The IRS posted its 2027 tax numbers on November 5, 2026. Your retired pay goes up 3.6% in January with the COLA. The brackets went up about 3.2% and the standard deduction about 3.1%, both less than the COLA. That gap is small, but it means a bit more of your pension lands in a taxed bracket every year the COLA runs ahead of the IRS.
So I ran six example retirees through the 2026 and 2027 federal returns, on the IRS's own tables, to see what 2027 does to the tax on a pension. Here's what changes, what doesn't, and what to check before your first 2027 payment.
The short answer
- Military retired pay is still taxed as ordinary income in 2027. VA disability pay and CRSC still aren't, and VA pay rises 3.6% too.
- The standard deduction is $33,200 filing jointly, $16,600 single and $24,925 head of household, up $1,000 for a couple.
- A pension on its own pays a little more. An E-7 couple with no other income gets a $1,236 raise in 2027 and pays $24 more federal tax on it.
- Families with kids at home pay less. The child tax credit goes up to $2,300 a child, and up to $1,800 of it can come back as a refund.
- Over 65, you still get the $6,000 senior deduction on top of the extra standard deduction, through 2028.
Table of Contents
- 2027 Tax Brackets and Standard Deduction
- Is Military Retirement Pay Taxable in 2027?
- What 2027 Does to the Tax on Your Pension
- The 2027 Senior Deduction and the Extra Deduction at 65
- The 2027 Child Tax Credit
- If You Work After the Military
- Check Your Withholding in January
- State Taxes in 2027
- What Isn't Out Yet
- Frequently Asked Questions
2027 Tax Brackets and Standard Deduction
These are the IRS's figures for tax year 2027, the return you file in early 2028 (Rev. Proc. 2026-35). The rates are the same seven as 2026. Only the dollar lines moved. The income in the table is taxable income, meaning what's left after the standard deduction.
| Rate | Single | Married filing jointly | Head of household |
|---|---|---|---|
| 10% | $0 to $12,800 | $0 to $25,600 | $0 to $18,250 |
| 12% | $12,801 to $52,025 | $25,601 to $104,050 | $18,251 to $69,650 |
| 22% | $52,026 to $109,125 | $104,051 to $218,250 | $69,651 to $109,100 |
| 24% | $109,126 to $208,325 | $218,251 to $416,650 | $109,101 to $208,300 |
| 32% | $208,326 to $264,550 | $416,651 to $529,100 | $208,301 to $264,550 |
| 35% | $264,551 to $661,375 | $529,101 to $793,650 | $264,551 to $661,350 |
| 37% | Over $661,375 | Over $793,650 | Over $661,350 |
| Standard deduction | 2026 | 2027 |
|---|---|---|
| Married filing jointly | $32,200 | $33,200 |
| Head of household | $24,150 | $24,925 |
| Single | $16,100 | $16,600 |
| Extra at 65, each married person | $1,650 | $1,700 |
| Extra at 65, unmarried | $2,050 | $2,100 |
The IRS raises these each year by chained CPI, a slower measure of inflation than the CPI-W that sets your COLA, and it rounds them down. That's why a 3.6% COLA meets a deduction that only grew about 3.1%.
Brackets Are One Line. Your Take-Home Is the Answer.
The free calculator runs your pension through the federal return and your state's, adds your VA pay on top, and shows what you keep each month and the civilian salary it would take to match it. About a minute, free, no account, nothing saved.
See What I Keep →Is Military Retirement Pay Taxable in 2027?
None of this changes in 2027. I couldn't find any law passed in 2026 that changes the federal tax on retired pay, VA pay, CRSC or SBP.
- Military retired pay is taxed as ordinary income, and so is CRDP, because CRDP is just retired pay you're no longer giving up for VA pay. DFAS reports it on your 1099-R each January.
- VA disability compensation is tax-free (38 U.S.C. 5301), and so is CRSC, since it's paid for combat-related disabilities.
- SBP premiums come out before tax. DFAS takes them off your taxable retired pay, so your 1099-R already shows the lower number.
- An SBP annuity is taxed to the survivor who gets it. DIC from the VA is not.
- Disability retired pay can be partly or fully tax-free, for example when the disability is combat related (IRS Publication 525).
- A VA rating that comes through late can mean a refund. If the VA rates you back to an earlier date, the retired pay you got for those months is tax-free up to the VA pay you'd have been owed. You claim it with an amended return for each year, sent with the VA's letter, within the IRS's time limits (Publication 525, "Retroactive VA determination").
The 2026 military retirement tax guide goes deeper on each of these, including how the VA waiver and CRDP change what's taxed. It's still the one to use for the return you file this spring.
What 2027 Does to the Tax on Your Pension
Here are six example retirees on 20 or 30 years. Each gets the full 3.6% COLA in January, the raise anyone who retired before 2026 gets. I held their other income the same in both years so the table shows only what the COLA and the new tables do. A job that gives you a raise will add to the 2027 figure. If you retired during 2026, your first COLA is a partial one, so your raise and the change in your tax are both smaller.
| Retiree | Pension, 2026 to 2027 | Federal tax, 2026 | Federal tax, 2027 | Change |
|---|---|---|---|---|
| E-7, 20 years, married, no other income | $2,880 to $2,983 a month | $236 | $260 | +$24 |
| E-7, 20 years, single | $2,880 to $2,983 a month | $1,967 | $2,048 | +$81 |
| E-7, 20 years, married, with a $55,000 job | $2,880 to $2,983 a month | $6,387 | $6,400 | +$13 |
| E-6, 20 years, head of household, two kids, a $40,000 job | $2,467 to $2,555 a month | $700 | $523 | -$177 |
| O-5, 20 years, married, with a $95,000 job | $5,463 to $5,659 a month | $17,662 | $17,619 | -$43 |
| O-6, 30 years, married, both 66, no other income | $10,721 to $11,106 a month | $9,242 | $9,649 | +$407 |
A pension on its own pays a little more. The E-7 couple's pension rises $1,236 for the year, but their standard deduction only rises $1,000. That leaves $236 of the raise taxed at 10%, which is the $24. A single E-7 pays more, $81, because a single filer's deduction only rose $500. That leaves $736 of the raise taxed, and at 12%.
For the O-5 couple, the brackets matter more than the deduction. Their pension and job land in the 22% bracket, and that bracket's floor rose $3,250. More of their income moved down into 12%, which cut their tax $43 even with a raise.
Kids turn it into a cut. The E-6 with two kids gets $200 more in child credit, which more than covers the tax on the raise.
The 65 and older couple's tax goes up the most, $407, because a big pension means a big raise, and the part their bigger deductions don't cover is all taxed at 12%.
None of these are big numbers next to the raise. The point is that the COLA isn't all yours. Over a long retirement, every year the COLA beats chained CPI, a little more of your pension climbs out of the standard deduction and into the brackets.
The 2027 Senior Deduction and the Extra Deduction at 65
Two things lower your tax at 65, and both apply in 2027.
- A bigger standard deduction. Each spouse 65 or older on a joint return adds $1,700. Someone single or head of household adds $2,100.
- The senior deduction. It's $6,000 for each person 65 or older, and it shrinks by 6% of your income over $75,000, or $150,000 filing jointly. It started in 2025 and ends after 2028, and it isn't indexed, so it's the same $6,000 in 2027 (Public Law 119-21, section 70103). You have to file jointly to take it if you're married.
For the O-6 couple in the table, both 66, those two take $15,400 off their income on top of the regular $33,200. Without them, their 2027 tax would be $11,497 instead of $9,649.
The 2027 Child Tax Credit
The child tax credit rises to $2,300 for each child under 17, up $100 from 2026, and up to $1,800 a child can be paid out as a refund if the credit is more than your tax (Rev. Proc. 2026-35, section 3.05). The refundable part needs earned income, though, and a pension isn't earned income. It only comes back to you if you or your spouse works.
A child 17 or older who's still your dependent gets the $500 credit for other dependents, which isn't indexed. Both credits start to phase out above $400,000 of income filing jointly and $200,000 otherwise.
If You Work After the Military
Your pension and your paycheck go on the same return, so the pension fills the lower brackets and the salary lands on top of it, in your highest ones. That top rate is the one to use when you weigh an offer.
- Social Security tax on wages applies up to $192,300 of pay in 2027, up from $184,500 (SSA). Your pension never counts toward it.
- If you're already collecting Social Security before the year you reach full retirement age, it holds back $1 for every $2 you earn over $25,560 in 2027. Your military pension doesn't count as earnings for that test.
- Neither payer's withholding knows about the other. If DFAS withholds as if the pension were your only income, the job's W-4 needs to make up the difference, or you'll owe in April.
Pension Plus a Job Is Where Taxes Get Real
Put in your rank, years, VA rating, state and the salary you're looking at. The calculator stacks your pension and your pay on one return and shows what you take home, so you can see what an offer is really worth.
Run My Numbers Free →Check Your Withholding in January
DFAS figures your withholding from the IRS's tables and the W-4P on file, and the COLA raises it on its own. What it can't know is the rest of your return. If you start a job, turn 65, or a kid ages out of the credit, update your W-4P in myPay. The IRS's draft 2027 W-4P has a line for the senior deduction, so a retiree 65 or older can count it in withholding (IRS draft).
Look at your first January statement either way. If the withholding jumped or dropped more than the COLA explains, that's the time to catch it, not next April.
State Taxes in 2027
Most of the change for 2027 is at the state level, not the federal one. Georgia's military exclusion grows a lot for retirees under 65, Delaware's goes up a step, and California's exclusion still has its hard income cliff. The 2027 state tax changes post works every one of those through on real pensions, and the state guides cover all 50.
What Isn't Out Yet
- The 2027 TSP and IRA limits. The IRS posts them each fall, usually in November. I'll add them here once they're out.
- The VA's official 2027 rate tables. The VA posts them before December 1. The 2027 VA disability rates post has them figured with the VA's own method until then.
- The final 2027 W-4P and withholding tables. Both are still drafts.
Frequently Asked Questions
Is military retirement pay taxed in 2027?
Yes. Military retired pay and CRDP are taxed as ordinary income in 2027, the same as in 2026. VA disability compensation, CRSC and DIC are tax-free. Most states don't tax military retired pay, and the 2027 state changes post covers the ones that do.
What is the 2027 standard deduction?
It's $33,200 married filing jointly, $16,600 single or married filing separately, and $24,925 head of household. Each spouse 65 or older adds $1,700, and someone 65 or older who isn't married adds $2,100.
Does the 3.6% COLA push me into a higher tax bracket?
Usually not into a new bracket, but it does raise your tax a little. The IRS raised the brackets about 3.2% and the standard deduction about 3.1% for 2027, less than the COLA, so a bit more of your pension is taxed. For an E-7 couple with no other income that's $24 more for the year.
What is the child tax credit in 2027?
The credit is $2,300 for each child under 17, up $100 from 2026. Up to $1,800 of it per child can come back as a refund, but only if you or your spouse has earned income, which a pension isn't.
Does the senior deduction still apply in 2027?
Yes. The deduction is $6,000 for each person 65 or older, reduced by 6% of income over $75,000 on most returns, and over $150,000 filing jointly. It runs through 2028, and married couples have to file jointly to take it.
Are the 2027 TSP contribution limits out?
The IRS posts the next year's TSP, 401(k) and IRA limits each fall, usually in November. I'll add the 2027 limits to this post once they're out.
Is VA disability pay taxable in 2027?
No. VA disability compensation stays tax-free, and so does CRSC. VA pay rises 3.6% with the same COLA as your pension, and none of that raise is taxed.
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- Do I Pay Taxes on Military Retirement Pay? 2026 Complete Guide
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- 2027 Military Retirement Pay Increase Chart
- 2027 VA Disability Rates and Pay Chart
This article is for educational purposes. It isn't tax advice. Check your own situation with a tax professional or the IRS before you change your withholding.