Does Ohio Tax Military Retirement Pay?

For military retirees residing in Ohio, understanding the state’s specific rules is a primary component of accurately managing their annual tax obligations. The tax policies can vary significantly from one state to another. This involves knowing if the income is taxable and the process for reporting it correctly.

Ohio’s Tax Treatment of Military Retirement Pay

Ohio allows a 100% deduction for uniformed services retirement income. Pension payments received for service in the active or reserve components of the U.S. Army, Navy, Air Force, Marine Corps, Space Force, Coast Guard, and National Guard are not subject to Ohio’s state income tax. The deduction also applies to retirement income from the commissioned corps of the National Oceanic and Atmospheric Administration and the Public Health Service.

This tax treatment extends to survivor benefits. A surviving spouse receiving payments under the Survivor Benefit Plan (SBP) can also deduct this income, provided it is included in their federal adjusted gross income. If a retiree has a federal civil service pension that includes credit for years of military service, only the portion of the pension directly attributable to the military service time is eligible for the deduction.

The calculation for a mixed pension requires the retiree to determine the ratio of their military service years to their total years of federal employment. This fraction is then multiplied by the total pension amount reported on their federal return to find the deductible portion for Ohio.

How to Claim the Deduction on Your Ohio Tax Return

To claim the deduction for military retirement pay, you must file an Ohio Individual Income Tax Return, Form IT 1040. The deduction is not taken directly on the main form but is detailed on a separate schedule, the Ohio Schedule of Adjustments. This form is a required attachment when claiming this income subtraction.

On the Ohio Schedule of Adjustments, you will find a specific line designated for “Uniformed Services Retirement Income.” You must enter the total amount of your federally taxed military retirement pay on this line. This also includes any qualifying Survivor Benefit Plan payments you received during the tax year. The total from the deductions section of this schedule is then transferred to the appropriate line on the Ohio IT 1040.

It is important to ensure the amount entered is only the retirement income received from uniformed service. The state may require documentation to verify the amount and source of the retirement income if requested.