns provide exemptions for veterans with a disability rating of 50% or more. Veterans must contact their local town office to determine eligibility.

Virginia

Virginia offers a partial exemption on military retirement pay for veterans aged 55 and older. This is known as the age deduction and can be applied to military retirement income. The amount of the deduction is subject to income limitations.

The state provides a full property tax exemption on the primary residence for veterans with a 100% permanent and total service-connected disability. This significant benefit also extends to the surviving spouse. The exemption does not have an income limit.

Washington

Washington state has no personal income tax, so military retirement pay is not taxed. This makes it a financially attractive location for veterans. The absence of an income tax simplifies financial planning for retirees.

The state also offers a property tax exemption program for disabled veterans. The program is based on the veteran’s income and disability rating. Veterans with a 100% disability may qualify for substantial relief if their household income falls below a certain threshold.

West Virginia

In West Virginia, military retirement pay is fully exempt from state income tax. This recent legislative change is a significant benefit for veterans in the state. West Virginia is now a more appealing destination for military retirees.

The state offers a homestead exemption program that can benefit senior or disabled citizens, including veterans. However, there isn’t a specific, separate property tax exemption program just for disabled veterans. Veterans should check their eligibility for the broader program.

Wisconsin

Wisconsin allows retired service members to exempt their military retirement pay from state income tax. This full exemption is a major benefit for veterans who choose to live in the state. It helps to lower their annual tax burden.

The state provides a property tax credit for eligible veterans and their unmarried surviving spouses. This credit is applied to the property tax bill of the primary residence. The veteran must have a 100% service-connected disability rating to qualify.

Wyoming

Wyoming does not have a state income tax, making it a tax-friendly state for all residents. Veterans benefit from this policy, as their military retirement pay is not taxed. This provides a straightforward financial advantage.

The state also offers a property tax exemption for veterans who served during specific wartime periods. The exemption reduces the assessed value of their property. A disabled veteran may qualify for a larger exemption amount.

A Note for Surviving Spouses

Many of these tax benefits do not end with the veteran’s death. States often extend property tax exemptions to the veteran’s surviving spouse. This helps ensure the spouse can remain in their home without facing a sudden, large tax increase.

Typically, the benefit is available to an un-remarried surviving spouse. The veteran must have qualified for the exemption at the time of their death. These rules are critical for Gold Star families and other surviving spouses to understand.

How to Claim Your Veteran Tax Exemptions

Claiming the veteran tax exemptions by state that you have earned involves a few key steps. While the process varies, the following guidelines can help you get started. Taking these actions can lead to significant savings.

  1. Contact your state’s Department of Veterans Affairs. They are the primary source for information on state-specific benefits and can provide the necessary forms and guidance.
  2. Gather all required documentation. This typically includes your DD-214 (proof of honorable discharge), a VA disability rating letter, proof of residency, and a marriage certificate for a surviving spouse.
  3. File for income tax exemptions when you submit your state tax return. Most tax software and tax professionals are familiar with these deductions and credits.
  4. For the property tax exemption, you must contact your local county assessor or tax office. These exemptions are not automatic and require a separate application process, often with an annual renewal.
  5. Do not hesitate to ask for help from a Veterans Service Organization (VSO). Groups like the VFW, American Legion, and DAV offer free assistance to help you get all the benefits you deserve.

Conclusion

Veteran tax exemptions by state provide substantial financial relief and are a testament to the nation’s gratitude for your military service. From income tax breaks on military retirement pay to major property tax exemptions, these benefits recognize your sacrifice. The specific rules for each tax credit or exemption vary based on where the veteran resides.

While the application process might require some paperwork, the potential savings are well worth the effort. By researching your state’s laws and contacting your county veteran service office, you can secure the benefits you have rightfully earned. These programs are a tangible way for states to say thank you for your service.

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