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Military Retired Pay — $15,000 Subtracted Under 55, a Different Rule After

A retired service member under 55 at the end of the tax year subtracts up to $15,000 of military retired pay from taxable income. At 55 that subtraction stops and the general pension and annuity subtraction takes over instead — one or the other, never both.

Verified August 25, 2026

What this benefit is

A retired service member under 55 at the end of the tax year subtracts up to $15,000 of military retired pay from taxable income. At 55 that subtraction stops and the general pension and annuity subtraction takes over instead — one or the other, never both.

What it's worth: Up to $15,000 of military retired pay subtracted, for a retiree under 55 at year end

  • The $15,000 limit has held since tax year 2022 and the department publishes it unchanged through tax year 2028.
  • It grew to that level in steps: $4,500 for 2019, $7,500 for 2020, $10,000 for 2021, then $15,000 from 2022 onward.
  • The subtraction reaches only military retirement benefits that are included in federal taxable income.
  • Age is tested at the end of the tax year, so the year you turn 55 is already the year the other rule applies.
  • A retiree aged 55 or over claims the general pension and annuity subtraction instead: the smaller of $20,000 or their taxable pension and annuity income at 55 to 64, and the smaller of $24,000 at 65 and over. Both are larger than this one.
  • From tax year 2022 taxable social security benefits above $24,000 are fully subtractable on separate lines of the DR 0104AD.
  • The department states the two subtractions are alternatives and that only one of them may be claimed.
  • Both are claimed on the subtractions schedule filed with the state return.

This record exists to correct a myth. Turning 55 does not increase this subtraction — it ends it. The military retirement subtraction is written for retirees UNDER 55, and at 55 the general pension and annuity subtraction takes over. A retiree who keeps claiming the military line after their 55th birthday is on the wrong line, and one who assumes the benefit simply stops is also wrong.

Who is entitled to it

  • The subtraction is claimed against military retirement benefits included in federal taxable income.
  • Your home is in this state.

Not sure whether that describes you?

Answer a few questions about this benefit specifically — we only ask what this one actually depends on, and we stop as soon as we know.

How to claim it

Deadline: With your return
  1. 1Work out your age on the last day of the tax year first. That single fact decides which of the two subtractions you are on, and there is no partial year.
  2. 2Under 55: enter the military retirement subtraction on the subtractions schedule, capped at $15,000 of the retired pay included in your federal taxable income.
  3. 355 or over: do not use the military line. Claim the general pension and annuity subtraction for the same income — a different line, a different limit, and worth checking against your total retirement income before you file.
  4. 4Claim one, not both. The department describes them as alternatives for the same income.
  5. 5VA disability compensation is a different thing again. It is excluded from federal gross income, so it never reaches the state return and needs no subtraction here.
  6. 6Read the department's guidance publication on military service members before filing if your residency changed during the year — where you are taxed at all turns on state of legal residence, which the subtraction rules sit on top of.
Form
Subtractions from Income Schedule (DR 0104AD), filed with the state return
File with
The Department of Revenue, with your return
Annual
Claimed once a year.
CorrectionTurning 55 does not increase this subtraction — it ends it. The military retirement subtraction is written for retirees UNDER 55, and at 55 the general pension and annuity subtraction takes over. A retiree who keeps claiming the military line after their 55th birthday is on the wrong line, and one who assumes the benefit simply stops is also wrong.
CorrectionThe $15,000 figure is not a step on a rising ladder. It climbed from $4,500 in 2019 to $15,000 in 2022 and has been flat ever since, with the department publishing the same $15,000 through tax year 2028. Guidance quoting $4,500, $7,500 or $10,000 is quoting a superseded year.
Worth knowingRetired pay is only reached at all if this is your state of legal residence for tax purposes. For a service member whose legal residence is elsewhere, the subtraction question never arises — the residency question comes first.
Known gapThe dollar limit on the general pension and annuity subtraction — the rule that governs a retiree at 55 and over — is not stated on the page read here, and the guidance publication that carries it was not opened this session. Anyone at or over 55 should treat the amount as unresearched.
Known gapThe statute was not read. The department's own pages carry the limits and the age split; the codified subtraction provision sits on a host that refused both automated fetching and the browser this session.

Sources

This finder provides an informational match, not a government eligibility determination. The responsible agency decides your application.