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 (38 states)
Nine have no income tax at all. The other 29 fully exempt military retired pay. CRDP more attractive.
Partial or Capped (12 states)
A capped exclusion, an age gate, or an income limit. Calculate both options.
Fully Taxed (District of Columbia)
No military-specific exclusion. CRSC more valuable.
✅ No Tax States (38)
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
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah*
Washington
West Virginia
Wisconsin
Wyoming
⚠️ Partial or Capped (12)
California: $20,000 exclusion, AGI limits apply
Colorado: $15,000 under 55, $20,000 at 55-64, $24,000 at 65+
Delaware: $12,500, any age
Georgia: $65,000 under age 65, from 2027
Idaho: Up to $40,536 for veterans 62+, disabled veterans, or under-62 veterans who work
Kentucky: $31,110 for service after 1997
Maryland: $12,500 under 55, $20,000 at 55+
Montana: Up to 50%, conditions apply
New Mexico: $30,000
Oregon: Only service before Oct 1, 1991
Vermont: Fully exempt under $125,000 AGI
Virginia: $40,000, any age
❌ Fully Taxed (1)
District of Columbia: 4% to 10.75%, no military exclusion
Every state now offers at least a partial break on military retired pay. California was the last holdout and added a $20,000 exclusion starting with tax year 2025.
*North Carolina requires 20+ years of service or a medical retirement. Utah delivers its break as a credit rather than a deduction, which zeroes the tax for nearly everyone.
💡 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 (first $20,000 excluded):
• Of $36,000/year in CRDP, about $16,000 is taxable by the state
• CRDP after federal + state taxes: ~$4,520/month
• CRSC after federal taxes: ~$4,750/month
• CRSC advantage: about $230/month ($2,760/year)
The Bottom Line: In states that tax retired pay, CRSC can be worth roughly $1,500 to $3,000 more per year than in a no-tax state, which is often enough to justify the combat-related documentation effort. The bigger your pension relative to your state's exclusion cap, the more CRSC is worth.