Does Virginia Tax Military Retirement Pay?
Virginia lets military retirees subtract up to $40,000 of military benefits per year for taxable years beginning on and after January 1, 2025, regardless of age. If you receive military retired pay, the portion up to that annual dollar limit comes off your Virginia taxable income. Congressional Medal of Honor recipients subtract all military retirement income received, with no dollar cap applying to their benefit. Under Code of Virginia Section 58.1-322.02 subdivision 18, military benefits above the subtraction limit are generally taxed unless another Virginia deduction or subtraction applies.
Virginia does not exempt all military retired pay. Its law provides a dollar-capped subtraction. You report your military retirement income, apply the allowable subtraction for that specific tax year, and determine what balance remains.
The rules governing this benefit depend on the specific tax year you are filing. While the current cap stands at $40,000 for any veteran drawing military benefits, the law phased this amount in over multiple years. The allowable subtraction amount increased each calendar year from 2022 through 2025. In addition, the statute removed the original age requirement once the phase-in reached the 2024 tax year.
We read Code of Virginia Section 58.1-322.02 subdivision 18 on November 12, 2026, to confirm the statutory amounts and age conditions across every phase-in year. The schedule below details the maximum subtraction allowable for each tax year and the corresponding age rule established by statute:
| Tax Year | Maximum Subtraction | Age Condition |
|---|---|---|
| 2022 | $10,000 | Age 55 or older |
| 2023 | $20,000 | Age 55 or older |
| 2024 | $30,000 | Any age |
| 2025 and after | $40,000 | Any age |
Subdivision 18.b sets the 2022 and 2023 amounts. Subdivision 18.c sets the 2024 amount and the amount for 2025 and after. For taxable years beginning on and after January 1, 2025, the subtraction limit reaches $40,000 for individuals of any age.
What Counts as Military Benefits
Virginia statute explicitly limits the subtraction to four specific categories of income. Code of Virginia Section 58.1-322.02 subdivision 18.d defines military benefits as any of the following items:
- Military retirement income received for service in the Armed Forces of the United States.
- Qualified military benefits received pursuant to section 134 of the Internal Revenue Code.
- Benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States under the Survivor Benefit Plan program.
- Military benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States.
These four statutory definitions determine what income can be entered on the subtraction line of your Virginia return. The statute covers both the retired service member and surviving spouses receiving qualified military benefits or survivor annuities. Under subdivision 18, no subtraction is allowed under subdivision 18.b or 18.c if a credit, exemption, subtraction, or deduction is claimed for the same income under subdivision 18.a or any other provision of Virginia or federal law. You cannot assign the same dollar of military pension to two different tax relief provisions.
What Virginia Taxes above the Cap and Which Other Deductions Apply
Military retirement income that exceeds the annual subtraction cap is generally taxed unless another specific Virginia statutory deduction or subtraction applies to your return. The retirement subtraction statute sets no tax rate.
If your military retired pay exceeds the $40,000 cap in taxable years from 2025 onward, examine these three provisions:
The Age-65 Deduction
Code of Virginia Section 58.1-322.03 subdivision 5 provides a deduction for older Virginia residents. Subdivision 5.a establishes a $12,000 deduction for individuals born on or before January 1, 1939. Subdivision 5.b provides a $12,000 deduction for individuals born after January 1, 1939, who have attained the age of 65.
The deduction under subdivision 5.b is subject to an income-based reduction. The $12,000 deduction is reduced by $1 for every $1 that the taxpayer's adjusted federal adjusted gross income exceeds $50,000 for single taxpayers or $75,000 for married taxpayers. For married taxpayers filing separately, the deduction is reduced by $1 for every $1 that the combined adjusted federal adjusted gross income of both spouses exceeds $75,000. The statute defines this figure as federal adjusted gross income minus Title II Social Security benefits. Other benefits taxed only under section 86 of the Internal Revenue Code are also subtracted.
Social Security Subtraction
Code of Virginia Section 58.1-322.02 subdivision 3 permits taxpayers to subtract benefits received under Title II of the Social Security Act. It also permits the subtraction of other benefits subject to federal income taxation solely pursuant to section 86 of the Internal Revenue Code. This provision is separate from the military benefits subtraction.
Disability Income Subtraction
Code of Virginia Section 58.1-322.02 subdivision 4 allows a subtraction of up to $20,000 of disability income, as defined in section 22(c)(2)(B)(iii) of the Internal Revenue Code. The law bars combining the two. A person who claims the subdivision 5 deduction under section 58.1-322.03 may not also claim the subdivision 4 subtraction.
Income subtracted under the military benefits subtraction cannot be claimed again under another provision.
Who This Is Not For and What Would Change Our Answer
This statutory subtraction framework does not apply to everyone connected to the military community. You should evaluate alternative information sources if your situation falls into any of the following groups:
- Residents of other states: This statute applies strictly to individuals filing Virginia state income tax returns.
- Service members not yet drawing retired pay: The subtraction applies to retired pay and benefits already being paid to you.
- Individuals receiving only Department of Veterans Affairs (VA) disability compensation: The subtraction covers military retirement benefits, qualified benefits under Internal Revenue Code section 134, and Survivor Benefit Plan income. VA disability compensation is not among the four kinds of military benefits.
To compare other states, see the state-by-state military retirement tax guide. To explore state-level programs outside the income tax code, review our Virginia veteran benefits overview.
Our answer would change if legislation is passed that amends Code of Virginia Section 58.1-322.02 or Section 58.1-322.03. We read the Code text on November 12, 2026, and our analysis reflects that statutory reading without tracking subsequent legislative acts beyond that date. If statutory caps, age rules, or deduction limits are altered by future amendments, the allowable tax subtractions will shift accordingly.
Our Takeaway
Virginia's statute lets a military retiree subtract up to $40,000 of military benefits a year for tax years beginning in 2025, at any age. Medal of Honor recipients subtract all of their military retirement income. Income above that $40,000 cap is generally taxed unless another provision applies. The age-65 deduction shrinks as adjusted federal adjusted gross income rises, and the Social Security and disability income subtractions may also apply. You cannot claim the same income twice under separate provisions. The subtraction applies strictly to military retirement income, qualified military benefits under Internal Revenue Code section 134, and Survivor Benefit Plan payments to a surviving spouse.
Our basis for these rules rests entirely on our direct reading of Code of Virginia Section 58.1-322.02 and Section 58.1-322.03 on November 12, 2026. Use our federal military retirement tax calculator to see your federal tax separately. Virginia's subtraction applies on your state return. Confirm the details for your own return with the Virginia Department of Taxation, then use that answer to settle whether Virginia taxes your military retirement pay.