U.S. Military (Ret.): Consider state taxes before settling into retirement - Military Retirement, leaving the service - Military Times

U.S. Military (Ret.): Consider state taxes before settling into retirement

A significant financial consideration for military retirees — particularly those who don’t plan to continue working after service — is income taxes.

We all have to file federal taxes, of course. But the states vary significantly in how they deal with military retirement pay for state income tax purposes.

Unfortunately, because the states are free to do their own thing in this area, it’s hard to find a complete, comprehensive guide to all state income tax policies wrapped up in one place.

The IRS has a web page with links to the individual states’ departments of taxation. You can find it by visiting the web site and typing “Government Sites” into the search box.

I recently came across a fact sheet on the website of a garrison in U.S. Army Europe listing the basic tax policies of all the states regarding military active-duty and retired pay.

It’s dated March 2010, so it’s possible that some details have changed, but the fact sheet offers a rudimentary idea of which states are more tax-friendly toward military retirement pay.

To find it, start here. Go down to “Legal Services,” on the left side, then click on “Legal Assistance.” Click the “Information” link on the top bar, then look toward the bottom of the middle column for the subject header that says “Military/Retirement Pay and State Taxes” and click it.

Whew … you’re there.

What you’ll see is that some states follow federal tax rules, while some allow a certain amount of military retired pay to be excluded from state taxation.

Then there are states that either have no state tax for any residents, or specifically exclude military retired pay.

The list offers a variety of places to settle down in retirement: Alabama, Alaska, Florida, Illinois, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, Nevada, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming.

Retirees in other states have tried to get their legislatures to join the above list. One of the most notable recent efforts unfolded in California in 2009, led by the California Council of Chapters of the Military Officers Association of America.

Unfortunately for the many military retirees in the Golden State, the bill ultimately was not approved.

And now, given the economic situation in our country in which cash-strapped states look to cut costs and raise revenue any way they can, it’s highly unlikely that more states will be willing to shield military retired pay from state taxes anytime soon.

Retirees living in states that take a chunk of retired pay — and soon-to-be-retirees mapping out life after service — must keep this issue high on their checklists.

Retired Command Master Chief Alex Keenan served 28 years in the Coast Guard. Click here to email him.