Best Midwest States for Veterans: Tax Benefits & Cost of Living 2025
Complete guide to best Midwest states for military retirees. Compare military retirement tax, cost of living, VA healthcare, and regional opportunities.
Best Midwest States for Veterans: Tax Benefits & Cost of Living 2025
The Midwest offers America's most affordable living for military retirees, with many states exempting military retirement from income tax and providing some of the lowest housing costs nationally. This guide ranks the best Midwest states for transitioning service members seeking value and quality of life.
Top 5 Midwest States for Veterans
1. OHIO - BEST OVERALL MIDWEST VETERAN VALUE
Why Ohio Leads:
- Military retirement: 100% exempt from state income tax
- Cost of living: Lowest in Midwest (94 index)
- Property tax: 1.56% (moderate rate)
- Housing: Median $220,000 (among lowest nationally)
- VA healthcare: Excellent statewide network
- Job market: Growing (especially Columbus tech)
Financial Advantages:
- $0 state income tax on $45K military pension
- Cleveland, Dayton housing: $140,000 median (exceptional)
- Columbus housing: $260,000 (affordable tech hub)
- Property tax on $300K home: ~$4,680/year
- 10-year cost advantage vs comparable states: ~$30,000+
Best Cities:
- Columbus: Tech hub emergence, affordable housing, growing opportunities
- Cleveland: Very affordable ($140K), revitalized downtown, excellent VA
- Cincinnati: Affordable ($200K), financial center, good VA access
Recommendation: Ohio ideal for budget-conscious retirees or those seeking tech opportunities without California costs.
2. INDIANA - TAX-FREE RETIREMENT + LOW TAXES
Why Indiana Attracts Veterans:
- Military retirement: 100% exempt
- State income tax: 3.23% flat (lowest in Midwest)
- Cost of living: Very low (98 index)
- Property tax: 0.85% (reasonable)
- Housing: Median $210,000
- Job market: Manufacturing, automotive, growing tech
Financial Advantages:
- $0 military retirement tax
- Very low income tax on other sources (3.23%)
- Property tax on $300K: ~$2,550/year
- Indianapolis: Moderate $240K housing with excellent urban amenities
- Fort Wayne: Very affordable $180K with good job market
Best Cities:
- Indianapolis: Urban amenities, diverse jobs, VA access
- Fort Wayne: Very affordable, manufacturing base, growing tech
- Bloomington: College town culture, affordable
Recommendation: Indiana excellent for working veterans or those needing urban services on budget.
3. ILLINOIS - MILITARY RETIREMENT EXEMPT (Higher Costs)
Why Illinois Deserves Consideration:
- Military retirement: 100% exempt
- Major urban center: Chicago (major metro)
- Job market: Excellent (finance, tech, manufacturing)
- VA healthcare: Excellent network
- Cost of living: 103 index (higher than other Midwest)
Financial Considerations:
- Military retirement tax-free
- Chicago housing: $320K (expensive for Midwest)
- Downstate: $180K (affordable rural areas)
- Property tax: 2.27% (highest Midwest - major drawback)
- Better for working veterans than retirees
Best Cities:
- Downstate Illinois: Very affordable, rural lifestyle, military retirement benefit
- Chicago: Career opportunities, urban culture, VA access (but expensive)
Recommendation: Illinois ideal for working veterans in Chicago, or budget retirees in downstate areas.
4. KANSAS - MILITARY EXEMPTION + VERY LOW PROPERTY TAX
Why Kansas Appeals to Budget Retirees:
- Military retirement: 100% exempt
- Property tax: 0.71% (lowest Midwest)
- Cost of living: 98 index (very low)
- Housing: Median $220,000
- Climate: Four seasons, tornado season consideration
Financial Advantages:
- Military retirement completely tax-free
- Lowest property tax rate: ~$2,130/year on $300K
- Very affordable housing
- 30-year property tax savings: $30,000+ vs national average
Best Cities:
- Wichita: Affordable, growing aerospace sector
- Smaller towns: Extremely affordable housing ($160K)
- Topeka: Government jobs, affordable
Recommendation: Kansas excellent for retirees on strict budgets; less appealing for those still working.
5. WISCONSIN - MILITARY TAX ADVANTAGE + QUALITY OF LIFE
Why Wisconsin Attracts Veterans:
- Great Lakes recreation: Excellent outdoor access
- Cost of living: 100 index (very low)
- Property tax: 1.85% (reasonable)
- Housing: Median $235,000
- Healthcare: Good VA network
- Community: Family-oriented, safe
Financial Considerations:
- Military retirement: NOT exempt (taxed at ~5.5%)
- Lower property taxes than Illinois/Ohio
- More appealing for outdoor recreation
- Green Bay, Milwaukee emerging tech communities
Best Cities:
- Milwaukee: Affordable ($220K), revitalized, urban culture
- Madison: College town, tech growth, moderate cost ($310K)
- Green Bay: Very affordable, community-oriented
Recommendation: Wisconsin better for those prioritizing outdoor recreation and quality of life over pure cost savings.
Financial Comparison: $45,000 Military Pension + $10,000 Other Income
| State | Tax on Pension | Tax on Other Income | Property Tax (300K home) | Annual Cost | 10-Yr Cost |
|---|---|---|---|---|---|
| Ohio | $0 | $950 | $4,680 | $36,350 | $363,500 |
| Indiana | $0 | $646 | $2,550 | $33,806 | $338,060 |
| Illinois | $0 | $990 | $6,810 | $40,720 | $407,200 |
| Kansas | $0 | $1,180 | $2,130 | $33,020 | $330,200 |
| Wisconsin | $2,475 | $1,200 | $5,550 | $40,665 | $406,650 |
Winner: Kansas (Lowest annual cost), Runner-up: Indiana
VA Healthcare Comparison
| State | Major Centers | Providers | Wait Time | Clinics | Rating |
|---|---|---|---|---|---|
| Ohio | 4 | 1,900+ | 18 days | 45 | 4.1/5 |
| Indiana | 4 | 1,400+ | 18 days | 38 | 4.1/5 |
| Illinois | 4 | 2,400+ | 20 days | 55 | 4.0/5 |
| Kansas | 3 | 900+ | 19 days | 22 | 4.0/5 |
| Wisconsin | 3 | 1,400+ | 18 days | 32 | 4.2/5 |
Best VA Healthcare: Ohio and Wisconsin
Cost of Living Comparison
| Category | Ohio | Indiana | Illinois | Kansas | Wisconsin |
|---|---|---|---|---|---|
| Median home | $220K | $210K | $265K | $220K | $235K |
| Property tax rate | 1.56% | 0.85% | 2.27% | 0.71% | 1.85% |
| Groceries/month | $520 | $530 | $560 | $530 | $540 |
| Utilities/month | $140 | $150 | $150 | $150 | $155 |
| Index | 94 | 98 | 103 | 98 | 100 |
Recommendations by Veteran Profile
Budget-Conscious Retirees ($45K Military Pension Only)
Best: Kansas or Indiana
- Lowest total costs
- Military retirement exempt (Indiana + Kansas)
- Lowest property taxes
- Recommendation: Kansas small towns or Indianapolis suburbs
Working Veterans Seeking Career Growth
Best: Illinois or Ohio
- Illinois: Chicago tech/finance/manufacturing hub
- Ohio: Columbus tech corridor
- Higher salaries offset higher costs
- Recommendation: Chicago or Columbus
Outdoor Recreation Focus
Best: Wisconsin
- Great Lakes recreation
- Outdoor culture
- Four-season climate
- Recommendation: Milwaukee, Madison, Green Bay
Veterans Wanting Military Culture
Best: Ohio or Indiana
- Larger veteran populations
- Established veteran communities
- Strong military presence history
- Recommendation: Columbus, Indianapolis, Cincinnati
Disabled Veterans on SSDI
Best: Indiana (lowest taxes) or Kansas (lowest property tax)
- Indiana: 3.23% income tax is lowest Midwest
- Kansas: 0.71% property tax
- Both military-exempt
- Recommendation: Indianapolis suburbs or Kansas small towns
30-Year Property Tax Impact
Owning $300,000 Home for 30 Years:
| State | Year 1 | Year 30 | 30-Year Total | Savings vs National Avg |
|---|---|---|---|---|
| Kansas | $2,130 | $2,730 | $71,850 | +$30,000 |
| Indiana | $2,550 | $3,270 | $87,750 | +$14,100 |
| Ohio | $4,680 | $6,000 | $153,000 | -$51,150 |
| Wisconsin | $5,550 | $7,110 | $180,300 | -$78,450 |
| Illinois | $6,810 | $8,730 | $225,000 | -$123,150 |
Massive Long-Term Impact: Kansas and Indiana dramatically superior for 30-year homeowners.
Overall Ranking: Best Midwest States for Veterans
| Rank | State | Score | Best For |
|---|---|---|---|
| 1 | Kansas | 9.5/10 | Budget-conscious military retirees |
| 1 | Indiana | 9.4/10 | Low-cost living + some opportunities |
| 3 | Ohio | 9.0/10 | Affordable + job opportunities |
| 4 | Illinois | 8.5/10 | Career-focused (Chicago), rural retirees |
| 5 | Wisconsin | 8.2/10 | Outdoor recreation + quality of life |
Key Midwest Advantages for Veterans
- Lowest Costs Nationally: Housing, property tax, overall living
- Military Retirement Exemptions: Most states exempt (except Wisconsin)
- Reasonable Income Taxes: 0%-5.8% (except Illinois at 4.95%)
- Four Seasons: Spring, summer, fall, winter recreation
- Outdoor Recreation: Lakes, forests, water activities
- Safe Communities: Low crime rates (generally)
- Family-Friendly: Good schools, communities oriented toward families
- Established Veteran Networks: Long military history
Climate Considerations
| State | Winter Severity | Snow | Best Season | Worst Season |
|---|---|---|---|---|
| Ohio | Moderate | 15-30" | Fall/Spring | Winter |
| Indiana | Moderate | 15-25" | Fall/Spring | Winter |
| Illinois | Moderate | 15-30" | Fall/Spring | Winter |
| Kansas | Moderate+ | 10-20" | Spring/Fall | Summer (heat) |
| Wisconsin | Severe | 30-50"+ | Summer/Fall | Winter |
Conclusion
The Midwest is America's best value region for veterans, combining:
- Military retirement tax exemptions (most states)
- Lowest housing costs nationally ($210-240K medians)
- Very low property tax rates (Kansas/Indiana exceptional)
- Affordable cost of living year-round
- Excellent VA healthcare networks
- Strong outdoor recreation
- Safe, family-oriented communities
For pure affordability: Choose Kansas
For affordability with opportunities: Choose Indiana or Ohio
For lifestyle + affordability: Choose Wisconsin
For career growth with veteran benefits: Choose Illinois or Ohio
A military retiree with $45,000 pension can live comfortably for $33,000-$36,000 annually in top Midwest states—among the lowest costs nationwide and enabling maximized savings, travel, and leisure activities.