Military Taxes: In-Depth Guide & Helpful Links to File

Military pay isn’t always subject to the same tax rules as civilian pay.

Yes, your base salary is taxed at ordinary income rates, but income earned in a designated combat zone and certain allowances, such as BAH and BAS, aren’t taxed at all at the federal level.

Furthermore, the rules may change depending on whether you’re active duty, reserve, retired, deployed, or married to someone in uniform. This guide covers how federal and state taxes apply to military income: what you owe, what’s exempt, and how to file without paying for help you can get for free.

Your federal income tax liability depends on your status and the type of pay involved.

Active-duty members and reservists both owe federal income tax on military base pay, but not on certain types of allowances. The kind of income each earns determines how much the government can reach.

Active Duty and Reserves

Active-duty service members and reservists both pay federal income tax on their base pay. Reservists owe federal tax on income earned during drill and annual training, as well as on their civilian paychecks.

All base pay, which is your basic salary, is subject to federal income tax, Social Security, and Medicare. For a full breakdown of how federal taxes apply to military personnel, refer to IRS Publication 3 (Armed Forces Tax Guide) or consult a tax professional.

The following items are generally not subject to federal income tax:

• Basic Allowance for Housing (BAH).
• Basic Allowance for Subsistence (BAS).
• Family Separation Allowance, which is approximately $250 per month for members deployed away from their dependents for extended periods, and it remains tax-free regardless of the member’s location.
• Pay drawn during any month spent in a designated combat zone.

How much combat-zone pay you can shield depends on your rank:

Note: Special and incentive pays earned outside a combat zone, such as flight, jump, and dive pay, remain fully taxable, regardless of rank.

Veterans

Many Veterans have certain tax-exempt allowances, such as:

• Disability payments
• GI Bill BAH

These are considered government benefits (just like BAH, etc) and therefore non-taxable. But you pay regular taxes on your income just like any civilian. There are no blanket federal tax exemptions for disabled Veterans. However, some disabled Veterans can apply for special considerations only if they meet specific circumstances related to their disability.

Retirees

A military pension, unlike disability benefits, qualifies as military income, much like a regular salary. That means the pension is subject to federal income tax. However, unlike active-duty base pay, retirement pay is not subject to Social Security or Medicare (FICA) withholding.

Military Spouses

Military spouses pay federal taxes on their jobs just like any other civilian job. However, if they file jointly with their spouse, they have access to the same filing programs and benefits as their spouse.

Unlike federal taxes, which all currently serving personnel pay on their income, state taxes vary widely for service members.

Remember: you pay state taxes in the state of your legal residence, not in the state you’re currently stationed.

Here’s how the state tax rates break down for different segments of the military community.

Active Duty and Reserves

Many states tax military income on the same basis as the federal system, applying only standard income percentages. Others do not tax military pay, though some of these require you to fill out a waiver to qualify for exemption or have other stipulations on how much they tax you. Other states just don’t have income taxes at all.

If you’re a legal resident of one of the following states, you will not be required to pay state income taxes:

• Alaska
• Florida
• Nevada
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

All others should check their state’s government website to learn the specific regulations.

Veterans Benefits

Many VA-administered benefits are non-taxable, including disability compensation, disability pension payments, education and training allowances, and certain rehabilitation benefits.

Veterans receiving VA disability compensation and other Veterans benefits still pay tax on taxable civilian income and other taxable income.

Military Retirees

Nearly all states exempt military retirement pay, either fully or partially. California and Washington, D.C., are the only jurisdictions that tax it like regular income, though California offers a partial exclusion for eligible retirees. A handful of states — including Maryland, Oregon, Delaware, Montana, and New Mexico — offer limited partial exemptions. All others either fully exempt military retirement pay or have no state income tax at all.

Military retirement pay is tax-free in most states.

Military pensions are taxable income in the District of Columbia.

California taxes military retirement pay, but allows a $20,000 deduction for single filers with incomes below $125,000 and joint filers with incomes below $250,000.

A shifting group of states taxes military retirement pay only partially, with breaks keyed to age, income, or the retiree’s service. Currently, these states include Colorado, Delaware, Georgia, Idaho, Kentucky, Maryland, Montana, New Mexico, Oregon, Vermont, Virginia, and West Virginia.

State-level tax exemptions for military retirement pay vary widely, and several states have moved from partial to full exemptions in the past few years. A retiree should confirm the current rule with the state’s tax authority before relying on it.

Which State Should Military Spouses Choose to File In?

The Military Spouses Residency Relief Act (MSRRA) of 2009 allows spouses who relocate due to a service member’s orders to retain their existing legal residence.

In 2018, the Veterans Benefits and Transition Act expanded that benefit, allowing military spouses to claim the service member’s legal residence, even if they have no history of living there. The purpose of the act was to allow military households ways to simplify their tax filing. It has the added benefit of allowing spouses to choose whichever applicable state has the most beneficial tax system.

This gives military families one of three choices:

• File in the state service member’s current legal residence
• File in the state where the service member is currently stationed
• File in the state of the spouse’s legal residence.

Most military families choose the state with the lowest state income tax.

Okay, so you know what taxes apply to you and why. Now comes the actual hard part: filing and paying them. Luckily, there are some great assets out there to help you get this process over with as painlessly as possible.

Active Duty and Reserves

If you are currently serving in some capacity, you probably have enough on your plate without having to worry about figuring out how much you owe and how to pay it. Luckily, there are a few great options for help with your taxes.

1. VITA: The IRS’s Volunteer Income Tax Assistance program operates tax centers near military bases nationwide, providing free tax services to active-duty, reserve, and retired personnel, staffed by specialists in military taxes. You can find your nearest location on the IRS website.
2. MilTax: Prefer to file from home? Military OneSource offers free tax software and access to professionals via online chat, phone, or in person. MilTax software and expert consultations are free for active-duty service members, eligible family members, survivors, and recent Veterans up to 365 days after separation or retirement; eligibility is verified through DEERS.

Tax Services for Veterans

There are no government-run programs to help Veterans generally prepare and file their taxes, but several organizations and companies offer assistance and/or discounts to eligible Veterans.

1. MyFreeTaxes: A program run by the United Way, MyFreeTaxes offers free online tax filing for individuals who meet certain income and eligibility requirements.
2. IRS Free File partners: As of 2026, anyone with an adjusted gross income of $89,000 or less can prepare and file a federal return at no charge through a Free File partner.A number of these providers waive their fee for active-duty members, in some cases with no income ceiling.To use an IRS Free File partner, visit irs.gov/freefile and run the lookup tool to see which partner best fits your situation. Skip the brand names you might expect here: H&R Block dropped out of the program in 2020 and TurboTax in 2021, so neither belongs to IRS Free File anymore. Their own no-cost tiers can still tack on charges once a return gets complicated, which is why starting from the IRS page pays off.
3. Online Taxes (OLT): OLT also partners with the IRS Free File program and provides free filing for those who meet current eligibility guidelines.

Military Retirees

In addition to qualifying for VITA, many retirees may now or will someday qualify for Tax Counseling for the Elderly (TCE). TCE is similar to VITA in that it provides free tax services to those who qualify, but as its name implies, it’s for anyone 60 or older (retirees, Veterans, or civilians). Their personnel have specialized expertise in tax issues related to retirement and pensions.

Military Spouses

While there are no tax-filing programs established solely for military spouses, as we mentioned above, those filing jointly with their service members can take advantage of programs like VITA and MilTax.

For the 2026 filing season, the IRS Free File program is open to taxpayers with adjusted gross income of $89,000 or less.

If your earnings are higher than that, you can still file at no cost using Free File Fillable Forms, which are electronic versions of the paper forms and have no income limit.

The April 15th filing deadline applies to most service members, so the sooner you file after receiving your W-2s, the sooner you can receive any refunds owed to you.

If you served in a combat zone during the tax year, you automatically qualify for a filing extension, but don’t wait if you don’t need to.

Whether you use MilTax, VITA, or file on your own, getting your return in early means one less thing on your plate.

For more guidance on military pay, benefits, and PCS resources, check on AHRN.