Military taxes are an exemption for many retirees in an increasing number of states. West Virginia is the most recent addition, just after Arkansas passed a law that will end taxation on military pay in 2018. There are many perceived benefits to ending taxation for military retirees, especially for states looking to lure new residents with high earning potential and employable skills.
In the past, $20,000 of military retirement was not taxed at the state level in West Virginia. Other states offered exemptions for retirees such as property tax exemptions that offers great benefits for retirees who are just settling in after years in the military.
After the laws exempting taxation on military pay for retirees in West Virginia and Arkansas are passed this year, remaining states to tax military pay are California, Montana, Rhode Island, Virginia, Utah, Vermont, to name a few.
The recent years have seen an increasing number of states lifting taxation on military pay for retirees. The argument for this is that military retirees bring skills and increased earning potential to their home states, especially since many retirees are in their prime earning years when they return to private life. Military retirees come with skills, training, and education that are a lure to states looking for residents. States that can attract this group can benefit from property taxes, income taxes, sales taxes and other forms of taxable income as these retirees pick up secondary careers.
While cutting state taxes on military pay is a sound strategy to lure a desirable group such as military retirees, many studies on the cost-effectiveness of this strategy have yielded conflicting results. There are those who say there are no clear-cut benefits from eliminating taxation on retirees because this does not always draw a sure flow of veterans. Exemptions on military pay often benefit current residents, since many retirees choose secondary residence or retirement locations based on a myriad of factors such as quality of life, family-related factors and earning potential.
This is the reason why so many states are still hesitant about placing tax exemptions on military pay when the benefits are not certain. The lost revenue from these taxes has to be made up through other ways, which generates additional costs.
There are many tax benefits open to military retirees. However, only a small percentage of retirees are aware that these benefits are available to them, while some have very little knowledge of these benefits and how to avail of them. It is helpful to work with professional accounting and finance firms who can help retirees choose new retirement locations while taking potential tax exemptions in mind. This not only benefits them financially, it also supports state efforts to draw skilled and educated veterans to their states.
Get in touch with us at www.lonestartaxgroup.com for sound advice on tax exemptions and how you can benefit from state programs that offer these for military retirees.
Lone Star Tax Group