Which states tax my Active Duty or Reserve military pay?

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By the MyAirForceBenefits Staff

As tax season looms near, it is a good time to look at the state income tax requirements for Airmen on active duty or reserve status. Tax laws often change, so be sure to revisit the tax requirements of your state of residency, and or any state from which you receive income each year before filing.

It is important to keep in mind that even though a state may not tax your military income, it does not necessarily mean that you do not have to file. Often, the exclusion of military income is from a deduction or subtraction and requires forms, in addition to the main tax form to be completed.

The paragraphs below contain information on which states fully exempt, partially exempt, or fully tax military retired pay. Be aware that in some cases military pay may be fully exempt only if certain conditions are met. Also, the tax laws for active-duty military pay may be different from those for National Guard and Reserve pay. For instance, while active-duty military pay may be fully exempt, National Guard and Reserve pay may not be exempt or may require that additional conditions be met to qualify for a deduction. For detailed information on each state, visit the MyAirforceBenefits Benefit Library and your state’s website for individual income tax information for tax year 2021.

States with No Individual Income Tax/ Military Income Fully Exempt

 States that Fully Exempt Military Income (some states require conditions be met)

  • Arizona
  • Arkansas
  • Colorado--Resident living outside the 50 U.S. states for ≥305 days of the calendar year may file as Nonresident so military income is excluded from state tax
  • Illinois--All pay included in federal adjusted gross income (AGI) is not taxed but income excluded from AGI is taxed
  • Iowa
  • Kentucky
  • Michigan
  • Minnesota
  • Missouri--All Active-Duty military pay included in Federal AGI including pay on Title 10 or Title 32, Annual Training, and for Active Training or Schools are not taxed and are classified as a “Military Income Deduction”. For 2021, 40% of Inactive duty military pay for National Guard (NG) Inactive Duty Training, NG Annual Training, Reserve duty—must file copies of Leave and Earnings Statements as validation
  • Montana
  • New Mexico
  • Oklahoma--All Active-Duty military pay exempt, including National Guard and Reserve pay, if included in Federal AGI

States that Fully Exempt Military Income when Living Outside the State

  • California--All active-duty military pay exempt if not stationed in CA
  • Connecticut--All military pay not taxable and considered a nonresident for tax purposes if all the following are true: do not maintain permanent residence in CT, maintain permanent residence outside CT, and spent < 30 days in CT.
  • Idaho--Military pay earned while stationed outside Idaho for 120 days consecutive and uninterrupted is not taxed
  • Maine--Resident, active-duty military pay earned outside of Maine is not taxed
  • New York--All active-duty military pay is exempt IF you meet conditions of nonresident eligibility
  • Ohio--Resident NOT stationed in OH, military income deducted on schedule of adjustments; Resident stationed in OH, all military income taxed
  • Oregon--Residents stationed in Oregon may qualify for a subtraction of up to $6,000; Residents not stationed in Oregon that didn’t have a permanent residence in Oregon during any part of the tax year, maintained a permanent residence outside of Oregon for the entire tax year, and spent less than 31 days in Oregon during the tax year are considered nonresidents for Oregon tax purposes and only owe Oregon tax if receive income from other Oregon sources
  • Pennsylvania--Resident NOT stationed in PA, military income exempt; Resident stationed in PA, all military income taxed
  • Vermont--Resident living in VT, all military pay is taxable; Residents living outside VT on full-time active duty all military pay is exempt; National Guard and Reserve on drilling/training status, may be eligible for In-State Unit Training Exemption of up to $2,000

 States that Partially Exempt Military Income

  • Alabama-- Pay received while serving in a designated combat zone is exempt; military allowances for quarters, subsistence, uniforms, and travel also exempt
  • Hawaii-- Residents may exclude up to $7,152 of HI National Guard or Reserve duty pay from income beginning tax year 2021
  • Indiana-- May be eligible to deduct military pay from Active Duty, National Guard, and Reserve—either all or up to $5,000, whichever is less
  • Kansas-- Pay received while serving in a designated combat zone or while hospitalized due to an injury received in a combat zone; officer exclusion amount limited
  • Louisiana-- If stationed out of state on active duty for > 120 consecutive days, may be eligible to exempt up to $30,000 of military income
  • Maryland-- If military pay is < $30,000, may subtract up to $15,000 earned outside U.S. States or possessions
  • Massachusetts--Pay received while serving in a designated combat zone may be exempt; Enlisted military pay received while serving in a designated combat zone or while hospitalized due to injuries received while serving in a designated combat zone, Officers may exclude a portion of such income
  • Mississippi-- Pay received while serving in a designated combat zone is exempt; the first $15,000 of eligible compensation from National Guard or Reserve salary is exempt
  • New Jersey-- Pay received while serving in a designated combat zone or while hospitalized due to an injury received in a combat zone, as well as mustering out, are exempt
  • North Carolina--Military allowances for quarters, subsistence, uniforms, equipment, and most travel are exempt; deductions for cost of insignia, swords, aiguillettes, epaulets, campaign bars, cap devices, chinstraps and uniform alteration costs required due to change in rank are exempt
  • North Dakota--National Guard and Reserve called to federal active duty may deduct federal active-duty compensation from ND taxable income, except combat pay, pay for basic training, annual training, or professional military or development education, which are all taxable
  • South Carolina-- National Guard and Reserve members, salary for customary annual training, weekend drills, and other inactive duty training is generally exempt
  • Virginia--If on active duty for ≥ 90 consecutive days and military pay totals < $30,000, may be eligible to subtract up to a max of $15,000; National Guard ranks of Captain and below, can subtract salaries for active and inactive service for up to 39 days of service or $3,000, whichever is less
  • West Virginia-- Some deductions for active duty performed for domestic security duty and Operation Enduring Freedom, if income was included in federal AGI; National Guard must be on Title 10
  • Wisconsin-- Deduction for National Guard and Reserve pay received for Title 10 or Title 32 active duty; all military pay excluded from federal AGI is also excluded for WI

 States that Fully Tax Military Income