March 31, 2009 • June Walbert
Q: Hi June. I’m looking to retire in the next 14 months and was wondering what states along the east coast are most military pension friendly when it comes to taxes.
Thanks,
--Danny, Eldersburg, MD
A: You’re smart to think about taxes as they relate to your military retirement! What really matters to retirees is their “take-home” pay. Less paid in taxes equals more to cover expenses and to spend in retirement. According to retirementliving.com,there are 26 states that don’t tax retired military pay. Of those, only Massachusetts, New Jersey, New York and North Carolina fit in your parameters. The list expands as many more states exempt disability retired pay. Although there are many other factors to consider when choosing your retirement destination, strictly in terms of taxation North Carolina may be your best right coast bet as they don’t tax social security benefits either. Not a small point, because you'll likley have to pay federal taxes on social security. In 2009, married filing jointly taxpayers will be hit up with federal taxes on social security starting at about $32,000 in income. Yes, in the view of the IRS, military pensions do count as income.
Thanks for asking such a smart question. And congratulations and thank you for your service.
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