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Five additional states pass laws to make military retirement incomes tax-free

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Five states have passed new laws that will allow those collecting military retirement checks to receive the additional benefit of collecting that money tax-free.

The additions bring the total number of states that don’t subject military retirement income to their state income tax to 26, while nine others offer a partial exemption. Six states and Washington, D.C., fully tax military retirement funds, according to Military.com.

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Retirees in Arizona, North Carolina, and Utah will see the change in their checks immediately, while those in Indiana and Nebraska will have to wait until the next tax year for them to go into effect.

Arizona Gov. Doug Ducey’s executive budget for this fiscal year fully exempts income tax on all retirement pay, though previously up to $3,500 of military retirement pay was tax-free. Utah, similarly, had a limit to the amount of tax-free military retirement pay, though the bill the state passed last March changed that.

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Nebraska and Indiana made the same change in recent months, though Indiana’s change occurred in 2019 and was increased gradually.