Two states change what they take out of a military pension on January 1, 2027. Georgia's change is the big one, and how big depends on your pension and how you file. A single O-5 goes from $1,650.08 a year to nothing. A single E-8 goes from $815.75 to nothing. A single E-7 only goes from $103.06 to nothing, and a married E-7 living on the pension already owes Georgia zero today. Delaware's change is smaller and slower, worth $120 in the first year and, for a single filer, $566.84 a year once it finishes phasing in.
The part worth reading carefully is the date. A lot of coverage, including some from organizations that usually get this right, says Georgia's $65,000 military exclusion starts with the 2026 tax year. It does not. The bill says January 1, 2027, in plain language, and it says so in a subsection a skim reader will miss.
The reason those E-7 numbers are so small is the other thing most write-ups leave out. Georgia's standard deduction comes off on top of the military exclusion rather than instead of it, and House Bill 463 raised it to $15,000 single and $30,000 filing jointly starting with tax year 2026. Almost every published comparison of state pension taxes ignores that and reports a Georgia bill several times larger than the real one.
The short version
Georgia. A $65,000 military retired pay exclusion for retirees under 65 begins with tax year 2027, not 2026. It stacks with a standard deduction of $15,000 single or $30,000 joint, so from 2027 essentially no military pension is taxed at all. Separately, the exclusion for other retirement income at 65 and over goes from $65,000 to $70,000.
Delaware. The military pension cap goes $12,500 to $15,000 in 2027, $20,000 in 2028, $25,000 in 2029. The same bill adds a Delaware domicile test that applies only at age 60 and over, and it took effect when the bill was signed in August 2026.
Montana. The top rate drops from 5.65% to 5.4%. For a twenty-year E-7 pension this changes nothing at all.
Everywhere else. Nothing changes in what a military retiree pays. Connecticut widened its exemption to Public Health Service Commissioned Corps retirees in its budget, which does not move a Title 10 pension. Only 12 of the 50 states tax military retired pay at all, 8 of them take a dollar from a single twenty-year E-7, and just 6 take anything from a married one.
Only 12 States Tax Military Retired Pay, and Only 8 Actually Charge an E-7
Start here, because it reframes the whole question. Thirty-eight states exempt military retired pay outright. One caveat on that count. It is 50 states, and the District of Columbia is not in it. DC does tax military retired pay, with only a $3,000 exclusion at 62 and over, so a move inside the Beltway is not covered by anything below. Of the twelve that do not, four have exclusions large enough that a twenty-year E-7 pension of $34,565.40 falls entirely inside them and the bill comes to zero.
Here is every state that still taxes it, with the actual 2026 bill on that E-7 pension and no other income, computed from the same engine that runs the calculator.
| State | 2026 rule | Single | Married filing jointly |
|---|---|---|---|
| Oregon | Only pre-Oct 1991 service is exempt | $2,483.28 | $1,942.10 |
| Maryland | $12,500 exempt, $20,000 at 55 | $1,351.49 | $1,129.49 |
| Montana | Taxed, narrow temporary exception | $867.87 | $111.17 |
| Delaware | $12,500 exempt at any age | $684.14 | $528.14 |
| Colorado | $15,000 exempt under 55 | $152.48 | $0 |
| Georgia | $17,500 exempt under 62 | $103.06 | $0 |
| California | $20,000 exempt under an AGI cap | $88.59 | $31.53 |
| Kentucky | $31,110 exempt | $3.34 | $3.34 |
| Idaho | $48,216 deductible if you qualify | $0 | $0 |
| New Mexico | $30,000 exempt | $0 | $0 |
| Vermont | Exempt under $125,000 AGI | $0 | $0 |
| Virginia | $40,000 exempt at any age | $0 | $0 |
Three things fall out of that table. Oregon is the expensive one and nobody talks about it, because the state everyone worries about is California, which charges a married E-7 $31.53 a year. Filing status matters more than the rule does at the bottom of the list, where a second standard deduction wipes out Colorado and Georgia entirely for a married couple. And the gap between the worst state and the 38 that charge nothing is $2,483.28 for a single filer, or $1,942.10 filing jointly, which is real money but not the life-changing number people expect when they plan a whole move around it.
One row carries a condition rather than a number. Idaho's $48,216 deduction only exists if you are 62 or over, or classified as disabled, which includes a wartime veteran rated 10% or more, or you worked during the year and earned enough to owe a federal return. A retiree under 62 with no rating and no job does not qualify and pays about $724. Most readers here qualify on the rating alone, which is why the row shows zero.
Georgia, the Change That Actually Moves Money
House Bill 266 rewrote one paragraph of Georgia's tax code. The old paragraph gave a military retiree under 62 an exclusion of $17,500, plus another $17,500 if they had more than $17,500 of Georgia earned income. The new paragraph gives a retiree under 65 an exclusion of up to $65,000 with no earned income condition attached, and on a joint return each spouse drawing their own military retired pay claims it separately.
What that is worth depends on the size of your pension and how you file, because Georgia's standard deduction does a lot of the work before the exclusion ever gets there.
| Retiree | Annual pension | 2026, single | 2026, joint | 2027, either |
|---|---|---|---|---|
| E-7, 20 years | $34,565.40 | $103.06 | $0 | $0 |
| E-8, 24 years | $48,847.68 | $815.75 | $67.25 | $0 |
| O-5, 20 years | $65,567.70 | $1,650.08 | $901.58 | $0 |
By 2027 every one of those cells is zero, because $65,000 of exclusion plus $15,000 of deduction covers an $80,000 pension and very few people retire above that. The people who gain are the ones with the larger pensions, and single filers ahead of couples.
There is a second path to zero in 2026 that the table does not show. The old rule adds a second $17,500 exclusion for anyone with Georgia earned income of more than $17,500, so a retiree who left the service for a civilian job in Georgia shelters $35,000 rather than $17,500. That already zeroes the E-7 and the E-8 in 2026 and cuts a single O-5 to $776.83. For that person the 2027 change is worth nothing this year and everything later, once they stop working and the earned income half of the old rule goes away.
Over a thirty year retirement, holding the pension flat and ignoring COLA to keep the number conservative, the 2027 rule saves a single E-7 with no Georgia job $3,091.90 and a single O-5 $49,502.35. That spread is the honest shape of this change. It is a rounding error for a junior retiree and a used car for a senior one.
The date, from the bill itself
House Bill 266 carries two effective dates. Most of it took effect July 1, 2025. Section 1, which is the military exclusion, is separate. The bill's own words are that it "shall become effective on January 1, 2027, and shall be applicable to all taxable years beginning on or after January 1, 2027."
Georgia's Department of Veterans Service still lists the old amounts. If you are filing for tax year 2026, the old rule governs, $17,500 under 62 plus the second $17,500 if you have Georgia earned income of more than $17,500, and then the standard deduction on top of whichever you get.
What Georgia looks like in 2027 by age
The one restriction in the new exclusion is that you cannot stack it on Georgia's general retirement income exclusion. You take one or the other. That makes 2027 a three-way decision depending on your age.
| Your age in 2027 | Military exclusion | General retirement exclusion | What you take |
|---|---|---|---|
| Under 62 | $65,000 | Not available | The $65,000 |
| 62 to 64 | $65,000 | $35,000 | The $65,000 |
| 65 and over | Not available, the exclusion stops at 65 | $70,000 | The $70,000 |
That $70,000 at 65 and over is its own small piece of news. It was $65,000 through tax year 2026 and rises for taxable years beginning on or after January 1, 2027, under House Bill 463, the tax package Gov. Kemp signed on May 11, 2026. So the exclusion never actually drops when you turn 65 and age out of the military one. It goes up by $5,000.
The Georgia rate, and why it might not fall in 2027
Georgia's flat rate is 4.99% for 2026. House Bill 463 also set up annual reductions of 0.125 points beginning January 1, 2027, running down toward 3.99%. Do not budget for it yet. Each step is delayed a full year if any of three revenue conditions is missed, measured on December 1, and the Office of Planning and Budget makes that call. For 2027 the determination lands on December 1, 2026, so nobody knows the 2027 rate yet. Every Georgia figure in this post uses 4.99%, which is the conservative choice.
These are pension-only numbers. Yours probably are not.
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 move you into a different 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 →Delaware, Smaller Money and a Trap Worth Knowing
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 is available at any age. Through 2026 there is no military-specific branch at 60 and over, and a retiree that age simply takes the general $12,500.
| Tax year | Military pension cap | E-7 state tax | E-8 | O-5 |
|---|---|---|---|---|
| 2026 | $12,500 | $684.14 | $1,450.42 | $2,378.38 |
| 2027 | $15,000 | $564.14 | $1,311.67 | $2,239.63 |
| 2028 | $20,000 | $324.14 | $1,034.17 | $1,962.13 |
| 2029 | $25,000 | $117.30 | $772.08 | $1,684.63 |
Single filer, pension only. A household with two military pensions shelters twice these caps from 2027, because the bill states the limits apply individually to each spouse on a joint return. The first-year improvement is $120 for an E-7. By 2029 an E-7 is saving $566.84 a year against today and an O-5 $693.75. It is a real cut and it is not the kind of number you relocate for.
The part of SB 219 that takes something away
The same bill adds a Delaware domicile test, and it applies only to people age 60 and over. If you were domiciled in Delaware before January 1, 2027, you need 3 years of domicile to claim the subtraction. If you establish domicile on or after that date, you need 5 years. The bill carries no applicability clause, so on the face of the text the test took effect when it was signed on August 17, 2026. The January 1, 2027 date inside it only decides which waiting period you fall under, not when the test starts.
So a 63-year-old who retires to Delaware in 2027 gets no pension subtraction at all until 2032, not the old $12,500 and not the new $15,000. Under 60 there is no domicile test and nothing changed. This is the one place where a bill that reads as a tax cut leaves a specific person worse off than the coverage suggests.
Montana's Rate Cut, Which Almost Certainly Does Nothing for You
Montana does two things on January 1, 2027 under House Bill 337, and most coverage mentions only the first. The top marginal rate falls from 5.65% to 5.4%. At the same time the 4.7% band widens from the first $47,500 of taxable income to the first $65,000, and doubled for a joint return, from $95,000 to $130,000. Montana is one of only two states on the list with no military exclusion worth the name, so this sounds like it should matter. Run it and it does not.
Montana starts from federal taxable income, so the federal standard deduction of $16,100 shelters the front of the pension. That leaves an E-7 with $18,465.40 of Montana taxable income and an E-8 with $32,747.68, both sitting entirely inside the 4.7% band, which is the one rate not changing. Both save nothing.
The O-5 is the only one who moves, and the reason is the wider band rather than the lower rate. At $49,467.70 of Montana taxable income the O-5 pays 5.65% on the last $1,967.70 in 2026. In 2027 the 4.7% band reaches $65,000, so that slice drops back into the low rate and the 5.4% never applies at all. The saving is $18.69 a year. It is worth spelling out because a headline about a state cutting its income tax reads much larger than it lands on a pension.
What Is Not Changing, Including Three Things People Assume Are
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 stops unless the legislature acts. The threshold is a hard cliff on federal AGI, $125,000 single or head of household and $250,000 married filing jointly, not a phase-out. One dollar over and the entire exclusion vanishes.
Here is 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 | $114,565 | $587.60 |
| $150,000 | $184,565 | $1,265.40 |
| $215,434 | $249,999 | $1,354.58 |
| $215,436 | $250,001 | $3,214.58 |
Two dollars of AGI, $1,860 of tax. If you are anywhere 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 below $125,000 of AGI, then phases the exemption down to zero between $125,000 and $175,000. That structure has been in place since tax year 2025 and does not change in 2027. The difference from California matters. Going a dollar over $125,000 in Vermont costs you almost nothing, because the exemption shrinks proportionally rather than disappearing.
Oregon and Maryland tried and did not get there
Oregon still exempts only the share of a pension earned before October 1991, which excludes essentially everyone retiring today, and it is the most expensive state on the list at $2,483.28 for a single E-7. Two bills to give Oregon a real exemption died in the 2025 session, Senate Bill 225 with a $17,500 cap and House Bill 2050 uncapped for disabled and Reserve retirees, and nothing came back in the 2026 short session. Maryland's proposals to expand its $12,500 subtraction did not pass either. Both states remain exactly where they were, and both come back in the next session.
What to Actually Do Before January
- If you are retiring to Georgia with a large pension and you can pick the year, pick 2027. A single O-5 filing for 2026 with no Georgia earned income owes $1,650.08 that a 2027 filer does not. At E-7 money the same choice is worth $103.06, so it is not a reason to move a retirement date.
- If you are already in Georgia and working, check whether you actually owe anything today. The second $17,500 earned income exclusion may already be covering you, in which case the 2027 change is a retirement-day benefit, not a raise.
- If you are 60 or over and thinking about Delaware, count the years first. Five years of domicile before the subtraction starts is a long time to fund out of pocket.
- If you are in California and near the AGI cliff, look at it before December 31. This is one of the few tax lines a single deferral decision can put you back under.
- If you are choosing between two states, run both. The whole spread across all 50 states for a twenty-year E-7 is $2,483.28 a year at the very worst, and under $2,000 if you file jointly. Cost of living, VA facility access and where your kids are will outweigh it in almost every case.
Where these numbers come from
Every dollar figure on this page is computed from the same pension engine and state tax tables that run the calculator, using the 2026 DFAS pay tables and a true High-3 average for a July 1, 2026 retirement. The legislative details come from the signed text of Georgia House Bill 266 and House Bill 463 and Delaware Senate Bill 219, not from summaries of them.
The Bottom Line
Georgia is the only 2027 change large enough to affect a decision, and its start date is a year later than much of the coverage says. Delaware's is modest and comes with a domicile test that costs some 60-plus retirees more than the increase gives them. Montana's rate cut is a rounding error on a pension. Everything else holds.
The larger point is the one the table makes. Thirty-eight states already charge you nothing, and the worst state on the list charges a single E-7 about $207 a month, or about $162 filing jointly. State tax is worth optimizing when it is free to optimize and worth ignoring when it would cost you the house you want or the drive to the VA hospital you need.