Is Military Retirement Pay Taxed?
Military retirement pay is generally taxable; however, disability retirement pay is not taxable to the extent that it is based on the percentage of disability. Additionally, veterans benefits, such as education and grants for medical equipment, are not taxable by the federal government.
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Pension
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Military retirement pay is taxed by the IRS as a pension rather than as wages.
State Taxes
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Many states follow federal tax rules regarding military retirement pensions, but several states have deemed these pensions tax-exempt either in full or conditionally. Per the Retirement Living Information Center, these states are: Alabama, Alaska, Florida, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming.
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Social Security
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Drawing retirement benefits for military service does not adversely affect your ability to draw Social Security benefits.
Garnishments
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Retirement pay cannot be garnished for commercial debt but it can be garnished for alimony, child support, and for debts owed to the government, such as tax levies and student loan payments.
Withholding
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Retirement is a good time to revisit the amount of withholding from your pension check and make changes through the proper channels as needed.
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References
Resources
- Photo Credit Image by Flickr.com, courtesy of The U.S. Army
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Comments
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the pension should be non taxable however the inteest income through this may be taxable income.
