Does Georgia Tax Military Retirement Income?

Georgia offers a state tax exclusion that can apply to military retirement income. The benefit is a general retirement income exclusion, not one specific to military members, and is determined by specific age-based rules. This is part of a broader tax framework that also includes no state tax on Social Security benefits and no estate or inheritance taxes.

Georgia’s Retirement Income Exclusion Rules

Georgia’s tax benefit for retirees applies to a wide range of retirement income, not just military pensions. The amount of income that can be excluded from state taxation depends on the taxpayer’s age. Individuals between the ages of 62 and 64 may exclude up to $35,000 of retirement income, while those aged 65 and older can exclude up to $65,000.

For military retirees under the age of 62, a different set of rules applies. These individuals can exclude up to $17,500 of their military retirement pay. An additional exclusion of up to $17,500 is available if the retiree also has at least $17,500 in earned income, bringing the potential total exclusion to $35,000. Qualifying income includes payments from military pensions and survivor benefit plans.

A new law enacted in May 2025 will make all military retirement income fully exempt from state income tax beginning with the 2026 tax year. This change will eliminate the current age and income-based limitations for military pensions. Until then, the existing tiered system based on age remains in effect for tax filings.

Claiming the Exclusion on Your Tax Return

To benefit from Georgia’s retirement income exclusion, you must claim it when you file your state income tax return. The process involves making an adjustment on Georgia’s Form 500, the Individual Income Tax Return. This adjustment is not automatic, so you must actively subtract the eligible amount of retirement income from your total income.

The specific calculation and subtraction are made on Schedule 1 (Form 500), titled “Adjustments to Income.” On this schedule is a designated line for the retirement income exclusion. Here, you will enter the amount of your qualifying retirement income, up to the maximum limit for your age group, which reduces your Georgia adjusted gross income.

Taxation of Other Military-Related Income

Beyond retirement pensions, other forms of military-related income have distinct tax treatments in Georgia. Active-duty military pay is generally taxable if you are a legal resident of Georgia. However, if you are a Georgia resident stationed and serving in a combat zone, that income is exempt from state tax.

U.S. Department of Veterans Affairs (VA) disability compensation is not taxable at the federal or state level. These payments, for injuries or sicknesses from active service, should not be included in your taxable income. This protection also applies to VA benefits like grants for specially adapted housing or vehicles.

Distributions from the Thrift Savings Plan (TSP) are treated under the same general retirement income exclusion rules previously mentioned. When you begin withdrawing from your TSP, those distributions are considered retirement income and are eligible for the age-based exclusions. The income is reported on IRS Form 1099-R and must be accounted for on your Georgia tax return to apply the exclusion, even though the TSP does not withhold state taxes.