10 States with Low Taxes for Veterans
by Becca Stewart - July 20th, 2022
You’re ready to lace up those boots for the last time. For many military retirees, leaving the service means doing one last PCS and buying a home to live in long-term.
When choosing a location for your post-service life, there are many things to consider. Income and property taxes are just two of the considerations to take into account. However, tax incentives can significantly reduce your monthly costs, meaning you can keep more of that hard-earned pension and enjoy your retirement.
Here, we’re looking at the states with the best property tax and income tax incentives. Using these measures, we rank the ten best states for military retirees based on tax incentives.
Once you receive a DD-214, you’re probably ready to put down some roots. No more moving every few years!
Many military retirees choose to buy a home once they retire and start their new lives as civilians. However, deciding where to buy that “forever home” can be difficult.
Property taxes are just one factor to consider. Moving to a location with lower property taxes can make your military retirement pay go further. However, low property taxes aren’t the only thing to take into account. A low property tax rate can still mean shelling out thousands of dollars per year in states with a high cost of living and high housing prices.
For instance, Hawaii has the lowest property tax rate in the country at 0.31%. However, the state also has some of the highest housing prices. Because the average home price is just shy of $830,000 in 2022, the overall tax burden averages about $2,500 per year, even at a 0.31% tax rate.
The trick is finding a location with low property tax rates and a low cost of living.
Property Tax Exemptions for Military
All 50 states and the District of Columbia offer property tax exemptions for Disabled Veterans. The tax exemptions vary by state and largely depend on the service member’s disability percentage. Some states waive all property taxes for Veterans with a 100% disability rating.
Certain states offer tax incentives for Veterans regardless of disability. In some locations, Veterans and military retirees may also qualify for homestead exemptions and other property tax exemptions based on their state, time in service, disability rating, and other factors.
Here are the states that offer the best property tax exemptions for the most Veterans. These states allow Veterans with a less than 100% disability rating to access some property tax relief:
All property tax exemptions vary by state or county. Check with your local assessor’s office for more information.
You’ve worked hard to earn your military retirement. The 2022 legislative sessions saw many states passing bipartisan laws that would drastically reduce or completely eliminate the tax burden for military veterans and retirees. As of 2023, more than half of states will provide a 100% income tax exemption for military retirees.
The following states will entirely exempt state income tax on military retirement pay for tax year 2022:
Alabama, Arizona, Arkansas, Connecticut, Hawaii, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Utah, West Virginia, and Wisconsin.
The following states do not have any income tax, regardless of military service: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Other states are currently introducing or discussing laws that would completely exempt military retirement pay. States that do not offer full exemptions may offer partial exemptions or credits for military retirees based on time in service, age, and disability.
Income tax is only one measure of a military-friendly state. For instance, some states have no or very low taxes on military retirement pay, but high property taxes essentially cancel out the income tax benefits.
10 states with low taxes
Property taxes, income taxes, cost of living – it’s all a bit overwhelming. We examined the tax data for each state.
Using both total property tax burden and income tax as a measure, these ten states are the PCSgrades top picks for places to buy a home in retirement:
Alaska offers many incentives for military retirees. The state has no individual income tax for any citizen, property tax incentives for military Veterans, and a relatively low cost of living.
Florida is perhaps one of the most popular retirement locations for military and non-military alike. The tax incentives in the Sunshine State are pretty incredible, especially for military Veterans. Though housing costs are elevated in some parts of the state, there are many locations where housing is readily available and affordable.
Indiana recently passed legislation exempting military retirement pay from income taxes. The state also offers property tax incentives for some military retirees based on age and disability rating.
Iowa offers a 100% income tax exemption for military retirement pay. Retired Iowans can also take advantage of some of the most comprehensive property tax exemptions available to military Veterans, regardless of disability or age.
While Kentucky only provides partial income tax exemptions on military retirement pay, the cost of housing and extremely low property taxes make the state an ideal location for military retirees. The state also allows property tax exemptions for all senior citizens, regardless of military service.
With no individual income tax and significant property tax exemptions for Veterans with a 60% or greater disability, Nevada is a great place to call home after military service. The state also has a low property tax rate and relatively affordable housing.
In 2022, Oklahoma lawmakers vowed to pass sweeping legislation to make the Sooner State #1 in the nation for Veterans and military retirees. So far, they have lived up to their promises, eliminating income taxes on military retirement pay and offering property tax incentives as well. Plus, Oklahoma has some of the lowest housing prices in the nation.
Texas is one of the most military-friendly states in the U.S. The Lone Star State does not tax individual income for any resident and offers homestead exemptions and other tax incentives for both active duty and retired military. Many parts of Texas are still very affordable, making it a great place to set down your roots.
Utah has made significant headway, quickly becoming one of the top states for military retirement benefits. The state recently passed a law exempting income taxes on retirement pay. In addition, Veterans with a 10% disability or greater are eligible for property tax relief.
Wyoming has it all: low property taxes, low housing prices, and great tax incentives for military retirees. Most military Veterans qualify for property tax exemption under Wyoming law. The state has no individual income tax for any resident.
Tax advantages and cost of living are only two of the many considerations when choosing where to buy a home in retirement. Other factors like lifestyle, access to medical care, and proximity to family and friends often outweigh the financial benefits a state offers.
Still trying to decide? Check out our extensive collection of area guides, reviews from military families, and online content dedicated to helping you make the best decision for your military retirement.