This guide answers the question "best states for military retirement" in plain terms. Choosing where to settle after decades of service is one of the biggest financial decisions a veteran or retiring service member will make. According to the U.S.
Department of Veterans Affairs, over 200,000 service members transition to civilian life each year, and state-level tax policies can mean a difference of tens of thousands of dollars across a retirement. The problem is that most rankings focus on scenery or cost of living while ignoring what actually matters for a military pension: whether your state taxes it at all.
This guide breaks down the best states for military retirement based on verifiable tax policies, veterans' benefits, and quality-of-life factors. You will learn which states fully exempt military retirement pay, which ones offer property tax relief for disabled veterans, and how to evaluate your own situation before you make the move.
Why State Tax Policy Is the Biggest Factor
Your military retirement pay is taxable at the federal level, but states have wildly different rules. Some states tax it as ordinary income. Others exclude it entirely. Understanding these differences is essential when identifying the best states for military retirement.
The Tax Foundation, a nonpartisan tax policy nonprofit, publishes annual state tax data showing that nine states impose no individual income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
For a retiree receiving $30,000 to $60,000 annually in military pension income, moving to one of these states can preserve thousands of dollars each year.
Beyond income tax, property tax exemptions for veterans vary significantly by state. Some states offer full property tax waivers for 100% disabled veterans. Others offer partial exemptions based on disability rating. The best states for military retirement often combine favorable income tax treatment with meaningful property tax relief.
How to apply this: Pull your most recent pension statement and calculate what a 4% to 8% state income tax would cost you annually, then compare that against states with zero income tax.
Top States That Fully Exempt Military Retirement Pay
Several states stand out among the best states for military retirement because they explicitly exempt military retirement income from state taxation.
Florida
Florida has no state income tax, which automatically covers military pensions. The state also offers a homestead exemption that reduces the assessed value of a primary residence by up to $50,000 for qualifying homeowners. This combination makes Florida one of the best states for military retirement for those seeking simplicity.
Florida's Department of Veterans' Affairs reports that the state is home to over 1.5 million veterans, one of the largest veteran populations in the country. The warm climate and access to multiple VA medical centers add practical appeal.
How to apply this: Check Florida's homestead exemption eligibility requirements on your county property appraiser's website before purchasing a home.
Texas
Texas also imposes no state income tax. The state goes further by offering property tax exemptions for veterans with a service-connected disability. For many, Texas ranks among the best states for military retirement due to these layered benefits.
The Texas Veterans Commission administers benefits including the Hazlewood Act, which provides tuition exemptions for veterans and their dependents at public universities. That benefit alone can be worth tens of thousands of dollars for a retiree with college-aged children.
How to apply this: Contact the Texas Veterans Commission to request a benefits eligibility review before you relocate.
Tennessee
Tennessee eliminated its tax on interest and dividend income in 2021, making it a fully income-tax-free state. Military retirement pay is therefore untaxed at the state level. This positions Tennessee as one of the best states for military retirement in the Southeast.
The state also offers property tax relief for disabled veterans and their surviving spouses. According to the Tennessee Department of Veterans Services, eligible veterans with a 100% permanent and total disability rating may qualify for full property tax relief on their primary residence.
How to apply this: Review Tennessee's property tax relief program guidelines and have your VA disability rating letter ready when you apply.
States With Partial Exemptions Worth Considering
Not every strong option for the best states for military retirement is a zero-income-tax state. Some states exempt a portion of military retirement pay or offer offsetting benefits.
Colorado
Colorado taxes military retirement income but allows a deduction of up to $24,000 per year for retirees aged 55 to 64. For those 65 and older, the deduction increases to $24,000 of all retirement income. Even with these deductions, Colorado remains competitive among the best states for military retirement for those who value outdoor recreation.
The Colorado Division of Veterans Affairs also administers a property tax exemption for veterans with a 100% service-connected disability, which can reduce the taxable value of a home by up to half.
How to apply this: Calculate your total retirement income and compare Colorado's deduction against your expected tax liability before dismissing the state.
Virginia
Virginia allows a subtraction of up to $10,000 in military retirement income for retirees aged 55 and older. That amount is scheduled to increase to $20,000 by 2026 under legislation passed in 2022, according to the Virginia Department of Taxation. Virginia's evolving tax landscape keeps it on the list of best states for military retirement for many veterans.
Virginia also exempts military survivor benefit plan payments from state income tax. This makes it a more attractive option for surviving spouses.
How to apply this: If you are under 55, note that Virginia's subtraction phases in based on age, so plan your retirement date accordingly.
Property Tax Benefits for Disabled Veterans
Property tax relief can outweigh income tax savings for many retirees, especially those with high disability ratings.
A common scenario: a retired service member with a 100% VA disability rating buys a $400,000 home. In a state like Illinois, the standard homestead exemption for a disabled veteran can reduce the equalized assessed value by up to $100,000 before local tax rates apply.
In a state like New Jersey, a 100% disabled veteran may qualify for a full property tax exemption on their primary residence.
The best states for military retirement for disabled veterans are often not the ones that top general retirement rankings. States like New Jersey, Illinois, and Michigan offer substantial property tax relief programs that offset their higher income tax rates. Evaluating the best states for military retirement through the lens of disability benefits can completely change your shortlist.
How to apply this: Obtain your VA disability rating decision letter and contact your target state's department of revenue to confirm which exemptions you qualify for before committing to a move.
Cost of Living and Quality of Life Considerations
Tax savings mean little if housing, healthcare, and daily expenses consume the difference. Several states combine tax advantages with a lower cost of living.
According to the Bureau of Economic Analysis, regional price parity data shows that states like Tennessee, Texas, and Florida generally have a cost of living at or below the national average, while coastal states like California and New York run 10% to 20% higher. This cost advantage reinforces why these states consistently appear among the best states for military retirement.
Access to military healthcare is another factor. The Department of Veterans Affairs operates 171 medical centers nationwide. States with multiple VA facilities and military treatment facilities, such as Texas and Florida, reduce travel time for routine and specialty care. Healthcare access is a critical component when ranking the best states for military retirement.
How to apply this: Use the VA's facility locator tool to check the distance from any prospective home to the nearest VA medical center and specialty clinic.
Comparison of Top States for Military Retirement
| State | Income Tax on Military Pension | Property Tax Relief for Disabled Veterans | Notable Extra Benefit |
|---|---|---|---|
| Florida | None | Homestead exemption up to $50,000 | Large VA healthcare network |
| Texas | None | Exemptions based on disability rating | Hazlewood Act tuition benefit |
| Tennessee | None | Full relief for 100% disabled veterans | No tax on interest or dividends |
| Colorado | Up to $24,000 deduction | Up to 50% reduction for 100% disabled | Strong outdoor recreation access |
| Virginia | Up to $10,000 subtraction (rising to $20,000) | Exemption for 100% disabled veterans | Survivor benefit plan exemption |
Frequently Asked Questions About best states for military retirement
What states tax military retirement pay the most?
California, Vermont, and Oregon fully tax military retirement income at ordinary state income tax rates, which can exceed 9% for higher earners. A retiree with $50,000 in annual pension income could owe over $3,000 annually in state taxes in these states.
However, California offers a property tax exemption for 100% disabled veterans that can offset some of that burden, making the best states for military retirement situation more nuanced for disabled veterans specifically.
Do any states offer both no income tax and full property tax exemption for disabled veterans?
Texas and Tennessee come closest to this combination. Both states have no income tax on military retirement pay and offer substantial property tax relief for veterans with a 100% service-connected disability. Florida offers no income tax but its property tax benefits for disabled veterans are more limited than Texas.
A 100% disabled veteran evaluating the best states for military retirement should compare the total combined tax burden, not just income tax.
How does military retirement pay affect Social Security taxation at the state level?
Most states that tax Social Security also tax military retirement pay, but the rules differ. Missouri and Nebraska tax both, while Colorado exempts Social Security entirely and offers a deduction for military retirement income.
When evaluating the best states for military retirement, calculate your combined income from Social Security, military pension, and any civilian retirement accounts, since some states exempt one type of income but not others.
Can surviving spouses receive military retirement tax benefits?
Yes, in most states, a surviving spouse receiving Survivor Benefit Plan payments qualifies for the same state tax treatment as the retiree. Some states, including Virginia, explicitly exempt SBP payments from state income tax even when the retiree's own pension would have been partially taxed.
This makes the best states for military retirement list different for surviving spouses than for retirees themselves, so run the numbers for your specific household situation.
Does changing your state of legal residence require more than just moving?
Yes. To establish a new state of legal residence for tax purposes, you must demonstrate intent to remain there permanently. This typically means registering to vote, obtaining a driver's license, registering vehicles, and filing a change of domicile with your branch of service. Simply buying a home in a state does not automatically make it your domicile.
Many service members and retirees interested in the best states for military retirement overlook this requirement and face tax disputes later.
Conclusion
- The best states for military retirement combine no or low income tax on military pensions with meaningful property tax relief and access to VA healthcare.
- Zero-income-tax states like Florida, Texas, and Tennessee offer the simplest path to preserving your pension, while states like Colorado and Virginia provide partial deductions that still make them competitive.
- Disabled veterans should prioritize property tax exemptions, which can exceed income tax savings in states like Texas and New Jersey.
- Establishing legal residency requires formal steps beyond physically moving.
Your next step is to request your VA disability rating letter, pull a recent pension statement, and run a side-by-side tax comparison for your top three states. Contact each state's department of revenue or veterans affairs office directly to confirm current benefit amounts before you commit.
