Best States for Military Retirees in 2026

Military retirement pay averages over $40,000 annually for a 20-year E7, and more than half of all states now fully exempt it from income tax. The state you pick on retirement day is one of the highest-value financial decisions you will ever make.

The Tax Picture Has Shifted Dramatically

As of 2026, 43 states either fully exempt military retirement pay from state income tax or have no state income tax at all. That is a significant expansion from just a decade ago, when fewer than 30 states offered full exemption. The holdouts, including California and Vermont, still tax military retirement income at ordinary income tax rates, which means California can take up to 13.3% of your pension.

For context, a retired E7 with 20 years pulling roughly $42,000 per year in retirement pay loses more than $5,500 annually to California's income tax compared to a retiree in Florida or Texas. Over a 20-year retirement, that gap exceeds $110,000 before investment growth. If you want to see how that math applies to your specific pay grade and state, run the numbers with our retirement tax calculator.

For a deeper breakdown of states where retirees keep the most, see our post on the best states for retirees to avoid taxes.

The Top States for Military Retirees in 2026

Florida remains the consensus top pick. No state income tax, full military retirement pay exemption, no estate tax, and a cost of living index that sits around 102 (just above the national baseline of 100). The VA medical center network in Florida is one of the densest in the country, with major facilities in Tampa, Orlando, Miami, and Jacksonville, all of which sit near active installations.

Texas is the other obvious answer. No income tax, no tax on military retirement pay, and a cost of living index around 93 in cities like San Antonio, which also hosts one of the largest military retiree populations in the United States. Property taxes are the one asterisk: Texas averages around 1.60% effective property tax, which is high compared to southern competitors. That said, the absence of income tax still produces net savings for most retirees.

South Carolina is the underrated pick. It fully exempts military retirement pay, has an effective property tax rate of just 0.57%, and offers additional veteran property tax exemptions for those with service-connected disabilities. The cost of living index in cities like Greenville and Columbia runs around 88 to 92. Winters are mild and the state sits within driving distance of multiple VA facilities.

Nevada earns a spot for retirees who want the West Coast climate without the West Coast tax bill. No state income tax, no tax on military retirement, and a cost of living index around 105 in Reno and slightly higher in Las Vegas. Nevada also has no estate tax, which matters if you are thinking about what you leave behind. See our analysis of estate tax by state for the full picture.

Wyoming rounds out the top five. No state income tax, the lowest overall tax burden of any state by several measures, and a cost of living index around 90. It is not for everyone given the winters and the sparse VA infrastructure, but for retirees who own property and want maximum tax efficiency, it competes with anything in the South.

What Beyond Taxes Actually Matters

Tax policy is the biggest lever, but VA healthcare access is the one that catches retirees off guard. States with dense VA networks, like Florida, Texas, Virginia, and Georgia, give retirees genuine options. States with thin VA coverage can mean driving 90 minutes for a specialist appointment.

Employment matters too for the large share of military retirees who continue working. States near active installations have the deepest markets for defense contractor and federal civilian jobs. Virginia, Texas, and Florida dominate that category. Wyoming and Montana do not.

Property tax divergence is real and often overlooked. South Carolina's 0.57% effective rate versus Texas's 1.60% is a $10,000 annual difference on a $1 million home. On a $400,000 home it is still over $4,000 per year.

Key Takeaways

• A retired E7 with 20 years of service earns approximately $42,000 annually in retirement pay. California's top rate of 13.3% costs that retiree more than $5,500 per year compared to a no-tax state.
• As of 2026, 43 states fully exempt military retirement pay from income tax or have no income tax at all.
• Florida, Texas, South Carolina, Nevada, and Wyoming offer the strongest combined profile of tax savings, cost of living, and veteran services for most military retirees.

Your best state depends on your pay grade, disability rating, property plans, and how close you need to be to VA care. Compare every state head to head using our state comparison tool and see exactly what you keep.