Arizona Might Become The 14th State To Not Tax Military Pensions

Published: Sunday, January 19, 2020 - 3:15pm

During his State of the State address, the governor announced a plan to eliminate the state income tax on all pensions paid to armed forces retirees.

Since 1989, the first $2,500 earned on a military pension have been exempt from the state income tax. In 2019, the state legislature increased that to $3,500. Military pensions are still subject to federal income taxes.

"The government shouldn’t be taxing their service to country," Ducey said. "It should be honoring their service to country. Our budget does this by eliminating all state income taxes on our veterans’ military pensions once and for all."

This is part of what the governor says is an effort to attract more veterans to Arizona.

"We have a goal: To make Arizona home base for veterans everywhere in the country," Ducey said. "These women and men make our state stronger. To all our veterans, everywhere, from California to New York State, Arizona wants you. All of you. You’ve put our country first; now with this budget, Arizona will put you first."

Arizona ranks 11th in the number of military veterans, with more than 600,000. Close to one-third of them have service connected disabilities, according to the Census Bureau.

Thirteen other states currently exempt military retirement income from the state income tax.

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