Georgia and Delaware change what they take out of a military pension on January 1, 2027, and Montana changes its tax rates. Georgia's change is the big one. A single O-5 retiring at 20 years pays Georgia $1,649.49 on the 2026 pension and nothing from 2027. A single E-8 at 24 years goes from $815.37 to nothing, and a single E-7 at 20 years from $102.79 to nothing. A married E-7 living on the pension already owes Georgia nothing. Delaware's change is smaller and phases in over three years.
The date is the part to get right. Georgia's $65,000 military exclusion applies to tax years beginning on or after January 1, 2027, not to 2026. Some early coverage of the bill said 2026. The date is in the bill's own effective date section, Section 3(b), which is easy to miss.
Those E-7 numbers are small because Georgia's standard deduction comes off on top of the military exclusion, not instead of it, and House Bill 463 raised it to $15,000 single and $30,000 filing jointly starting with tax year 2026.
Every figure here is on what DFAS actually pays, rounded down to the dollar. An E-7 retiring July 1, 2026 with 20 years gets $2,880 a month, $34,560 a year.
The short version
Georgia. A $65,000 military retired pay exclusion for retirees under 65 begins with tax year 2027. It stacks with a standard deduction of $15,000 single or $30,000 joint, so from 2027 almost no military pension is taxed there. The exclusion for other retirement income at 65 and over goes from $65,000 to $70,000.
Delaware. The military pension cap goes from $12,500 to $15,000 in 2027, $20,000 in 2028 and $25,000 in 2029. The same bill adds a Delaware domicile requirement at 60 and over.
Montana. The top rate drops from 5.65% to 5.4% and the lower band widens. For a 20-year E-7 or a 24-year E-8 it changes nothing.
Everywhere else. I found no other state law that changes what a military retiree owes in 2027. Connecticut extended its exemption to Public Health Service Commissioned Corps retirees, which doesn't touch a Title 10 pension. A few states with fixed dollar exclusions take a little more each year as COLAs raise the pension, and Colorado's under-55 exclusion ends after 2028.
Only 12 States Tax Military Retired Pay, and Only 6 Will Charge a Single E-7 in 2027
Start here, because it changes the whole question. 38 of the 50 states charge no income tax on military retired pay at all. The other 12 tax at least some of it, but most have exclusions large enough that a 20-year E-7 pension falls inside them. In 2026, 7 of them take something from a single E-7 with no other income, and 5 from a married one. In 2027 it's 6 and 5, because Georgia drops off the list.
The District of Columbia isn't in that count. DC taxes military retired pay with no exclusion at all. Its old $3,000 exclusion at 62 applied only to tax years before 2015 (D.C. Code § 47-1803.02).
Here's every state that still taxes it, with the yearly bill on that E-7 pension, computed from the same engine that runs the calculator. The 2027 columns are in 2026 dollars.
| State | 2026 rule | 2026 single | 2026 married filing jointly | 2027 single | 2027 married filing jointly |
|---|---|---|---|---|---|
| Oregon | Only the share for service before October 1991 is exempt | $2,015.25 | $1,330.10 | $2,015.25 | $1,330.10 |
| Maryland | $12,500 exempt, $20,000 at 55 or older | $1,176.57 | $647.90 | $1,207.05 | $684.34 |
| Montana | Taxed, with a narrow 5-year exception | $867.62 | $110.92 | $867.62 | $110.92 |
| Delaware | $12,500 exempt at any age | $573.88 | $307.88 | $482.12 | $222.36 |
| Colorado | $15,000 exempt under 55 | $152.24 | $0.00 | $167.71 | $0.00 |
| Georgia | $17,500 exempt under 62 | $102.79 | $0.00 | $0.00 | $0.00 |
| Kentucky | $31,110 of all pension income exempt | $3.15 | $3.15 | $28.67 | $28.67 |
| California | $20,000 exempt under an AGI limit | $0.00 | $0.00 | $0.00 | $0.00 |
| Idaho | Deductible if you qualify, up to a cap tied to Social Security | $0.00 | $0.00 | $0.00 | $0.00 |
| New Mexico | $30,000 exempt | $0.00 | $0.00 | $0.00 | $0.00 |
| Vermont | Exempt at $125,000 of AGI or less, phased out to $175,000 | $0.00 | $0.00 | $0.00 | $0.00 |
| Virginia | $40,000 exempt at any age | $0.00 | $0.00 | $0.00 | $0.00 |
A few things stand out. Oregon is the expensive one, at $2,015.25 a year single and $1,330.10 filing jointly. California, the state people usually worry about, charges this E-7 nothing either way. Filing status matters most at the bottom of the list, where a married couple's larger standard deduction wipes out Colorado and Georgia. And Maryland, Colorado and Kentucky creep up in 2027, because their exclusions are fixed dollar amounts while the pension rises with the COLA. Kentucky goes from $3.15 to $28.67 in 2026 dollars.
A few rows rest on assumptions. Maryland includes a 3.2% county tax, the rate in 12 of its 24 local jurisdictions. Oregon includes its subtraction for federal tax paid. Colorado uses its flat 4.4% rate. Idaho assumes you qualify for its retirement deduction, which needs you to be 62 or older, classified as disabled (a wartime veteran rated 10% or more counts) or working enough to file a federal return. The deduction's cap follows the maximum Social Security benefit, and the engine uses the 2026 cap that formula gives, since Idaho hasn't printed its 2026 form yet. A retiree under 62 who doesn't qualify would owe Idaho tax on most of the pension.
These are pension-only numbers. Yours probably aren't.
A VA rating pays tax-free and never shows up in a state tax table. A spouse's income changes which bracket your pension lands in. A second-career salary can change the answer entirely. The calculator runs your real household against your real state and gives you the take-home figure, not the rule.
Run My Numbers Free →Georgia, the Change That Moves Real Money
House Bill 266 rewrote Georgia's military retirement exclusion. The old rule gives a retiree under 62 an exclusion of $17,500, or $35,000 with more than $17,500 of Georgia earned income. The new rule gives a retiree under 65 an exclusion of up to $65,000, with no earned income condition. On a joint return, each spouse who draws military retired pay gets their own exclusion.
What that's worth depends on the size of the pension and how you file, because Georgia's standard deduction does a lot of the work before the exclusion ever gets there.
| Retiree | Yearly pension | 2026, single | 2026, joint | 2027, single or joint |
|---|---|---|---|---|
| E-7, 20 years | $34,560 | $102.79 | $0.00 | $0.00 |
| E-8, 24 years | $48,840 | $815.37 | $66.87 | $0.00 |
| O-5, 20 years | $65,556 | $1,649.49 | $900.99 | $0.00 |
By 2027 every one of those is zero, because the exclusion plus a $15,000 deduction covers a pension of up to $80,000, more than any of these three draws. The people who gain the most are the ones with bigger pensions, and single filers more than couples.
There's a second way to zero in 2026. A retiree with more than $17,500 of Georgia earned income, from a civilian job in Georgia for example, excludes $35,000 instead of $17,500. That already zeroes the E-7 in 2026. It does less for bigger pensions, because the job's pay uses up the standard deduction first.
The date, from the bill itself
House Bill 266 has two effective dates. Section 3(a) puts most of it in effect July 1, 2025. Section 3(b) is the one that matters here. "Section 1 of this Act shall become effective on January 1, 2027, and shall be applicable to all taxable years beginning on or after January 1, 2027." Section 1 is the military exclusion.
As of October 2026, the Georgia Department of Veterans Service still lists the old amounts, and for tax year 2026 the old rule is the one that applies. That's $17,500 under 62, or $35,000 with more than $17,500 of Georgia earned income, with the standard deduction on top.
What Georgia looks like in 2027 by age
You can't stack the new military exclusion on Georgia's general retirement income exclusion. You take one or the other, so in 2027 your age decides which.
| Your age in 2027 | Military exclusion | General retirement exclusion | What you take |
|---|---|---|---|
| Under 62 | $65,000 | Only if permanently disabled | The $65,000 |
| 62 to 64 | $65,000 | $35,000 | The $65,000 |
| 65 and over | Not available, it stops at 65 | $70,000 | The $70,000 |
The $70,000 at 65 and over is news of its own. It was $65,000 through tax year 2026 and rises from 2027 under House Bill 463. So the exclusion never drops when you turn 65 and age out of the military one.
Georgia's rate and deduction might move again in 2027
Georgia's flat rate is 4.99% for 2026. House Bill 463 also schedules increases to the standard deduction of $375 a year single and $750 joint starting January 1, 2027, up to $18,000 and $36,000, and cuts the rate 0.125 points a year toward 3.99%. All of those steps wait on revenue tests. Each December 1, the Office of Planning and Budget checks three of them, and if any one fails, every step waits a year. The call for 2027 comes December 1, 2026. If the steps go ahead, 2027 brings a $15,375 deduction ($30,750 joint) and a 4.865% rate. Every Georgia figure here uses the 2026 deduction and 4.99%. The 2027 zeros don't depend on the outcome.
Delaware, Smaller Money and a Domicile Test
Senate Bill 219 was signed on August 17, 2026. It raises the cap on Delaware's military pension subtraction over three years, and from 2027 it gives the military figure to both age groups, so the cap applies at any age. Through 2026 there's no military-specific amount at 60 and over, and a retiree that age takes the general $12,500 pension exclusion.
| Tax year | Military pension cap | E-7, 20 years | E-8, 24 years | O-5, 20 years |
|---|---|---|---|---|
| 2026 | $12,500 | $573.88 | $1,340.00 | $2,267.73 |
| 2027 | $15,000 | $482.12 | $1,236.62 | $2,164.36 |
| 2028 | $20,000 | $280.82 | $1,006.52 | $1,934.26 |
| 2029 | $25,000 | $99.17 | $790.66 | $1,715.76 |
Single filer, pension only, Delaware tax in 2026 dollars. Delaware doesn't index the cap or its brackets, while the pension rises with the COLA, so each step of the cap is worth a little less than its face value by the time it arrives. Even so, the E-7's bill falls from $573.88 in 2026 to $99.17 by 2029. On a joint return where both spouses draw a military pension, each spouse gets the cap.
The part of SB 219 that takes something away
The same bill adds a Delaware domicile test, and it applies only at age 60 and over. If you were domiciled in Delaware before January 1, 2027, you need 3 years of domicile to take the pension subtraction. If you establish domicile on or after that date, you need 5 years. The test covers the whole subtraction, the general $12,500 included. The bill has no separate applicability date, and Delaware's Division of Revenue hadn't published guidance on its first tax year as of October 2026.
So a 63-year-old who moves to Delaware in 2027 gets no pension subtraction until they've been domiciled there five years. Under 60 there's no domicile test. This is the one place where a bill that reads as a tax cut leaves a specific person worse off.
Montana's Rate Cut, Which Probably Does Nothing for You
Montana makes two changes on January 1, 2027 under House Bill 337. The top rate falls from 5.65% to 5.4%. And the 4.7% band widens from the first $47,500 of taxable income to the first $65,000, or from $95,000 to $130,000 on a joint return. Montana is one of two states on the list, with Oregon, that has no military exclusion worth the name.
Montana starts from federal taxable income, so the federal standard deduction of $16,100 shelters the front of the pension. That's the 2026 figure, the latest the IRS had published as of October 2026. It leaves an E-7 with $18,460 of Montana taxable income and an E-8 with $32,740, both inside the 4.7% band, which isn't changing. Neither saves anything.
The O-5 is the only one who moves, and the reason is the wider band, not the lower rate. At $49,456 of Montana taxable income, the O-5 pays 5.65% on the last $1,956 in 2026. In 2027 that slice falls back into the 4.7% band, and the 5.4% rate never applies. The saving is $18.58 a year, in 2026 dollars.
What Isn't Changing, and What Changes Later
California's cliff is still a cliff, and it still expires
California's $20,000 military retired pay exclusion runs for tax years 2025 through 2029 and then ends unless the legislature acts. A 2026 bill to raise and extend it, SB 1407, passed the Senate and was held in the Assembly Appropriations Committee in August. The income limit is a hard cliff on federal AGI, $125,000 single or head of household and $250,000 married filing jointly. Your AGI can't exceed it, and one dollar over takes away the whole exclusion.
Here's what that looks like for a married E-7 with a second-career salary.
| Civilian salary | Federal AGI | California tax on the pension |
|---|---|---|
| $80,000 | $114,560 | $582.40 |
| $150,000 | $184,560 | $1,195.56 |
| $215,440 | $250,000 | $1,354.08 |
| $215,441 | $250,001 | $3,214.08 |
One dollar of salary, from $215,440 to $215,441, moves the tax on the pension from $1,354.08 to $3,214.08. That's $1,860 for a dollar. If you're near that line, a traditional 401(k) contribution or a deferred bonus is worth more than it looks.
Vermont is a ramp, not a cliff
Vermont fully exempts military retired pay and survivor benefits when AGI is $125,000 or less, then phases the exemption out between $125,000 and $175,000 (32 V.S.A. § 5830e). That's been the rule since tax year 2025 and it doesn't change in 2027. Going a dollar over $125,000 in Vermont costs almost nothing, because the exemption shrinks a little at a time.
Colorado's under-55 exclusion ends after 2028
Colorado excludes $15,000 of military retired pay under 55 through tax year 2028. A 2026 bill, HB 26-1062, would have removed the caps on Colorado's pension subtraction at 55 and older. It was postponed indefinitely in February and didn't touch the under-55 exclusion. Unless the legislature extends it, a married E-7 who owes Colorado nothing today owes $103.84 in 2029, in 2026 dollars.
Oregon and Maryland tried and didn't get there
Oregon still exempts only the share of a pension earned before October 1991, which leaves out almost everyone retiring today. Two bills to give it a real exemption, Senate Bill 225 and House Bill 2050, died in the 2025 session. In Maryland, two 2026 bills to raise the military exclusion, House Bill 857 and House Bill 761, got a hearing in February and went no further.
What to Do Before January
- If you live in Georgia in 2026, file 2026 under the old rule. The $65,000 exclusion starts with your 2027 return.
- If you're already working in Georgia, check whether you owe anything now. The $35,000 earned income exclusion may already cover you, in which case 2027 changes little.
- If you're 60 or over and thinking about Delaware, count the years first. Five years of domicile before the subtraction starts is a long time to go without it.
- If you're in California and near the AGI cliff, look at it before December 31. It's one of the few tax lines a single deferral can put you back under.
- If you're choosing between two states, run both. The whole spread across all 50 states for a 20-year E-7 is $2,015.25 a year at the very worst, and $1,330.10 filing jointly. Cost of living, a VA hospital nearby and where your kids live will usually matter more.
Where these numbers come from
Every dollar figure is computed by the same pension engine and state tax tables that run the calculator, on the 2023 to 2026 DFAS pay tables, a true High-3 average for a July 1, 2026 retirement and retired pay rounded down to the dollar the way DFAS pays it. Figures for 2027 and later are in 2026 dollars, with the pension rising with the COLA and each amount a state fixes in law divided by 1.024 for each year after 2026, an assumed 2.4% a year of inflation, the long-run rate in the Social Security Trustees Report. The Georgia and Delaware details come from the signed text of Georgia House Bills 266 and 463 and Delaware Senate Bill 219. Montana's come from its Department of Revenue, Colorado's from its Department of Revenue and the legislature's bill page, Idaho's from Form 39R and Idaho Code § 63-3022A, and California's and Vermont's from their tax statutes, with SB 1407's fate from the Assembly Appropriations Committee's August 13 results. Connecticut's change is from its Office of Legislative Research, the Maryland and Oregon bills from the legislatures' own pages, and DC's rule from D.C. Code § 47-1803.02.
Frequently Asked Questions
When does Georgia's $65,000 military retirement exclusion start?
With tax year 2027. House Bill 266 says Section 1, the military exclusion, "shall become effective on January 1, 2027, and shall be applicable to all taxable years beginning on or after January 1, 2027." For 2026 the old rule applies, $17,500 under 62, or $35,000 with more than $17,500 of Georgia earned income.
Does Georgia's standard deduction stack with the military exclusion?
Yes. Georgia subtracts both the standard deduction and the retirement exclusions from federal AGI. House Bill 463 set the standard deduction at $15,000 single and $30,000 joint from tax year 2026, so a married E-7 living on the pension already owes Georgia nothing, and from 2027 almost no military pension is taxed there.
What changes in Delaware?
Senate Bill 219, signed August 17, 2026, raises the military pension cap from $12,500 to $15,000 for 2027, $20,000 for 2028 and $25,000 from 2029, at any age. It also adds a domicile test at 60 and over, 3 years for anyone domiciled in Delaware before 2027 and 5 years for anyone who establishes domicile in 2027 or later.
How many states tax military retired pay in 2027?
12 of the 50 states tax at least some of it, and 38 don't tax it at all. For a 20-year E-7 with no other income, 6 states take something from a single filer in 2027 and 5 from a married couple filing jointly. In 2026 it's 7 and 5. Oregon charges the most.
Does DC tax military retired pay?
Yes, with no exclusion. The District's $3,000 exclusion at 62 and over applied only to tax years before 2015.
Is California's military retirement exclusion a cliff?
Yes. The $20,000 exclusion applies only if federal AGI is no more than $125,000 single or head of household, or $250,000 married filing jointly. One dollar over takes away the whole exclusion. The exclusion runs for tax years 2025 through 2029.
Will Georgia's tax rate drop in 2027?
Maybe. House Bill 463 cuts the rate 0.125 points a year from 2027 toward 3.99% and raises the standard deduction, but each step waits a year if any of three revenue tests fails. Georgia's Office of Planning and Budget makes the call each December 1, so the 2027 answer comes December 1, 2026.
The Bottom Line
Georgia is the only 2027 change big enough to affect a decision, and it starts a year later than some coverage said. Delaware's is modest and comes with a domicile test that costs some retirees over 60 more than the increase gives them. Montana's rate cut barely touches a pension.
The bigger point is the one the table makes. 38 states already charge you nothing, and the most expensive one charges a single E-7 about $168 a month, or about $111 filing jointly. State tax is worth planning around when it costs you nothing to do it, and worth ignoring when it would cost you the house you want or the drive to the VA hospital you need.