Military Retirement Pay Taxable in Virginia: A Guide for Veterans
As a proud veteran of the United States Armed Forces, you deserve a comfortable and secure transition into civilian life. After decades of dedicated service to your country, you might be wondering about the taxes on your military retirement pay in Virginia. In this article, we will demystify the taxation rules for military retirement pay and provide you with essential guidance to navigate the complex federal and state tax systems.
Is Military Retirement Pay Taxable in Virginia?
Yes, military retirement pay is taxable, but with some exceptions.
- Federal Taxes: The Internal Revenue Service (IRS) considers military retired pay as taxable income for federal income tax purposes, subject to withholding.
- Virginia State Taxes: Virginia also taxes military retired pay, but with specific exemptions and deductions.
In Virginia, military retirement pay is subject to state income tax, but combat pay and family separation allowance are exempt from Virginia state income tax. Furthermore, Virginia offers a 50% exemption on federal adjusted gross income (FGI) for Line of Duty (LOD) disability and 100% disabled Veterans.
When is Military Retirement Pay Subject to Taxation?
You’re right – as military retirees, you may already be paying federal income tax on your retirement pay, but there are scenarios when additional taxes apply:
1. Supplemental Income: Excess income above the limit (currently $14,400 for single filers and $28,800 for joint filers for tax year 2021) is subject to self-employment tax, effectively doubling the tax burden for these amounts.
Table: Taxable Supplemental Income
| Adjusted Gross Income (AGI) | Supplemental Income |
|---|---|
| Below $14,400 (single) | No supplemental income tax |
| $14,400 – $29,200 (single) | Supplemental income tax |
| $29,200 or more (single) | Self-employment tax applied |
2. Special Assignments Duty Pay (SADIP): This special stipend, received by combat-tapped airmen (pilots and gunners), is subject to federal income tax withholding and Virginia state taxes.
3. Other Income: Earned income, such as side jobs, freelancing, or commercial activities, may also render your military retirement pay liable for additional taxes.
Virginia Tax Exemptions and Deductions for Veterans
Virginia offers a 50% exemption on FGI for Veterans with Line of Duty (LOD) disabilities and 100% disabled Veterans. Take advantage of these exemptions:
Table: Virginia Military Retirement Pay Exemptions
| Type | Exemption Percent |
|---|---|
| LOD disabled Veterans | 50% |
| 100% disabled Veterans | 100% |
Benefits for Virginia Veterans
Additional benefits for Virginia Veterans may include:
- VIRGINIA WAR PENSION EXEMPTION for veterans with service-related disabilities
- STUDENT LOAN DEFERMENT for students affected by service-related injuries
- VETERANS EMPLOYMENT PREFERENCE: preference in state government jobs
Conclusion
Understandably, navigating complex tax laws can be stressful for military retirees. Key takeaways:
- Federal taxes apply to military retired pay, but Virginia exempts combat pay and family separation allowance.
- Supplementary income above the threshold can trigger self-employment taxes.
- Special Assignments Duty Pay (SADIP) is subject to federal and state taxes.
To ensure accurate taxation on your military retirement pay, consult with a tax professional or the Virginia Department of Taxation. Your experience and sacrifices have earned a comfortable transition into civilian life – don’t let misunderstandings about taxes compromise that.
