State Military Retirement Tax Treatment Map (2026)

Your state's tax treatment of military retirement significantly impacts whether CRDP or CRSC is better for you.
Use this guide to understand how your state taxes military retirement pay.

No Tax (37 states)
Full exemption for military retirement. CRDP more attractive.
Partial Tax (6 states)
Partial exemptions or age-based limits. Calculate both options.
Full Tax (11 states)
Military retirement taxed as ordinary income. CRSC more valuable.
✅ No Tax States (37)
Alabama
Alaska
Arizona
Arkansas
Connecticut
Florida
Hawaii
Illinois
Indiana
Iowa
Kansas
Louisiana
Maine
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Nebraska
Nevada
New Hampshire
New Jersey
New York
North Carolina
North Dakota
Ohio
Oklahoma
Pennsylvania
South Dakota
Tennessee
Texas
Washington
West Virginia
Wisconsin
Wyoming
District of Columbia
⚠️ Partial Tax States (6)
Delaware: First $12,500 exempt
Georgia: Up to $35,000 exempt (age 62-64), $65,000 (65+)
Maryland: First $5,000 exempt + additional for disabled vets
Oregon: Partial exemption based on disability %
Virginia: Limited exemption ($10,000) for disabled vets
West Virginia: Varies by age and income
❌ Full Tax States (11)
California: 9.3% - 13.3% tax rate
Colorado: 4.4% flat tax
Idaho: Up to 5.8%
Kentucky: 4.5% flat tax
Montana: Up to 6.75%
New Mexico: Up to 5.9%
Rhode Island: Up to 5.99%
South Carolina: Up to 6.5%
Utah: 4.85% flat tax
Vermont: Up to 8.75%
Virginia: 5.75% (above exemption)
💡 How State Taxes Impact Your CRDP vs CRSC Decision
The higher your state taxes military retirement, the more valuable CRSC's tax-free status becomes. Here's why this matters:
Example: $3,000/month Retirement, 70% VA (All Combat-Related)
📍 Texas (No State Tax):
• CRDP after federal taxes: ~$4,600/month
• CRSC after federal taxes: ~$4,750/month
• CRSC advantage: $150/month ($1,800/year)
📍 California (9.3% State Tax):
• CRDP after federal + state taxes: ~$4,320/month
• CRSC after federal taxes: ~$4,750/month
• CRSC advantage: $430/month ($5,160/year)
The Bottom Line: In high-tax states, CRSC can save you an additional $3,000-5,000 per year compared to no-tax states, making the combat-related documentation effort well worth it.