2026 State Tax Changes for Military Retirees and Veterans: What's New (and What's Not)

Bottom Line Up Front

Most states did not change how they tax military retirement or veterans for 2026. If your state isn't on the list below, its rules are the same as they were in 2025, so your existing state benefits guide still applies.

Seven states changed something for 2026 (each verified against the state's own tax authority):

• Georgia — military retirement exclusion jumps to $65,000 (retirees under 65)
• California — brand-new $20,000 exclusion (income limits apply)
• Vermont — full exemption for most retirees (income-based)
• Delaware — exemption rises to $25,000, any age
• Indiana — full exemption extended to Space Force, USPHS, and NOAA retirees
• New York — new 100% property tax exemption for permanently and totally disabled veterans
• New Mexico — disabled-veteran property exemption is now proportional to your rating

This is general information, not tax advice. Confirm your own situation with your state's tax department or a free accredited VSO before you file.

Income Tax on Military Retirement — What Changed for 2026

Georgia — exclusion rises to $65,000 (under 65)

For tax years beginning on or after January 1, 2026, Georgia lets military retirees under age 65 exclude up to $65,000 of military retirement income (up from the prior $17,500, plus an extra $17,500 if you had earned income). Married couples filing jointly can each claim it if both qualify. It cannot be combined with Georgia's general retirement income exclusion — you take one or the other. Retirees 65 and older generally use the larger general retirement exclusion instead.

Source: Georgia Department of Revenue.

California — a brand-new $20,000 exclusion

For the first time, California exempts military retirement pay. For tax years 2025 through 2029, qualifying retirees can exclude up to $20,000 of uniformed-services retirement pay or Survivor Benefit Plan (SBP) payments. There are income limits: federal adjusted gross income of $125,000 or less for individuals, or $250,000 or less for a joint return or surviving spouse. The provision is set to sunset after 2029 unless extended.

Source: California Franchise Tax Board (R&TC §17132.9).

Vermont — full exemption for most retirees

Under Act 71, beginning with the 2025 tax year, all military retirement and survivor benefit income is exempt for taxpayers of any filing status with adjusted gross income of $125,000 or less. Between $125,000 and $175,000 the exempt amount phases down as income rises, and there is no exemption at $175,000 or more.

Source: Vermont Department of Taxes.

Delaware — $25,000, any age

Delaware finished phasing in its military pension exemption. For tax years beginning on or after January 1, 2026, the exemption is $25,000 for all military pensioners regardless of age — removing the old age limits that had capped younger retirees at a lower amount.

Source: Delaware General Assembly (SB 201).

Indiana — now covers Space Force, USPHS, and NOAA

Indiana already fully exempts military retirement and survivor benefits. As of January 1, 2025, that full deduction explicitly includes the U.S. Space Force, the U.S. Public Health Service Commissioned Corps, and the NOAA Commissioned Officer Corps, along with their survivors (who qualify regardless of age).

Source: Indiana Department of Revenue.

Property Tax — What Changed for 2026

New York — new 100% exemption for P&T disabled veterans

New York enacted a new property tax exemption (Chapter 77 of the Laws of 2026) providing a 100% exemption for veterans the U.S. Department of Veterans Affairs deems permanently and totally disabled as a result of service. It applies to assessment rolls with taxable status dates on or after October 1, 2026. The exemption is not automatic — you must apply with your local assessor, and because New York exemptions can depend on local adoption, confirm availability with your assessor's office.

Source: NY State Senate (S.8803 / Chapter 77); NY Dept. of Veterans' Services.

New Mexico — disabled-veteran exemption now scales with your rating

For the 2026 property tax year and after, New Mexico's disabled-veteran property tax exemption is calculated in proportion to your VA disability percentage (rather than a flat amount), and the base figure is adjusted annually for inflation.

Source: New Mexico Legislature (HB 285).

Everything Else Is the Same as 2025

If your state isn't above, nothing changed for 2026:

• The nine no-income-tax states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — still don't tax any retirement pay, military or otherwise.
• States that already fully or partially exempt military retirement kept their existing rules. For example, Virginia holds steady at up to $40,000 for retirees 55 and older (the figure it reached in 2025).
• Property tax breaks for disabled veterans in most other states are unchanged.

For the full picture in your state — income tax, property tax exemptions, and other benefits — start with the State Benefits Comparison and your state's guide.

The Catch Worth Knowing

State tax rules have fine print: income limits, age thresholds, whether SBP counts, and whether you claim a military-specific exclusion or a general retirement exclusion (not both). The figures above are the headline numbers verified against each state's tax authority as of 2026, but your exact result depends on your full return.

Before you rely on any of it, confirm with your state's department of revenue or sit down with a free accredited Veterans Service Officer — they'll walk your specific situation at no cost.

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Every figure in this guide was verified against the issuing state's tax authority or enacting legislation, linked inline. This is general information, not tax or legal advice.