Does Missouri Tax Military Retirement?

Missouri’s Public Pension Exemption

Missouri provides a substantial tax benefit to retirees, including those who have served in the military. While military retirement pay is subject to state income tax, a significant portion of it can be excluded from your taxable income through the state’s public pension exemption. The full amount of your military retirement pay may be deductible, effectively making it tax-free for many retirees in the state.

The exemption extends beyond just the primary retiree’s pension. Payments received by a surviving spouse under the Survivor Benefit Plan (SBP) also qualify for this deduction. The state has also moved to make these survivor annuities fully deductible without income limitations starting in recent tax years, providing further relief for military families.

Eligibility Requirements for the Deduction

To qualify for the full military retirement deduction, a taxpayer must meet specific criteria established by the state. The primary requirement is that the military retirement income must be included in your federal adjusted gross income. This deduction is a subtraction on your Missouri return. The state has eliminated previous income limitations for the military retirement pay deduction, making it fully deductible regardless of your Missouri adjusted gross income.

Previously, Missouri used a public pension exemption that was subject to income phase-outs, but legislative changes have created a 100% exemption specifically for military retirement income.

Required Information and Forms

To claim the deduction, you will need your federal Form 1099-R. This document is sent by DFAS and details the total amount of military retirement pay you received during the tax year. This form is the primary piece of evidence for the income you are claiming as a deduction, so it is important to have it on hand when preparing your state tax return.

The deduction itself is calculated and reported on Missouri’s Form MO-A, Individual Income Tax Adjustments. On this form, you will find a specific line item for the military retirement deduction. You will enter the total amount of your retirement pay as shown on your Form 1099-R onto the designated line. Since the income is 100% deductible, the calculation is straightforward, and you will subtract the full amount of your military pension.

How to Claim the Deduction on Your Tax Return

After you have determined the amount of your deduction using Form MO-A, the next step is to transfer that figure to your main state tax return, Form MO-1040. You will enter the total deduction amount on the line for subtractions from income. This will reduce your Missouri adjusted gross income and, consequently, your overall state tax liability.

The final step is to file your return. If you are filing a paper return by mail, you must attach a completed copy of Form MO-A to your Form MO-1040. For those who e-file, the tax preparation software will automatically handle the inclusion of the necessary forms. You will simply need to navigate to the section for income subtractions or adjustments and input the military retirement pay information when prompted.