Serving in the military is a challenging occupation, with numerous service members enduring long periods away from their loved ones and putting their safety at risk.
Recently, five states have added a new one for veterans: exempting military retirement income from taxes. This is a step to show their appreciation for military veterans. Although these states are not the first to offer this benefit, they are the latest to do so. These are the following states:
- Arizona
- Utah
- Indiana
- Nebraska
- North Carolina
According to TurboTax, previously there are states who did not tax military retirement pay already. These states include Alabama, Connecticut, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Missouri, New York, North Dakota, Ohio, Pennsylvania, West Virginia, and Wisconsin. Smart Asset also identified some states that do not tax military retirement pay.
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Some states only partially tax military retirement income with credits or exemptions. These states include Colorado, Delaware, Georgia, Idaho, Kentucky, Maryland, New Jersey, Oklahoma, Oregon, and South Carolina. On the other hand, Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming don’t tax any income, including military benefits.
For military veterans in Arizona and Utah, the new law takes effect immediately, and they may see a large tax refund when they file their taxes for the 2021 tax year. The law for Indiana, Nebraska, and North Carolina, will come into effect for the 2022 tax year.
SmartAsset’s free tool can help military veterans and anyone looking for retirement planning assistance by matching them with up to three financial advisors in their area. The best way to plan for retirement is to use a workplace retirement plan such as a 401(k) if available, or open an individual retirement account (IRA).
In conclusion, the elimination of taxes on military retirement income in Arizona, Utah, Indiana, Nebraska, and North Carolina is a way to show appreciation for military veterans. Whether you are a veteran or not, seeking the help of a financial advisor and planning for retirement is essential for a secure financial future.
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