Currently 14 of the 41 states that levy an income tax do not tax military retirement income. They include Massachusetts, New Jersey, New York, and Pennsylvania in the Northeast. The others are Alabama, Hawaii, Illinois, Iowa, Kansas, Louisiana, Michigan, Mississippi, Ohio, and Wisconsin. Additionally, beginning in 2016, Missouri will also start fully exempting military retirement income.
By law, Connecticut exempts 50% of federally taxable military retirement income from the state income tax (CGS § 12-701(20)(B)(xvii)). According to the Department of Revenue Services, for the 2012 tax year, 9,157 veterans claimed the exemption.
Read the full OLR report here.
