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Virginia State Tax

Does Virginia tax military retirement pay?

Partly. Virginia lets you subtract up to $40,000 of it a year.That limit holds from the 2025 tax year on, at any age. Across the line, Maryland's limit is lower: up to $12,500 under age 55, or $20,000 at 55 or older.

This page shows what each state does with your retired pay, a surviving spouse's payments and your other income.

Virginia, Maryland and federal law sourcedChecked October 2026

Start Here

How Virginia's limit works

Virginia law lets each person who gets military retirement pay subtract up to $40,000 of it a year. A subtraction takes that pay out of the income Virginia taxes.

The $40,000 limit is for the 2025 tax year and later, and there is no age test. You claim it on Virginia's Schedule ADJ, with subtraction code 60. Pay above $40,000 is taxed unless another Virginia rule covers it.

Two conditions come with it. The pay has to be counted on your federal return first. And you cannot use the same dollars for this and another Virginia or federal tax break.

Virginia Tax says Thrift Savings Plan withdrawals do not count, and neither do civil service pensions, like the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).

A bill to remove the limit failed in Virginia's 2026 session, so the limit is still $40,000.

Sources: Code of Virginia, Section 58.1-322.02 (subdivision 18). Virginia Tax, Military Benefits Subtraction FAQ. Virginia Tax, 2025 Form 760 instructions (Schedule ADJ, code 60). Virginia General Assembly, HB588 (2026). All retrieved 30 October 2026.

What The Line Changes

Virginia or Maryland

Federal law says a state cannot tax the retirement income of someone who is not its resident and does not keep their legal home there, and that includes military retired pay. Each state uses its own law to decide who its residents are.

So the state where you are a resident decides, not where you served or where you retired from.

You live in Virginia

Virginia resident
Military retired pay

Up to $40,000 a year subtracted

From the 2025 tax year on, at any age. You claim it on Schedule ADJ, code 60.

Married, both retired

Each of you, up to $40,000

Virginia Tax says each spouse can take the full subtraction for the military retirement pay each one gets.

A surviving spouse

Inside the same limit

Virginia's law names Survivor Benefit Plan payments to a veteran's surviving spouse, and other military benefits paid to one.

Your other income

Taxed by Virginia's rules

Virginia subtracts taxable Social Security benefits. Virginia Tax says you can take the military retirement subtraction and Virginia's age deduction on the same return, if you qualify for both.

You live in Maryland

Maryland resident
Military retired pay

Up to $12,500 a year, or $20,000 at 55 or older

Your age on the last day of the tax year decides which. The pay has to be on your federal return first. You claim it on Form 502SU, line u.

Married, both retired

Each of you, by your own age

Maryland's limit is for each person who gets this pay.

A surviving spouse

Can claim it

Maryland's rule includes death benefits from military service, and the Comptroller says a surviving spouse can claim the subtraction.

Your other income

Taxed by Maryland's rules, and your county's

Maryland's counties and Baltimore City also tax a resident's income, on the same return. Social Security benefits are exempt from Maryland tax. Maryland's pension exclusion has its own tests.

So the line changes how much of your retired pay each state leaves out, and Maryland adds a county income tax. Above each state's limit, the rest is taxed unless another rule in that state covers it.

Every other state sets its own rule. If you are looking across a different state line, ask that state's tax agency how it treats military retired pay.

Sources: 4 U.S. Code 114. Code of Virginia, Section 58.1-322.02. Virginia Tax, Military Benefits Subtraction FAQ. Virginia Tax, 2025 Form 760 instructions. Maryland Code, Tax-General, Section 10-207 (subsection q). Comptroller of Maryland, 2025 resident tax booklet. Comptroller of Maryland, 2025 Form 502SU. Comptroller of Maryland, Administrative Release 23. All retrieved 30 October 2026.

When You Move

Check your state withholding

DFAS, the Defense Finance and Accounting Service, can take state income tax out of your retired pay for one state at a time.

You can start, stop or change it in myPay, or with DD Form 2866. DFAS's table lists both Virginia and Maryland as states it can withhold for. If you move across the line, check which state your retired pay is set to.

DFAS says it cannot take state tax out for annuitants. DFAS calls people who get Survivor Benefit Plan payments "SBP annuitants".

This page is about state tax. DFAS says whether some or all of your retired pay is taxed by the federal government depends on your own case.

Sources: DFAS, How to Start, Stop or Change State Income Tax Withholding from Your Military Retired Pay. DFAS, Taxes. DFAS, Is it Taxable?. All retrieved 30 October 2026.

Before You Buy

What to ask before you choose a side

Ask these before you sign, so the tax is part of the plan.

  1. Which state will I live in, and what does that state's law say makes me a resident?
  2. How much of my retired pay is above each state's limit?
  3. If I live in Maryland, what will my county's income tax add?
  4. If my spouse would get Survivor Benefit Plan payments, how would each state count them?
  5. Is my state withholding in myPay set to the right state?
  6. What about property and sales taxes? This page covers only income tax.

This page is not legal or tax advice. Virginia Tax and the Comptroller of Maryland decide how a return in their state is treated. Ask a tax professional about your own case.

A page can explain the tax rule.Someone who works this market can walk a specific home with you.

John Y. Ford is a Mission Ready Operator who helps active duty service members and defense professionals buy and sell homes in Prince William County, Quantico and the Fort Belvoir corridor, on a timeline built from the report date or the day they start work.

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Last reviewed October 2026 · Maintained by My Military HQ

Common Questions

Questions retirees ask about Virginia tax

Does Virginia tax military retirement pay?

Partly. From the 2025 tax year on, each Virginia resident who gets military retirement pay can subtract up to $40,000 of it a year, at any age. The pay has to be counted on the federal return first. Pay above $40,000 is taxed unless another Virginia rule covers it.

Will Virginia remove its $40,000 limit on military retirement pay?

Not under the law today. A 2026 bill to remove Virginia's limit failed, so the limit for the 2025 tax year and later is still $40,000. Check Virginia Tax before you file, in case the law changes.

Does Maryland tax military retirement pay?

Partly. A Maryland resident can subtract up to $12,500 of military retirement pay a year if they are under 55 on the last day of the tax year, or up to $20,000 if they are 55 or older. The pay has to be counted on the federal return first. Maryland's counties and Baltimore City also tax a resident's income.

Do Virginia and Maryland tax active duty military pay?

Yes, with some subtractions for residents. Virginia lets a resident on extended active duty for more than 90 days in a row subtract up to $15,000 of military basic pay. That amount shrinks dollar for dollar as basic pay goes over $15,000, and ends at $30,000. If you take it, you cannot also claim Virginia's credit for low-income people or its earned income credits. Virginia also has its own subtraction for combat zone pay. Maryland's $15,000 subtraction is only for a resident's active duty pay earned outside the United States. It shrinks as total military pay goes over $15,000, and ends above $30,000.

Does Virginia tax a surviving spouse's Survivor Benefit Plan payments?

Virginia lets a veteran's surviving spouse subtract Survivor Benefit Plan payments, inside the same $40,000 a year limit. In Maryland, the rule includes death benefits from military service, and the Comptroller of Maryland says a surviving spouse can claim the subtraction.

Does Virginia's military retirement subtraction cover a civil service pension or the TSP?

No. Virginia Tax says Thrift Savings Plan withdrawals and civil service pensions, like the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS), are not military benefits. That is true even if you moved your military years into the civil service plan.

If I move to Virginia, can the state I retired from tax my military retirement pay?

Not once you are no longer its resident and your legal home is somewhere else. Federal law says a state cannot tax the retirement income of someone who is not its resident and does not keep their legal home there, and that includes military retired pay. Each state uses its own law to decide who its residents are. As a Virginia resident, Virginia's rules apply.

How do I change state tax withholding on my military retirement pay?

Use myPay, or send DD Form 2866, says DFAS, the Defense Finance and Accounting Service. DFAS takes out tax for one state at a time, and its table lists both Virginia and Maryland as states it can withhold for. DFAS cannot take out state tax for annuitants. If you move, check which state your retired pay is set to.

Sources

Where every fact came from

Everything on this page comes from Virginia law, Maryland law, federal law, or the agencies that apply them. Where they do not say something, we left it out.

What we left out on purpose. We give no tax rates or county rates, because they change, and we do not say how much you would save, because that depends on your whole return. We cover only income tax, not property or sales tax. We cover only Virginia and Maryland, because each other state sets its own rule. We leave out Virginia's smaller limits and age test before the 2025 tax year, the terms of Maryland's pension exclusion, and the forms for a year you move in or out. Virginia's rule names the Armed Forces: if you retired from the Public Health Service or the commissioned corps of the National Oceanic and Atmospheric Administration, ask Virginia Tax. Maryland's Administrative Release 23 dates from 2009 and its dollar amounts are older law, so we use it only for the surviving spouse point. And apart from the one failed 2026 bill named above, we leave out bills in either state that have not become law.

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