How Military Retirement Is Taxed

Retirement pay = federal taxable income at your marginal rate. Many states exempt it — check our state pages. VA disability portion is tax-free. Under CRDP, VA pay remains tax-free while retirement is taxable. CRSC is entirely tax-free.

First year tip: retirement pay may not have sufficient withholding. Set up withholding via myPay or make quarterly estimated payments to avoid April surprise.