Which States Don't Tax Military Pay? 2026 State-by-State Guide

This guide reflects our best understanding of 2026 state tax rules for active-duty military members. State tax laws change frequently — sometimes mid-year. Verify your specific situation with your state's department of revenue or a tax professional before making decisions. This is educational information, not tax advice.

Most service members know that BAH and BAS are tax-free. Fewer realize that the state they claim as their legal residence — not where their orders send them — determines whether their base pay itself gets taxed at the state level. That decision is one of the most controllable financial levers in military life.

Why state taxes matter more for military than for civilians

Under the Servicemembers Civil Relief Act (SCRA), your duty station state cannot tax your military pay if you're not a legal resident of that state. A service member stationed in California but with a legal residence in Texas pays no California state income tax on their military wages.

This means the relevant question isn't "where are you stationed?" — it's "where is your state of legal residence, and how does that state treat military pay?"

For an E-6 with 10 years of service earning approximately $57,000 in base pay:

These numbers don't account for base pay growth over a career, making the actual lifetime difference even larger. Your state of legal residence is worth real money.

The nine states with no income tax

These states impose no income tax on earned income. Military pay — like all earned income — is completely untaxed by the state, regardless of military status.

1. Alaska — No state income tax
2. Florida — No state income tax
3. Nevada — No state income tax
4. New Hampshire — No tax on wages or earned income (taxes certain investment income; verify current rules)
5. South Dakota — No state income tax
6. Tennessee — No state income tax on wages (eliminated investment income tax in 2022)
7. Texas — No state income tax
8. Washington — No state income tax on wages (has capital gains tax; verify current rules)
9. Wyoming — No state income tax

If your legal residence is one of these states, your military base pay is entirely free from state income tax.

States that fully exempt active-duty military pay

These states have a state income tax but specifically exempt active-duty military pay for their residents. The legislation behind these exemptions has expanded significantly over the last several years as states have competed to attract military families and honor service members' contributions.

States I'm confident have enacted full exemptions for active-duty military pay (verify for your specific situation):

• Arkansas — Active-duty military pay exempt
• Illinois — Military pay fully exempt under state statute
• Indiana — Active-duty pay exempt
• Iowa — Military pay exempt for active-duty members
• Kansas — Active-duty pay exempt
• Louisiana — Active-duty military pay exempt
• Michigan — Active-duty pay exempt
• Minnesota — Military pay exempt for active-duty members
• Mississippi — All active-duty military pay fully exempt
• Missouri — Active-duty military pay exempt
• Nebraska — Military pay exempt
• New Jersey — Active-duty military pay exempt
• Ohio — Active-duty pay exempt
• Oklahoma — Active-duty military pay exempt
• Oregon — Pay from active federal service exempt
• Pennsylvania — Military pay exempt

Note: Even states with full exemptions may have conditions, income thresholds, or residency requirements. Confirm your state's current rules with the state department of revenue or a military tax resource.

States with partial exemptions or complex rules

These states have some form of military pay benefit, but the rules involve thresholds, conditions, or situations that make a blanket statement difficult. Verify the specific rules with your state.

• Colorado — Military pay subtraction available up to a specified annual amount (verify current limit for 2026)
• Delaware — Some military pay deductions available (verify)
• Georgia — Military pay exemption available (verify current rules and amounts)
• Hawaii — Partial military pay exemption (verify)
• Idaho — Some military pay deductions (verify)
• Kentucky — Active-duty pay exemption (verify current status)
• Maine — Some exemption available for active-duty members (verify)
• Maryland — Military pay subtraction available (verify current amount)
• Massachusetts — Active-duty pay of non-Massachusetts-resident members is protected by SCRA; Massachusetts residents serving outside the state may have exemptions (verify)
• Montana — Some military pay deductions (verify)
• New Mexico — Some military pay deductions (verify)
• North Carolina — Active-duty pay may be exempt for members stationed outside NC or in certain categories (verify)
• Rhode Island — Military pay exemption (verify current rules)
• South Carolina — Some military pay exemption available (verify current threshold and rules)
• Utah — Military pay deductions available (verify)
• Vermont — Some military pay exemptions (verify)
• Virginia — Non-Virginia-domiciled members are protected by SCRA; active-duty residents stationed outside Virginia may have exemptions (verify)
• West Virginia — Military pay exemption (verify current rules)
• Wisconsin — Military pay deductions available (verify)

States that tax military pay with no broad exemption

These states generally tax their residents' military pay without a broad active-duty exemption. Being a legal resident of one of these states while serving means you may owe state income tax on your base pay.

• Alabama — Military pay generally taxable; verify whether any exemptions apply for your situation
• Arizona — Verify current rules; some exemptions may apply
• California — California taxes its residents' military pay even if they're stationed outside the state. California does not have a general active-duty military pay exemption. This is the most commonly cited example of a state that pursues its residents' income regardless of military service location.
• Connecticut — Verify current rules; some exemptions may apply
• New York — Some exemptions available; verify current rules
• North Dakota — Verify current rules

Important about California: California's aggressive income tax enforcement applies to residents even when they're stationed across the country or overseas. If California is your legal residence and you're seeking to change it, consult a tax professional familiar with California's domicile rules — California sets a high bar for establishing that you've abandoned California residency.

The 50-state reference

This table reflects our best understanding of 2026 rules compiled from state tax authority sources and military pay resources. State tax laws change. Verify any state in this table with the relevant state tax authority before making legal residence decisions.

How to change your state of legal residence

Military members can maintain their original home of record or change their state of legal residence. The key concept is domicile — the state you consider your permanent home and intend to return to.

The process generally involves:

1. Filing DD Form 2058 (State of Legal Residence Certificate) with your finance office
2. Updating your state of legal residence in DEERS
3. Updating your withholding elections in myPay to reflect the new state
4. Filing a final-year or part-year return with your previous state (if required)
5. Establishing meaningful ties to your new domicile state (voter registration, driver's license, vehicle registration, bank accounts)

The SCRA protects your right to maintain your original domicile even when stationed far away. You don't have to change your legal residence just because you get PCS orders. Conversely, you can establish a new domicile if you genuinely intend to make a different state your permanent home.

The California caveat applies here too: California applies strict standards to determine whether someone has truly abandoned California domicile. If you're trying to leave California's tax jurisdiction, consult a tax professional who understands California's specific rules.

Spouse considerations: MSRRA

The Military Spouses Residency Relief Act (MSRRA) allows military spouses to use the service member's state of legal residence for tax purposes — even if the spouse has never lived there and even if the couple has long since moved away.

For a dual-income military family where one spouse earns civilian income, MSRRA can eliminate or reduce state income tax on that civilian income. A family stationed in California where the service member's legal residence is Texas may be able to claim MSRRA exemption on the spouse's civilian income as well.

MSRRA rules are complex and have changed since the law's original passage. Requirements include that the spouse is present in the new state solely to be with the service member, and that the spouse has the same domicile as the service member. Consult a military tax resource or professional before applying MSRRA to a spouse's civilian income.

Common mistakes

Assuming your legal residence is where you're stationed. It's not, unless you've actively established it there. Where you receive mail and where your orders send you are not necessarily your legal residence.

Not updating withholding after a legal residence change. Changing your DD Form 2058 doesn't automatically update your withholding in myPay. You need to do both steps.

Forgetting that you have a choice. Most service members don't realize their legal residence is actually a decision they control. Many default to their home of record from recruitment and never reconsider it, even after moving multiple times.

Changing too quickly. Changing your legal residence has implications beyond taxes: voting, vehicle registration, hunting/fishing licenses, bar admissions, and professional licensing. The tax savings are real, but think about where you genuinely plan to live after service before establishing legal residence somewhere new.

Not verifying what your state actually says. This guide is a starting point. Tax laws change. An exemption that was partial in 2024 may be full in 2026, or vice versa. Before making decisions based on state tax rules, read the actual state guidance or ask a military tax resource like Military OneSource's free tax prep services.

The bottom line

Your state of legal residence is one of the few financial levers you actually control in military life. Over a 20-year career, the difference between living in California (taxed) and Texas (no income tax) can exceed $50,000 in cumulative state income tax on base pay alone.

That doesn't mean everyone should rush to establish legal residence in Texas. Where you plan to retire, where your family has ties, where you own property, where your professional licenses are — all of these matter beyond the tax question. But understanding the financial impact of your legal residence decision is the first step to making it intentionally rather than by default.

For a full picture of your compensation including the tax advantage of your allowances, see the Total Compensation Calculator. For a side-by-side comparison of what different duty stations mean for your paycheck, see Compare Your PCS Move.

Sources: SCRA (50 U.S.C. § 3901 et seq.), Military Spouses Residency Relief Act, individual state department of revenue guidance. This guide is educational, not tax advice. Consult a tax professional for your specific situation.