Relocation
Best States for Military Retirees in 2026
By Marcus Webb · April 29, 2026
Military retirement pay averages over $30,000 a year for a 20-year E7, and where you retire determines how much of that you actually keep. Some states tax none of it. Others take thousands off the top. Here is where your benefits go furthest.
Military retirement pay is federally taxable, but state taxation varies wildly. Twenty-seven states now fully exempt military retirement income from state income tax, while a handful still treat it like any other paycheck.
What a 20-Year Military Retiree Actually Earns
A 20-year retired E7 collects roughly $2,500 to $2,800 per month in base retirement pay as of 2026, depending on final base pay and retirement system (Legacy High-3 vs. Blended Retirement System). That works out to approximately $30,000 to $33,600 annually before any disability or VA compensation is added. An E7 with a 50% VA disability rating on top of that can clear $45,000 or more annually, and VA disability compensation is tax-free at every level of government.
The 2026 Cost of Living Adjustment (COLA) for military retirement pay came in at 2.5%, the same rate applied to Social Security. That added roughly $600 to $700 per year for a typical E7 retiree, a modest bump that makes state tax policy even more meaningful.
The States That Don't Touch Your Retirement Pay
Florida, Texas, and Nevada lead the list for a simple reason: no state income tax at all. Every dollar of your retirement check, VA compensation, and any part-time income stays in your account. Florida adds property tax exemptions for veterans with a service-connected disability rating of 10% or higher. Texas gives 100% disabled veterans a full property tax exemption on their primary residence, which can save $4,000 to $8,000 per year depending on home value and county.
Nevada pairs no income tax with relatively low property taxes, averaging an effective rate of about 0.55% statewide. The tradeoff is that Las Vegas and Reno have seen cost-of-living increases over the past three years, so the tax advantage narrows somewhat if you buy near the urban core.
South Dakota and Wyoming round out the no-income-tax tier. Both are low-cost states with favorable gun laws (relevant to many veterans) and growing veteran communities. Wyoming's total state and local tax burden sits among the lowest in the nation.
For the full picture on income-tax-free states and how they handle other retirement income, see our breakdown of best states for retirees to avoid taxes.
States With Income Tax That Still Treat Veterans Well
Not every strong state for military retirees eliminates income tax entirely. Several states with income taxes carve out full exemptions specifically for military retirement pay.
Virginia exempts all military retirement income from state income tax as of 2026, a policy that became fully phased in after 2022. Virginia also sits next to the Pentagon, Fort Belvoir, and Joint Base Langley-Eustis, meaning VA medical centers, military exchanges, and commissary access are dense and accessible. The median home price is higher than national average, but the proximity to federal employment for a second career is unmatched.
North Carolina fully exempts military retirement pay for retirees who served at least five years before August 12, 1989, and has extended substantial exemptions for those who retired more recently. The state income tax rate dropped to 4.5% in 2024 and is scheduled to continue declining toward a flat 3.99% by 2027. Combined with a relatively low cost of living, Fort Bragg and Camp Lejeune proximity, and strong VA infrastructure, North Carolina consistently ranks among the top five states for veteran population size.
Georgia exempts up to $35,000 of retirement income per person from state income tax for taxpayers under 62, and that limit increases to $65,000 at 62 and older. For a retired military couple both drawing pension income, the combined exemption is substantial.
States to Avoid
California taxes military retirement pay at ordinary income rates, which top out at 13.3% for higher earners. Even at a modest $35,000 in retirement income, the effective state tax rate still pulls $1,500 or more annually. California also has one of the highest cost-of-living indexes in the country, and the veteran population continues to decline as residents move to Nevada, Texas, and Arizona. For a side-by-side look at what staying in California actually costs, read Florida vs. California: The Tax Reality.
New Jersey and Connecticut both tax military retirement income and carry property tax burdens that offset any other benefits. New Jersey's effective property tax rate is 2.13%, the highest in the nation.
Use our state tax calculator to model your specific retirement income, disability rating, and target state to see your actual take-home.
Key Takeaways
- A 20-year retired E7 earns approximately $30,000 to $33,600 in base retirement pay in 2026, plus a 2.5% COLA applied this year.
- Twenty-seven states fully exempt military retirement pay from state income tax. Florida, Texas, Nevada, South Dakota, and Wyoming have no income tax at all.
- California taxes military retirement at rates up to 13.3%, and New Jersey's 2.13% effective property tax rate makes it one of the costliest states for veteran homeowners regardless of income tax treatment.
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