Military Pensions Are Entirely Exempt from New York Income Tax
Military retirement pay is fully excluded from New York State, New York City and Yonkers income tax, with no cap. For most retirees this is worth more than every property tax exemption combined.
Verified August 18, 2026
What this benefit is
New York excludes military retirement pay from state income tax entirely — and from New York City and Yonkers income tax too. There is no cap.
It is claimed as a subtraction on your tax return, not applied for at a counter.
What it's worth: The whole of New York income tax on your military pension
- Shown as a range and excluded from your annual total, because the saving depends entirely on your pension and your other income.
- New York income tax runs from about 4% to over 10%. On a $40,000 pension the exclusion is worth roughly $2,000 to $2,500 a year, and more again for a New York City resident who also avoids the city tax.
- There is no cap on the amount excluded, unlike many states that exempt only the first few thousand dollars.
Who is entitled to it
- Retired military personnel receiving a military pension,
- and beneficiaries of that pension,
- who are New York residents.
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.
The thing most people get wrong
This is probably the largest New York veteran benefit, and almost nothing lists it as one
Every guide to New York veteran benefits leads with the property tax exemptions, which for a typical homeowner are worth a few hundred dollars a year and depend on whether their town opted in. The military pension exclusion is worth roughly $2,000 to $2,500 a year on a $40,000 pension, more again for a New York City resident who also escapes the city tax, and it depends on nothing at all except being a resident. It gets left off the lists because it lives on a tax return rather than on an assessor’s form — there is no application, no deadline, and no office to visit, so it does not look like a benefit.
How to claim it
Deadline: With your annual return- 1Subtract your military pension on the New York return. It is a subtraction modification, not an exemption you register for.
- 2If you have been filing without it, ask about amending — New York generally allows three years.
- 3Note this is separate from VA disability compensation, which is not taxable income in the first place.
- File with
- On your New York State income tax return
- Documents you will need
- form 1099r
- You must re-file every year
- It is claimed on the return each year — it is a subtraction, not a registration.
Common mistakes that cost people this benefit
- Not taking it, because nobody told you it existed. If you have been paying New York tax on your military pension, you have been overpaying — and New York generally allows amended returns three years back.
- Confusing it with VA disability compensation, which is not taxable income in the first place and needs no exclusion.
- Assuming there is a cap. Many states exempt only the first few thousand dollars. New York exempts the whole thing.
Questions people ask
- Is there a limit on the amount excluded?
- No. Unlike many states, New York excludes the entire military pension with no cap.
- I have been paying tax on it for years. Can I get it back?
- Ask a tax preparer about amending. New York generally permits amended returns for three years, so several years of overpayment may be recoverable.
- Does this cover my civilian federal pension too?
- No — this exclusion is for military retirement pay specifically. Other pensions have their own, narrower New York treatment.
Sources
- authority · statuteN.Y. Tax Law §612(c)(3)
- operating · published policyNYS Dept. of Taxation and Finance — Information for military personnel and veterans
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