MOAA National serves in an advisory capacity for state-specific issues such as income tax exemption. Please contact your local MOAA council as state legislation must originate at the state level.  

Military retirees in one state will benefit from a law signed this month expanding the exemption of their retirement pay from state income tax, while legislation has been introduced in five others to provide either partial or total exemptions.

Find details on these bills below, and on earlier bills introduced in California, Maryland, Montana, and Virginia at this link. MOAA councils and chapters nationwide have advocated for exemptions in various forms; find your local affiliate for more information on their efforts.

Idaho

The change: A law signed March 6 by Gov. Brad Little expands the state’s income tax exemption on military retirement pay to cover veterans of all ages and disability levels. To qualify for the relief, retirees under age 62 must have worked enough during the tax year to be required to file a federal tax return.

The deduction is limited to the maximum Social Security benefit, which for 2024 was $45,864 for individual filers.

The law also covers survivor payments. It is limited to “military services,” which does not include members of the commissioned corps of the U.S. Public Health Service or NOAA.

[RELATED: Where Servicemembers, Veterans Can Get Free Tax Help]

Georgia

The proposed change: SB 31 would replace the state’s partial exemption – up to $35,000, based on income requirements – with a full exemption. The law does not address survivor benefits, nor does it cover USPHS or NOAA commissioned corps members.

Where it stands: The bill cleared the Senate by a 53-1 margin March 3 and moves to the House, where it is under consideration by the Ways and Means Committee.

Kentucky

The proposed change: HB 192 would exempt all military retirement pay and survivor benefits from state taxes. It would take effect no earlier than Jan. 1, 2026, and no later than Jan. 1, 2030. Retirees who left service in 1997 or earlier already have their retirement pay exempted, and those who retired after 1997 have a partial exemption of up to $31,110.

Where it stands: The bill moved to the House Appropriations and Revenue committee on Feb. 4. The state House is adjourned through March 27.

[RELATED: MOAA's Military State Report Card and Tax Guide]

New Mexico

The proposed change: SB 497 would exempt all military retirement pay and survivor benefits from state taxes, replacing the state’s existing $30,000 exemption limit. The change would take effect no earlier than Jan. 1, 2026. The bill does not address USPHS or NOAA commissioned corps retirees.

Where it stands: The bill was introduced Feb. 28 and referred to the Senate Tax, Business, and Transportation Committee.

Oregon

The proposed change: SB 225 would allow military retirees age 62 and younger to exempt up to $17,500 of their military retirement pay from state income taxes. The bill does not address survivor benefits and would not apply to USPHS or NOAA commissioned corps retirees.

Existing state law fully exempts retirement pay from state tax if the retiree left service before Oct. 1, 1991, with partial exemptions available to those with some time in uniform prior to that date.

The bill would reduce state tax revenue by $13.3 million from 2025 to 2027, according to a state budget analysis, with that figure surpassing $17 million for the two-year span from 2029 to 2031.

Where it stands: The Senate Veterans, Emergency Management, Federal and World Affairs Committee passed the bill after a March 13 meeting and requested a referral to the Finance and Revenue Committee.

[RELATED: 2026 Retiree Pay Adjustment Trending Toward 5-Year Low]

Vermont

The proposed change: S. 17 and H. 43 would fully exempt military retirement pay and survivor benefits from state taxes, expanding on a 2022 law exempting a portion of that income. Both bills have significant sponsorship – the Senate measure includes 21 sponsors from the 30-seat chamber, while the House bill has 75 sponsors out of 150 representatives.

The bill reportedly would cost the state $4 million in revenue. The exemption is supported by Gov. Phil Scott, who said military retirees can “bring with them significant skills learned in the military, which is why we desperately need to attract more of them to our state.”

Where it stands: Both bills have been referred to committees for consideration.

Has your state made an update to its military retirement tax rules? Email us at editor@moaa.org with the details.