Getting out, military retirement, military to civilian transition - Navy Times

Other benefits: Taxes

Most retirement pay is subject to federal income taxes. So are SBP benefits. Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax.

VA benefits are not taxable because they generally are for disabilities. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.

Individual states have their own rules regarding military retired pay. Some follow federal guidelines. Others have no tax on military retired pay or grant exemptions.

For guidance, check with the revenue service in the state where you claim residency. Retirees also can have state income taxes withheld from their military retirement pay.