Tax season will be upon us all shortly, and a number of states have cut their income taxes for servicemembers and veterans in 2023.
Here's a rundown of the new military income tax cuts that were signed into law in 2023:
The state of Maryland initiated a large tax cut for veterans under the age of 55. Also, spouses and anybody receiving military pensions in Maryland who is under the age of 55 will get the exemption.
The governor of Maryland's office said the new exemption is "the largest military tax cut for younger veterans in a generation." Beginning with the 2023 tax year, the first $12,500 of your military retirement pay will be exempt from state income tax (if you are under 55 years old). This is more than double what it used to be. If you are not under 55 years old, your exemption will also go up. Previously it was the first $15,000, and it is going up to your first $20,000 that will be exempt.
This new tax cut will not go into effect until the 2024 tax year. Montana announced it will exempt up to half of military retirement pay for up to 5 years after a retiree becomes a Montana resident or starts to get retirement pay.
Here's a statement released by Montana on the tax cut:
Beginning with Tax Year 2024, Montana resident military retirees working in the state may be eligible for an exemption of part of their military retirement income.
The exemption is available to working military retirees who become Montana residents after June 30, 2023, or who began receiving military retirement income after becoming a Montana resident. The exemption is equal to the lesser of half of the taxpayer’s military retirement income or the amount of Montana source wage income.
The exemption is only available for five consecutive years after becoming a resident.
The governor of Virginia signed legislation extending state tax-exemptions to all military retirees, regardless of their age. In 2022 Virginia enacted a state tax exemption for military retirement pay, however it was just for veterans aged 55 and older. The new law is taking away that age limit. Beginning with the 2024 tax year, retirees of any age will be able to claim the exemption.
Here is a statement from Virginia's governor Glenn Youngkin on the new law:
“With the support of the members of the Virginia General Assembly from both sides of the aisle, I was pleased to provide additional tax relief to our vast number of military retirees that call Virginia home. Reducing the tax burden on military retirees was a promise we made early on, and we were able to deliver. After commendable years of service and sacrifice, our Virginia veterans deserve the best treatment,”
Beginning with the 2023 tax year, a new Indiana law will exempt from state income tax the entire military pay of active-duty service members. Members of reserve units, including Indiana's National Guard, will also get the new exemption.
More states providing tax cuts for veterans is a good move in the right direction. Hopefully additional states will follow suit soon.
If you happen to live in one of the above states, make sure to talk with your accountant so you can claim all the deductions you are eligible for.