By MOAA Staff

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.  

Some of the states with the most military retirees are making moves to reduce the tax burden on those collecting uniformed services retirement pay in the new year.

Here’s a look at four states with proposals in the early days of their 2025 legislative sessions that would begin or increase tax exemptions for this type of compensation. Learn more about the tax rules in every state at MOAA’s Military State Report Card and Tax Guide.

California

The Bill: Legislation excluding uniformed services retirement pay and Survivor Benefit Plan (SBP) income from state tax was reintroduced Dec. 2 after failing to become law in the previous session.

AB 53, which would cover armed services retirees in addition to commissioned corps members of the U.S. Public Health Service and NOAA, retains the backing of MOAA’s California Council of Chapters (CALMOAA), which supports the bill alongside other military and veterans groups such as the American Legion-Department of California, the Marine Corps League-Department of California, the California Association of County Veteran Service Officers, the Enlisted Association of the California National Guard, and the California State Commanders Veterans Council.

The Budget: Gov. Gavin Newsom’s 2025-2026 budget proposal does not include a full exemption, but it would exempt up to $20,000 in uniformed service retirement pay and SBP benefits beginning in the 2025 tax year for taxpayers with up to $125,000 in annual income ($250,000 if filing jointly).

“Veterans’ organizations throughout California were pleased to see that Governor Newsom recognizes the many sacrifices our nation’s career military families endure over a 20-year career and addressed taxation of military retirement in his proposed budget,” said Cmdr. Jeff Breiten, USN (Ret), vice president of legislative affairs for CALMOAA, who also thanked Assemblymember James Ramos for his ongoing sponsorship and work on exemption legislation.

[RELATED: More Financial Resources From MOAA]

Maryland

The Bill: The Keep Our Heroes Home Act, introduced in the Maryland House on Jan. 8, would double the available exemption for some military retirement pay. At present, residents age 55 and over can subtract the first $20,000 of retirement income – $12,500 for those under 55. The new law would boost that figure to $25,000 in tax year 2025 and to $40,000 after that, with no further age limits.

The bill, which includes USPHS and NOAA retirement compensation, has been supported by Gov. Wes Moore in previous legislative cycles; Moore testified on its behalf in 2023. It would mark a step toward a full exemption of military retired pay – a longstanding legislative goal of MOAA’s Maryland Council of Chapters.

What’s Next: “Right now, Maryland is facing a $2.7 billion deficit, which is estimated to grow to $5.9 billion by 2030. Asking for anything that costs money is going to be difficult to get passed. We struggled whether to only ask for removal of the age restriction or to do the full bill,” said Capt. Lynn A. Nash, USPHS (Ret), legislative liaison for the Maryland Council and Chapters and recent recipient of MOAA’s Colonel Steve Strobridge Legislative Liaison Award.

“Ultimately, the sponsors said we should put it out there. We’ll do our best, but I’m not optimistic while in the current fiscal climate.”

Montana

The Current Rules: Working military retirees in Montana qualify for an exemption of up to 50% of their retirement income or survivor benefits, or an amount equal to their Montana source income, whichever is lower. Recipients must have become residents after June 30, 2023 (or been a resident before receiving the income and remained one afterward); the deduction can be taken for up to five consecutive years; and the program is set to expire in tax year 2033. The benefit does not apply to USPHS or NOAA retirees.

The Bill: SB 93 would open the benefit to more recipients by changing the residency date (to Sept. 11, 2001), removing the five-year limit, and eliminating the expiration date.

Virginia

The Bill: Legislation introduced in the state Senate on Jan. 3 would remove the state’s $40,000 cap on military retirement pay exemptions starting with the 2026 tax year. Multiple versions of similar legislation have been introduced in the state House. 

The Budget: A proposed amendment to HB 1600 – the state budget bill for FY 2025 and 2026 – would classify the commission corps of USPHS and NOAA as “uniformed services” in Virginia code, thereby expanding the current tax exemption for military retirees to include retirees from these services. Including USPHS and NOAA Corps officers in the exemption is estimated to reduce Virginia’s tax revenue by approximately $780,000 annually.

What’s Next: Supporters, including’s MOAA’s Virginia Council of Chapters, are closely watching for positive movement on these measures before the legislative session concludes Feb. 22.