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Pennsylvania Does Not Tax Your Pension — But It Does Tax Duty Pay Earned In-State

Military retirement is untaxed because Pennsylvania taxes no retirement income. Active duty pay is untaxed only if you earned it outside Pennsylvania.

Verified August 18, 2026

What this benefit is

Military retirement is untaxed because Pennsylvania taxes no retirement income. Active duty pay is untaxed only if you earned it outside Pennsylvania.

What it's worth: No Pennsylvania income tax on retired pay, at a flat 3.07%

  • Pennsylvania does not tax retirement income generally, so military retired pay is untaxed for the same reason a civilian pension is. It is not a veteran-specific relief.
  • Estimated against Pennsylvania’s flat personal income tax rate of 3.07%.

Who is entitled to it

  • You draw military retired pay, which Pennsylvania does not tax.
  • You are serving — where the duty was performed decides whether the pay is taxed.
  • Your home is in Pennsylvania.

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: April 15, with your return
  1. 1If you are retired, there is nothing to claim — Pennsylvania does not tax the pension at all.
  2. 2If you are serving, check where the duty was performed. Pay for federal active duty performed OUTSIDE Pennsylvania is not taxable; pay for duty performed INSIDE Pennsylvania is fully taxable, even on federal active duty.
File with
The Pennsylvania Department of Revenue, with your annual return
Documents you will need
form 1099 r · leave and earnings statement
Annual
Claimed once a year.
CorrectionPennsylvania is often listed as simply "does not tax military pay". The in-state exception is real and is missed: income received by a Pennsylvania resident for military service performed INSIDE Pennsylvania is fully taxable, even on federal active duty, unless it is active duty within the state for an emergency.
Worth knowingCounting the untaxed pension as a veteran benefit overstates it. Pennsylvania does not tax anyone’s retirement income; a veteran gets the same treatment as a retired teacher.

Sources

Why only one source type: The Department of Revenue guidance is the operating authority for how it taxes military pay. We publish this record to correct a widely mis-stated rule rather than to route a filing.

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