Military Retirement in Ohio: Complete 2026 Tax Guide
100% tax-free retirement + affordable Midwest living
🎯 Quick Summary: Ohio Military Retirement Taxes (2026)
- ✓ Military retirement pay: 100% EXEMPT from state income tax
- ✓ VA disability payments: Tax-free (federal and state)
- ✓ Survivor Benefit Plan (SBP): 100% exempt
- ✓ Property tax: Exemptions for disabled veterans
- ✓ Cost of living: 9% below national average
Why Ohio Became a Top State for Military Retirement
Ohio made a major move in 2022 when it began phasing in a 100% exemption on military retirement pay. As of 2024, Ohio now offers complete state income tax exemption on military pensions—joining the elite group of states where veterans keep every dollar of their retirement pay (minus federal taxes).
Combined with a cost of living 9% below the national average, strong veteran community around Wright-Patterson AFB, excellent VA healthcare, and proximity to major Midwest cities, Ohio offers an exceptional value proposition for military retirees looking for affordable living without sacrificing quality of life.
2026 Ohio Military Retirement Tax Breakdown
State Income Tax on Military Retirement Pay
🎉 100% EXEMPT!
Starting in 2024, Ohio exempts 100% of military retirement pay from state income tax. This includes:
- All military pensions (regardless of rank or years served)
- Survivor Benefit Plan (SBP) payments
- Reserve/Guard retirement pay
- No age restrictions—works for early retirees too!
VA Disability Compensation
✓ Completely Tax-Free
VA disability payments are tax-exempt at both the federal and Ohio state levels. This is protected by federal law nationwide.
Ohio State Income Tax Rates (2026)
While military retirement is exempt, other income (civilian jobs, investments) is taxed at these rates:
| Taxable Income | Tax Rate |
|---|---|
| $0 - $26,050 | 0% |
| $26,051 - $100,000 | 2.75% |
| Over $100,000 | 3.50% |
Note: Ohio has been cutting taxes—the top rate was 3.99% in 2023. No local income taxes on top of state tax (unlike some states).
Other Tax Benefits for Ohio Veterans (2026)
| Benefit | Details |
|---|---|
| Homestead Exemption |
|
| Sales Tax | 5.75% state sales tax + 0-2.25% county. No special veteran exemption, but lower than many states. |
| Vehicle Registration | Disabled veteran license plates available. Purple Heart and other special plates offered. |
| Hunting/Fishing | Free licenses for 100% disabled veterans. Discounted for other disabled vets. |
Real Example: How Much You'll Save in Ohio (2026)
Example: E-7 Retired After 20 Years
- • Military retirement pay: $2,800/month ($33,600/year)
- • VA disability (50%): $1,150/month ($13,800/year)
- • Part-time job: $20,000/year
- • Total income: $67,400
Ohio Tax Calculation
Military retirement: $0 (100% exempt)
VA disability: $0 (always exempt)
Part-time job: $0 (under $26,050 threshold)
State tax: $0
California Comparison
Partial exemption, still pays on some income
State tax: ~$1,800+
Annual Ohio Savings: $1,800+
Over 20 years: $36,000+ saved in taxes
🎓 Education Benefits for Veterans & Families in Ohio
Ohio War Orphans Scholarship
- For children of deceased or 100% disabled veterans
- Covers full tuition at Ohio public universities
- Ages 16-25 eligible
- One of the most generous programs in the nation
Ohio GI Promise
- In-state tuition for all veterans immediately (no waiting period)
- All Ohio public colleges participate
- Yellow Ribbon Program widely available
Ohio National Guard Scholarship Program
- 100% tuition coverage for Guard members
- Available at all Ohio public universities
- Great option for retirees joining the Guard
Air Force Institute of Technology (AFIT)
- Located at Wright-Patterson AFB
- Graduate programs in engineering and management
- Opportunities for civilian employees and contractors
Cost of Living in Ohio for Military Retirees (2026)
Ohio offers a cost of living 9% below the national average, making your tax-free retirement dollars stretch further:
| Category | vs. National Average | Notes |
|---|---|---|
| Housing | -20% cheaper | Median home: $230,000. Very affordable in Dayton area. |
| Groceries | -5% cheaper | Kroger headquarters in Cincinnati. Commissary at WPAFB. |
| Healthcare | -8% cheaper | Cleveland Clinic, Ohio State Wexner. Excellent VA facilities. |
| Utilities | -5% cheaper | Natural gas widely available. Four seasons mean A/C and heating costs. |
| Transportation | -10% cheaper | Lower gas prices, affordable car insurance. |
Major Military Installations in Ohio
✈️ Wright-Patterson Air Force Base
- Location: Dayton area
- Air Force Materiel Command HQ
- Air Force Research Laboratory
- Air Force Institute of Technology
- 30,000+ employees
- National Air and Space Intelligence Center
- Major defense contractor hub
📦 Defense Supply Center Columbus
- Location: Columbus
- Defense Logistics Agency
- Major logistics and supply operations
- Civilian employment opportunities
🛡️ Ohio National Guard
- Beightler Armory (Columbus)
- Springfield Air National Guard Base
- Mansfield Lahm Air National Guard Base
- Multiple Army National Guard facilities
🏛️ NASA Glenn Research Center
- Location: Cleveland
- Aerospace research opportunities
- Contractor employment
- STEM career opportunities
Best Cities for Military Retirees in Ohio
🥇 Dayton / Fairborn / Beavercreek
Best for Wright-Patterson AFB access. Strong military community, affordable housing ($200K-$300K), excellent schools in Beavercreek. Major defense contractors nearby. National Museum of the U.S. Air Force.
🥈 Columbus
State capital with Defense Supply Center. Growing tech scene, Ohio State University, diverse economy. More urban lifestyle. 1 hour from WPAFB.
🥉 Cincinnati
Affordable housing, growing job market, close to Kentucky (also tax-friendly). Good VA healthcare. Further from bases but offers urban amenities.
Cleveland
Cleveland Clinic (world-class healthcare), NASA Glenn Research Center, Lake Erie waterfront. Affordable housing, strong VA presence. Good for healthcare-focused retirees.
VA Healthcare in Ohio
🏥 VA Medical Centers in Ohio
- • Dayton VA Medical Center: Full-service, near WPAFB
- • Cincinnati VA Medical Center: Major facility, specialty care
- • Cleveland VA Medical Center: Large facility, near Cleveland Clinic
- • Chillicothe VA Medical Center: Mental health, long-term care
- • Columbus VA Outpatient Clinic: Primary care, mental health
- • 15+ Community-Based Outpatient Clinics across the state
TRICARE: Good network coverage statewide. Wright-Patterson has military treatment facility for TRICARE Prime enrollees.
Pros and Cons of Retiring in Ohio
✅ Pros
- ✓ 100% military retirement exemption
- ✓ Cost of living 9% below average
- ✓ Very affordable housing ($230K median)
- ✓ Wright-Patterson AFB community
- ✓ Excellent VA healthcare network
- ✓ Low state income tax (3.5% max)
- ✓ Strong education benefits (War Orphans)
- ✓ Four seasons, no extreme weather
- ✓ Central location - drive anywhere in US
❌ Cons
- ✗ Cold, snowy winters
- ✗ Gray skies much of winter
- ✗ Limited beaches (Lake Erie only)
- ✗ Fewer military bases than southern states
- ✗ Some areas economically depressed
- ✗ Tornado risk in spring/summer
- ✗ Not ideal for warm-weather lovers
Frequently Asked Questions
When did Ohio start exempting military retirement?
Ohio began phasing in the exemption in 2022, reaching 100% exemption in tax year 2024. For 2026, all military retirement pay is completely exempt from Ohio state income tax.
Do I need to be a certain age to get the exemption?
No! Ohio's military retirement exemption has no age requirement. Whether you retire at 38 or 68, your military pension is 100% exempt from state income tax.
Are there defense contractor jobs in Ohio?
Yes, particularly around Wright-Patterson AFB. Major contractors include Boeing, Lockheed Martin, Northrop Grumman, L3Harris, and many smaller firms. Cyber security and aerospace engineering are hot fields.
How does Ohio compare to other tax-free states?
Ohio offers 100% exemption like Texas and Florida, but with much lower housing costs. The trade-off is colder weather. For retirees who don't mind winter, Ohio provides exceptional value.
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