The best retirement states for military retirees are the ones that stack tax relief, base access, and health care on top of your pension. Nearly 1.8 million military retirees receive retired pay, according to Department of Defense actuarial data, and where that check lands can matter as much as how big it is.
Most retirees compare state income tax rates alone and miss the bigger picture: property tax breaks for disabled veterans, proximity to a commissary, and whether your Survivor Benefit Plan dollars get taxed twice. This guide ranks the strongest states, explains the trade-offs, and gives you a simple checklist to run before you pack.
Why Taxes and Base Access Drive the Best Retirement States for Military Retirees
The first thing to understand is that military retired pay is taxed by your state of residence, not the state where you earned it. The Department of Defense Office of the Actuary reports that retired pay totals run into the tens of billions of dollars annually, so a state that exempts it can save a retiree thousands each year.
There are three levers that matter most:
- Income tax treatment of retired pay. Nine states impose no personal income tax at all, and several more exempt military pensions specifically.
- Property tax relief. Many states offer homestead exemptions or full exemptions for veterans rated 100% disabled by the VA.
- Installation proximity. Access to commissaries, exchanges, and military treatment facilities stretches a fixed budget further.
Health care is the fourth lever. TRICARE For Life works nationwide, but proximity to a military treatment facility can reduce out-of-pocket costs and wait times for specialty care.
The catch is that no state wins on every lever. A no-income-tax state may have higher property taxes, and a state with generous veteran exemptions may tax other retirement income.
How to apply this: List your three biggest annual expenses — income tax, property tax, and health care — and score each candidate state on all three before you look at climate or housing.
Military retired pay follows your state of residence, so taxes shape which are the best retirement states for military retirees.
Comparing take-home pay across all fifty states quickly shows why taxes matter when ranking the best retirement states for military retirees.
Florida and Texas: The Zero-Income-Tax Favorites Among the Best Retirement States for Military Retirees
Florida and Texas both levy no personal income tax, which means your retired pay, VA disability compensation, and Thrift Savings Plan withdrawals all arrive untouched by state tax. Both states also host major installations and large veteran populations.
Florida adds a homestead exemption and a property tax discount for veterans with certain disability ratings. Texas offers a homestead exemption that increases with your VA disability rating, and veterans rated 100% permanently and totally disabled can qualify for a full exemption on the homestead.
The trade-offs are real. Property insurance in Florida has climbed sharply in recent years, and Texas property tax rates are among the highest in the nation before exemptions apply. Housing costs in popular metro areas in both states have risen too.
A common scenario is a retiree who moves for the income tax savings but is surprised by insurance and property tax bills. Run those numbers before you commit.
How to apply this: Use each state's official revenue department website to confirm current exemption rules, then get a property insurance quote for a specific address before you make an offer.
Florida and Texas levy no personal income tax, making them perennial favorites among the best retirement states for military retirees.
Both states host major installations and VA facilities, strengthening their case as the best retirement states for military retirees.
Washington, Nevada, and South Dakota: Quiet Contenders
Three more no-income-tax states deserve a serious look. Washington, Nevada, and South Dakota all skip personal income tax, and each has a distinct advantage for veterans.
- Washington has no income tax and a strong veteran service network, plus major installations including Joint Base Lewis-McChord.
- Nevada pairs no income tax with a lower overall cost of living than coastal states and a growing veteran community.
- South Dakota has no income tax, low property taxes in many counties, and a property tax exemption for certain disabled veterans.
The trade-off is climate and access. South Dakota winters are harsh, and all three states have fewer large military treatment facilities than the Southeast or Texas.
Consider a retiree who values outdoor recreation and low taxes but needs frequent specialty care. In that case, distance to a major VA medical center should outweigh a small tax difference.
How to apply this: Check the VA facility locator to measure drive time from any town you are considering to the nearest VA medical center and CBOC.
Washington, Nevada, and South Dakota skip income tax entirely, quietly earning spots among the best retirement states for military retirees.
Each of these three offers something distinct, yet all qualify as the best retirement states for military retirees on tax grounds alone.
The Best Retirement States for Military Retirees That Tax Other Income but Exempt Pensions
Some of the strongest options are states that do have an income tax but exempt military retired pay. This group often wins on quality of life, health care access, and veteran services.
| State | Retired pay taxed? | Standout benefit | Action to take |
|---|---|---|---|
| Florida | No income tax | Homestead exemption | Verify disability-based property relief |
| Texas | No income tax | 100% disabled homestead exemption | Confirm rating requirements |
| Washington | No income tax | Strong base access | Compare cost of living by county |
| Nevada | No income tax | Lower overall cost | Check VA clinic distance |
| South Dakota | No income tax | Disabled vet property exemption | Review county rules |
| Virginia | Partially exempt | Large veteran population | Confirm age-based exemption |
| Alabama | Exempt | Low property taxes | Check homestead rules |
Virginia, for instance, exempts a portion of military retired pay for taxpayers above a certain age, and Alabama exempts military retired pay from state income tax. Rules change, so always verify with the state's department of revenue.
How to apply this: Print this table, then replace each "action" column with the exact rule and phone number from the state's official site.
States that tax other income but exempt military pensions also rank among the best retirement states for military retirees.
Cost of Living, Health Care, and the Hidden Costs Nobody Mentions
Taxes are only part of the equation. The Council for Community and Economic Research publishes a Cost of Living Index that many financial planners use to compare regions, and the gap between a low-cost and high-cost state can exceed 40 index points.
Health care access matters just as much. TRICARE For Life covers Medicare-eligible retirees nationwide, but pharmacy copays and network availability vary by region.
- Housing: Check median home prices and insurance costs, not just list prices.
- Utilities: Extreme heat and cold both raise power bills.
- Transportation: Rural states may require two vehicles per household.
- Health care: Confirm specialist availability and VA wait times.
In one case, a retiree moved to a no-income-tax state and found that higher insurance and utility bills erased the tax savings within two years.
How to apply this: Build a one-page budget for each finalist state using real quotes for housing, insurance, and utilities, not national averages.
Cost of living and health care access can quietly outweigh tax savings when choosing the best retirement states for military retirees.
How to Verify Veteran Benefits Before You Move
Never rely on a blog post, including this one, for the final word on benefits. Verify directly with official sources before you sign a lease or buy a home.
The U.S. Department of Veterans Affairs publishes state-by-state benefit summaries, and each state's department of revenue or veterans affairs office publishes its own tax rules. The IRS explains that military retired pay is generally taxable at the federal level, so state treatment is the variable to confirm.
- Step 1: Pull your most recent Retiree Account Statement from DFAS.
- Step 2: Contact the state veterans affairs office for your top three states.
- Step 3: Ask specifically about retired pay, SBP annuities, and property tax relief.
- Step 4: Get answers in writing or save the official webpage.
Use DFAS myPay to download your statement and VA.gov to review state benefit summaries.
How to apply this: Email the veterans affairs office in your top state this week and ask for written confirmation of the retired pay exemption.
Confirm every benefit with official VA and state sources before committing to any of the best retirement states for military retirees.
Frequently Asked Questions About best retirement states for military retirees
What if I receive Survivor Benefit Plan payments — are they taxed differently?
SBP annuities are generally taxed as ordinary income at the federal level, and state treatment can differ from how retired pay is handled. Some states that exempt retired pay still tax survivor annuities. If your spouse will rely on SBP, confirm the survivor rules separately when comparing the best retirement states for military retirees.
How do I keep my state of legal residence if I move overseas?
You can generally retain a state of legal residence as long as you maintain ties such as a driver's license, voter registration, and a physical address. Military retirees living abroad should confirm domicile rules with a tax professional, since the best retirement states for military retirees only help if your residency is properly documented.
Does VA disability compensation count as income for state tax purposes?
VA disability compensation is not taxed at the federal level, and most states follow that treatment. A few states have unique rules for other veteran benefits, so verify locally. This distinction matters when you rank the best retirement states for military retirees, because disability income can represent a large share of your total.
What happens if I move mid-year — do I owe tax in two states?
Most states tax income based on residency days or source rules, so a mid-year move can create filing obligations in both states. Keep your move date documented and consult a tax preparer. When evaluating the best retirement states for military retirees, plan the timing of your move to avoid a surprise dual filing.
Are there states that are especially bad for military retirees?
States with high income tax and no military pension exclusion can cost you the most. California and New York, for instance, tax most retirement income and have high property costs. That does not make them wrong choices, but the best retirement states for military retirees usually offer at least one meaningful tax or benefit advantage.
Conclusion
Choosing where to retire is a math problem wrapped in a lifestyle decision. Keep these takeaways in mind:
- No-income-tax states like Florida, Texas, and Washington offer the simplest savings on retired pay.
- Property tax relief for disabled veterans can outweigh income tax differences.
- Cost of living, insurance, and health care access often decide the real winner.
- Always verify rules with official state and VA sources before you move.
Start this week by pulling your DFAS statement and requesting written benefit details from your top three states. The best retirement states for military retirees are the ones that fit your budget and your life, and a little verification now saves years of regret.
