Where you retire matters. Choosing the right state can mean the difference between keeping your full military pension or losing 5-10% to state taxes every year. Over a 20-year retirement, that decision could cost you $50,000 to $100,000 or more.
The good news? 37 states now offer 100% tax-free military retirement pay - either through having no income tax at all or through specific military exemptions. But taxes are just one factor. The best states for military retirees also offer affordable cost of living, quality VA healthcare, strong military communities, and veteran-friendly policies.
Bottom Line: An E-7 with 20 years can save $2,400-$3,600 per year by retiring in a tax-free state instead of California. An O-5 saves $4,000-$6,000+ annually. Over 20 years, that's $48,000 to $120,000+ in your pocket instead of the state's.
In This Guide
- The Top 10 States Ranked
- Quick Comparison Table
- #1: Florida - The Gold Standard
- #2: Texas - Big State, Big Savings
- #3: Tennessee - Southern Charm, Zero Tax
- #4: Nevada - Western Tax Haven
- #5: South Dakota - Hidden Gem
- #6: Wyoming - Wide Open Savings
- #7: South Carolina - NEW Full Exemption
- #8: Alabama - Affordable & Tax-Free
- #9: North Carolina - Military Hub
- #10: Pennsylvania - Northeast Standout
- Honorable Mentions
- States to Think Twice About
- Calculate Your Savings
- Frequently Asked Questions
The Top 10 States for Military Retirees in 2026
We ranked these states based on five key factors that matter most to military retirees:
- State Tax on Military Retirement - Is your pension 100% tax-free?
- Overall Tax Burden - Property taxes, sales tax, other fees
- Cost of Living - How far does your retirement dollar go?
- VA Healthcare Access - Medical centers, clinics, wait times
- Military Community - Bases, veteran population, support services
Quick Comparison: Top 10 States at a Glance
| Rank | State | Military Retirement Tax | Cost of Living | VA Facilities |
|---|---|---|---|---|
| 1 | Florida | 0% (No Income Tax) | Average | Excellent (8 VAMCs) |
| 2 | Texas | 0% (No Income Tax) | Below Average | Excellent (7 VAMCs) |
| 3 | Tennessee | 0% (No Income Tax) | Low | Good (4 VAMCs) |
| 4 | Nevada | 0% (No Income Tax) | Average | Good (2 VAMCs) |
| 5 | South Dakota | 0% (No Income Tax) | Low | Good (3 VAMCs) |
| 6 | Wyoming | 0% (No Income Tax) | Average | Limited (1 VAMC) |
| 7 | South Carolina | 0% (Full Exemption - NEW!) | Low | Excellent (4 VAMCs) |
| 8 | Alabama | 0% (Full Exemption) | Very Low | Good (3 VAMCs) |
| 9 | North Carolina | 0% (Full Exemption) | Below Average | Excellent (4 VAMCs) |
| 10 | Pennsylvania | 0% (Full Exemption) | Average | Excellent (6 VAMCs) |
VAMC = VA Medical Center. Cost of living compared to national average.
Florida - The Gold Standard for Military Retirees
No income tax, excellent VA care, massive military community, year-round sunshine
Florida tops nearly every "best states for military retirees" list for good reason. With zero state income tax, your entire military pension stays in your pocket. Add in 8 VA Medical Centers, 63 outpatient clinics, and one of the largest veteran populations in the country (1.5+ million), and it's easy to see why so many retirees call Florida home.
Why Florida Ranks #1
- Zero state income tax - Military retirement, VA disability, civilian income all tax-free at state level
- Homestead exemption - Up to $50,000 off assessed home value for property taxes
- Massive VA network - 8 medical centers including the flagship James A. Haley in Tampa
- Military-friendly communities - Jacksonville, Tampa, Pensacola, Panama City all have strong military presence
- No estate or inheritance tax - Keep more for your family
Pros
- No state income tax on any income
- Excellent VA healthcare network
- Large, active military retiree community
- Year-round outdoor activities
- No state estate tax
Cons
- Hurricane risk (insurance costs)
- Hot, humid summers
- Some areas have high property taxes
- Tourist areas can be expensive
Tax Savings Example: An E-7 with 20 years ($2,800/mo pension) saves approximately $3,360/year compared to California. An O-5 with 20 years ($5,200/mo pension) saves approximately $5,600/year.
Full Florida Military Retirement Guide →
Texas - Big State, Big Savings
No income tax, low cost of living, massive military presence, diverse geography
Texas offers everything Florida does tax-wise, often with a lower cost of living. The state is home to 15+ major military installations including Fort Cavazos (formerly Fort Hood), Joint Base San Antonio, and Fort Bliss. With 1.7+ million veterans, Texas has one of the largest and most active military communities in the nation.
Why Texas Ranks #2
- Zero state income tax - All retirement income (military, VA, civilian) is state tax-free
- Lower cost of living - Houston, San Antonio, and Dallas-Fort Worth metros are 8-15% below national average
- Massive military presence - Fort Cavazos, JBSA, Fort Bliss, NAS Corpus Christi, and more
- Disabled veteran property tax exemption - 100% disabled veterans pay $0 property tax
- Diverse job market - Defense contractors, tech, energy, healthcare
Pros
- No state income tax
- Lower cost of living than Florida
- Huge military/defense job market
- 100% disabled vet property tax exemption
- Diverse climate options
Cons
- Higher property taxes than average
- Extreme heat in summer
- Some areas have severe weather
- Large distances between cities
Full Texas Military Retirement Guide →
Tennessee - Southern Charm, Zero Tax
No income tax, very low cost of living, four seasons, growing economy
Tennessee eliminated its income tax completely in 2021, making it one of only 9 states with no income tax at all. Combined with a cost of living 10-15% below the national average and beautiful Smoky Mountain scenery, Tennessee offers an excellent quality of life for military retirees.
Why Tennessee Ranks #3
- Zero state income tax - Completely eliminated in 2021
- Very low cost of living - 10-15% below national average
- Four distinct seasons - Without extreme cold winters
- Growing job market - Nashville and Knoxville booming
- Central location - Easy access to much of the eastern US
Pros
- No state income tax at all
- Very affordable living
- Beautiful scenery (Smokies)
- Mild winters, four seasons
- Growing economy
Cons
- Fewer military bases
- Higher sales tax (9.55% combined)
- Limited VA facilities in rural areas
- Tornado risk in some areas
Full Tennessee Military Retirement Guide →
Nevada - Western Tax Haven
No income tax, outdoor recreation paradise, growing metro areas
Nevada combines zero state income tax with access to world-class outdoor recreation - from skiing at Lake Tahoe to hiking Red Rock Canyon. Las Vegas and Reno offer affordable living (outside the Strip), strong job markets, and easy access to California without the California taxes.
- Zero state income tax on all retirement income
- Nellis AFB and Creech AFB provide military community
- VA Southern Nevada Healthcare - New, modern facilities
- No state inheritance tax
- Year-round outdoor activities - Desert, mountains, lakes
Full Nevada Military Retirement Guide →
South Dakota - The Hidden Gem
No income tax, lowest housing burden in US, excellent veteran services
South Dakota consistently ranks as one of the most tax-friendly states in America. Beyond zero income tax, it has the third-lowest cost burden for housing in the nation at just 21.8%. The state also spends $12.68 per veteran on services - well above the national average.
- Zero state income tax on all income sources
- Third-lowest housing costs in the US (21.8% burden rate)
- Ellsworth AFB - Strong military community in Rapid City
- Excellent veteran services - $12.68 per veteran spending
- Mount Rushmore, Badlands - Beautiful scenery
Best For: Retirees who want maximum financial efficiency and don't mind cold winters. Sioux Falls and Rapid City offer urban amenities while maintaining low costs.
Full South Dakota Military Retirement Guide →
Wyoming - Wide Open Savings
No income tax, lowest overall tax burden in US, outdoor paradise
Wyoming has the lowest overall tax burden of any state - just 6.14% according to WalletHub. With no income tax, low property taxes, and minimal other fees, your retirement dollars stretch further here than almost anywhere else.
- Zero state income tax - All retirement income tax-free
- Lowest overall tax burden in the nation (6.14%)
- F.E. Warren AFB in Cheyenne
- Yellowstone & Grand Teton - World-class outdoor access
- Low property taxes - 0.55% effective rate
Full Wyoming Military Retirement Guide →
South Carolina - NEW Full Exemption for 2025!
Now 100% tax-free, excellent VA care, low cost of living, beach access
Big news for 2025: South Carolina now fully exempts military retirement pay from state taxes! Previously a partial exemption, this change is like getting a 5-6% raise overnight. Combined with the third-best VA hospitals in the country and beautiful coastal living, South Carolina just became a top-tier choice.
New for 2025: South Carolina's full military retirement exemption means an E-7 retiree keeps approximately $2,000+ more per year compared to the old partial exemption.
- 100% military retirement exemption - NEW as of 2025!
- Third-best VA hospitals in the nation
- Second-most VA hospitals per capita
- Low cost of living - 88% of national average
- Charleston, Myrtle Beach, Columbia - Diverse lifestyle options
Full South Carolina Military Retirement Guide →
Alabama - Maximum Value
100% tax-free, lowest cost of living, strong veteran benefits
Alabama offers perhaps the best pure financial value for military retirees. With full military retirement exemption, one of the lowest costs of living in the nation, and generous property tax relief for veterans, your retirement income goes further here than almost anywhere.
- 100% military retirement exemption
- Very low cost of living - 86% of national average
- 3.8 VA facilities per capita - Fifth-best in nation
- Redstone Arsenal, Maxwell AFB, Fort Novosel - Strong military presence
- Gulf Coast beaches - Orange Beach, Gulf Shores
Full Alabama Military Retirement Guide →
North Carolina - Military Hub
100% tax-free since 2022, massive military presence, diverse geography
North Carolina eliminated state tax on military retirement in 2022, and the state has one of the largest military footprints in the country. With Fort Liberty (formerly Fort Bragg), Camp Lejeune, and numerous other installations, you'll be surrounded by fellow military families.
- 100% military retirement exemption - Since 2022
- Fort Liberty, Camp Lejeune, Seymour Johnson AFB - Huge military community
- Mountains to coast - Blue Ridge to Outer Banks
- Property tax exemptions for disabled veterans
- Research Triangle job market - Defense contractors, tech
Full North Carolina Military Retirement Guide →
Pennsylvania - Northeast Standout
100% tax-free, excellent VA network, four seasons, close to major cities
Pennsylvania is the most tax-friendly state in the Northeast for military retirees. With full exemption on military retirement pay, 6 VA Medical Centers, and proximity to major East Coast cities, it's an excellent choice for those who want to stay in the region.
- 100% military retirement exemption
- 6 VA Medical Centers - One of the best networks in the country
- Carlisle Barracks, Tobyhanna Army Depot - Military presence
- No tax on Social Security at state level
- Proximity to DC, NYC, Philadelphia - Family connections
Full Pennsylvania Military Retirement Guide →
Honorable Mentions
These states just missed the top 10 but are still excellent choices for military retirees:
| State | Military Retirement Tax | Why Consider It |
|---|---|---|
| Alaska | 0% (No Income Tax) | No income or sales tax, PFD dividend, outdoor paradise |
| New Hampshire | 0% (No Income Tax - NEW!) | Just eliminated income tax in 2025, New England living |
| Washington | 0% (No Income Tax) | No income tax, JBLM military hub, Pacific Northwest |
| Arizona | 0% (Full Exemption) | Full exemption, warm climate, large veteran community |
| Mississippi | 0% (Full Exemption) | Full exemption, very low cost of living |
States to Think Twice About
While personal factors like family proximity matter, these states may not be ideal purely from a financial perspective:
California - Only State That Fully Taxes Military Retirement
California is the only state that fully taxes military retirement pay as regular income (up to 13.3% marginal rate). However, a new partial exemption of up to $20,000 was added for some retirees.
Potential annual tax: $3,000-$6,000+ for typical military retirees
Other states with partial taxation or high overall tax burdens include:
| State | Military Retirement Tax | Notes |
|---|---|---|
| California | Taxed (partial exemption up to $20K) | Only state with full taxation |
| Vermont | Partial exemption (income limits) | Exempt if AGI under $125K |
| Virginia | $40,000 exemption | Improved but still partial |
| Maryland | $12,500-$20,000 exemption | Age-dependent exemption |
| District of Columbia | Fully taxed | Not a state, but worth noting |
Calculate Your State Tax Savings
See exactly how much you'll save by retiring in each state. Our calculator compares your take-home pay across all 50 states.
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All 50 States: Military Retirement Tax Status
For quick reference, here's the complete breakdown of how every state treats military retirement pay in 2026:
| Tax Status | States | Count |
|---|---|---|
| No Income Tax | Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming | 9 |
| Full Exemption | Alabama, Arizona, Arkansas, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, West Virginia, Wisconsin | 28 |
| Partial Exemption | Colorado, Connecticut, Delaware, Georgia, Idaho, Kentucky, Maryland, Minnesota, Montana, New Mexico, Oregon, Utah, Vermont, Virginia | 14 |
| Fully Taxed | California (partial exemption up to $20K available) | 1 |
Frequently Asked Questions
What states don't tax military retirement pay?
37 states don't tax military retirement pay at all. Nine states have no income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming), and 28 additional states fully exempt military retirement through specific legislation.
What is the best state for military retirees in 2026?
Florida consistently ranks #1 due to its combination of zero state income tax, excellent VA healthcare network (8 medical centers), large military community, and quality of life factors. Texas and Tennessee are close alternatives with similar tax benefits and lower costs of living.
How much can I save by retiring in a tax-free state?
Savings depend on your retirement pay. An E-7 with 20 years saves approximately $2,400-$3,600 per year by avoiding state income tax. An O-5 with 20 years saves $4,000-$6,000+ annually. Over a 20-year retirement, this adds up to $48,000-$120,000 or more.
Is VA disability compensation taxed by states?
No. VA disability compensation is 100% tax-free at both federal AND state levels in all 50 states. This is federal law and cannot be overridden by states.
Should I consider cost of living or just taxes?
Both matter significantly. A state with no income tax but high cost of living (like parts of Nevada near Las Vegas) may cost you more overall than a state with low taxes and low cost of living (like Alabama or Tennessee). Our calculator factors in both.
What about property taxes for military retirees?
Property taxes vary significantly by state and county. Many states offer property tax exemptions for disabled veterans (100% disability often means $0 property tax in Texas, Florida, and others). Always check local property tax rates before choosing where to buy.
Can I change my state of residence after I retire?
Yes. You can change your state of legal residence at any time. To establish new residency, you typically need to: (1) physically move to the new state, (2) obtain a driver's license, (3) register to vote, (4) update your address with DFAS, and (5) file taxes in the new state.
Key Takeaways
- 37 states don't tax military retirement - You have lots of good options
- Florida, Texas, and Tennessee are the top choices for most retirees
- $48,000-$120,000+ potential 20-year savings by choosing wisely
- VA disability is always tax-free in every state
- Consider total picture - Taxes, cost of living, VA access, and family all matter
- South Carolina just went tax-free - Major new option for 2025
Next Steps
Ready to see exactly how much you'll take home in each state? Use our free calculator to compare your retirement income across all 50 states, factoring in military retirement pay, VA disability, and state taxes.