Military retirement pay in California
Varies
Does California Tax Military Retirement Pay?
Short answer: Partly. For tax years 2025 through 2029, California lets retirees exclude up to $20,000 of military retired pay if federal AGI is $125,000 or less ($250,000 for joint filers and surviving spouses); retirees above those limits are taxed in full. A separate exclusion of up to $20,000 applies to DoD Survivor Benefit Plan annuities, with the same AGI limits. Before 2025 California taxed military retired pay fully. SB 1407 (2026), which would raise both caps to $40,000 from 2026 and extend them through 2036, passed the Senate but was held in Assembly Appropriations on Aug. 13, 2026, so it is not law. Other retirement income: Pensions and 401(k)/IRA withdrawals are fully taxed as ordinary income; California has no retirement income exclusion.
Military retired pay is taxable federally; VA disability compensation isn't taxed federally or by any state.
Records to keep: Keep your state return, W-2s and 1099s (1099-R, SSA-1099), and any state credit worksheets. Check your state revenue department's current-year instructions before you file.
Military retirement pay in California
Varies
Individuals / Personal Taxes
Partly. For tax years 2025 through 2029, California lets retirees exclude up to $20,000 of military retired pay if federal AGI is $125,000 or less ($250,000 for joint filers and surviving spouses); retirees above those limits are taxed in full. A separate exclusion of up to $20,000 applies to DoD Survivor Benefit Plan annuities, with the same AGI limits. Before 2025 California taxed military retired pay fully. SB 1407 (2026), which would raise both caps to $40,000 from 2026 and extend them through 2036, passed the Senate but was held in Assembly Appropriations on Aug. 13, 2026, so it is not law. Other retirement income: Pensions and 401(k)/IRA withdrawals are fully taxed as ordinary income; California has no retirement income exclusion.
Business justification
Partly. For tax years 2025 through 2029, California lets retirees exclude up to $20,000 of military retired pay if federal AGI is $125,000 or less ($250,000 for joint filers and surviving spouses); retirees above those limits are taxed in full. A separate exclusion of up to $20,000 applies to DoD Survivor Benefit Plan annuities, with the same AGI limits. Before 2025 California taxed military retired pay fully. SB 1407 (2026), which would raise both caps to $40,000 from 2026 and extend them through 2036, passed the Senate but was held in Assembly Appropriations on Aug. 13, 2026, so it is not law. Other retirement income: Pensions and 401(k)/IRA withdrawals are fully taxed as ordinary income; California has no retirement income exclusion. Military retired pay is taxable federally; VA disability compensation isn't taxed federally or by any state.
Category
- Personal Tax Deductions