• D. Hendricks

Military Retirement Pay Will Now Be Totally Exempt from State Income Tax in These Two States

Military retirees living in Arizona and Nebraska have received good news about their tax bills. In both the states, legislation has been signed that totally exempts military retirement pay from state income tax.


In Arizona the exemption officially went into effect on July 1, 2021, and will be retroactive to January 1, 2021.


For military retirees living in Nebraska, they will receive a total tax exemption beginning in 2022.


The push to obtain the tax breaks for military retirees has been a long process, and was spearheaded by the Military Officers Association of America (MOAA).


MOAA members put pressure on lawmakers and the Governor to discuss the legislation until it was eventually passed.


The state of Arizona historically offered partial exemptions to military retirees and first responders, but it wasn’t until now that they will be offering a full exemption.


Deciding to not tax military retirement pay is a big success that will surely drive more retirees to states for second careers and eventually retirement, said Lt. Gen. John Regni, USAF (Ret), a member of MOAA’s board of directors.


Here’s a list of other states who do not currently tax retired military pay:


  • Alabama

  • Kansas

  • Minnesota

  • North Dakota

  • Arkansas

  • Louisiana

  • Mississippi

  • Ohio

  • Connecticut

  • Maine

  • Missouri

  • Pennsylvania

  • Hawaii

  • Massachusetts

  • New Jersey

  • Utah

  • Illinois

  • Michigan

  • New York

  • West Virginia

  • Iowa

  • Wisconsin