Does Georgia Still Tax Military Retirement Pay?

Georgia currently taxes military retirement pay, but only the portion that exceeds a generous age-based exclusion, and a bill signed into the 2025–2026 session would eliminate the Georgia tax on military retirement pay entirely starting with tax year 2026. Until that full exemption takes effect, a retiree can shield between $17,500 and $65,000 of pension income from state tax depending on age and earned income.

The Full Exemption Coming in 2026

Senate Bill 31 would remove every age threshold and income cap on military retirement pay, exempting all retirement benefits received from service in the U.S. armed forces or reserve components.¹ The bill carries an effective date of July 1, 2025, with the tax exemption applying to all tax years beginning on or after January 1, 2026.²

If SB 31 takes effect as written, a military retiree of any age owes zero Georgia income tax on their pension, no matter the amount and no matter what other income they earn. The fiscal note counts survivor benefits alongside retirement pay in its revenue projections, which suggests Survivor Benefit Plan payments fall under the same exemption.²

Because passage and signature status may not be reflected everywhere online, confirm the current status on the Georgia Department of Revenue website before filing your 2026 return. If SB 31 has not fully taken effect, the tiered exclusion below still governs.

The Exclusion by Age

Under the rules in place before SB 31, Georgia lets military retirees subtract part of their pension from state taxable income. How much depends on age and, for younger retirees, whether they also work. The starting figure is the taxable amount shown on IRS Form 1099-R.³

Under Age 62

A retiree younger than 62 can exclude up to $17,500 of military retirement income. A second $17,500 becomes available if the retiree also has more than $17,500 in Georgia earned income during the same tax year.⁴ A working retiree under 62 can therefore exclude as much as $35,000 of their pension, provided their Georgia job income clears the $17,500 threshold.⁵

Each spouse qualifies independently. If both receive military retirement pay and both meet the earned-income requirement, each can claim a separate exclusion.⁵ The earned income must come from Georgia sources and be included in Georgia taxable net income; reserve drill pay or Guard wages earned in Georgia count.

Ages 62 Through 64

At 62, the military-specific exclusion folds into Georgia’s broader retirement income exclusion. Retirees in this bracket can exclude up to $35,000 of total retirement income, regardless of whether they have earned income.² The cap covers every source of retirement income combined: the military pension, IRA distributions, 401(k) withdrawals, private annuities. A retiree collecting both a military pension and a private-sector pension applies the exclusion to the combined total, not each stream separately.

Age 65 and Older

Retirees 65 and older can exclude up to $65,000 of total retirement income.² The same pooling rule applies. For most enlisted and mid-grade officer retirees, $65,000 covers the full pension and effectively zeros out Georgia tax on retirement income. Higher-ranking retirees with larger pensions may still owe state tax on the portion above the cap.

Permanent and Total Disability

A taxpayer who is permanently and totally disabled can claim the retirement income exclusion regardless of age. Georgia treats these taxpayers the same as those 62 or older for exclusion purposes.⁵ A 45-year-old with a permanent and total disability rating, for instance, can access the $35,000 exclusion instead of being capped at the under-62 tier. Schedule 1 asks for documentation of the disability type and date when the exclusion is claimed on this basis.

Military Disability Retirement Pay

Disability retirement pay, including Chapter 61 medical retirements, follows a different path from longevity retirement. Benefits received as compensation for personal injury or sickness resulting from active military service are excluded from taxable income at the federal level. Because Georgia calculates state tax starting from federal adjusted gross income, disability retirement pay that is already excluded federally never appears on your Georgia return at all.

This matters because the exclusion is not limited by any of the age-based caps. A medically retired service member does not spend any part of the $17,500 or $35,000 exclusion on that income. The full exclusion stays available for other taxable retirement income such as a civilian pension or IRA distributions.

Other Military Income

VA Disability Compensation

Disability compensation and pension payments from the Department of Veterans Affairs are not included in gross income for federal tax purposes.⁶ Since Georgia begins its calculation with federal adjusted gross income, VA disability payments are automatically excluded from state tax as well. VA grants for specially adapted housing and vehicles fall under the same treatment.

Survivor Benefit Plan Payments

SBP annuity payments received by a spouse or other beneficiary after a service member’s death are generally taxable in Georgia. A surviving spouse claims the retirement income exclusion based on their own age and total retirement income, using the same $35,000 or $65,000 thresholds. The SB 31 fiscal analysis groups survivor benefits with military retirement pay, so if the 2026 exemption takes effect, SBP payments should also be fully exempt.²

Combat Zone Pay

Active duty pay earned while deployed to a federally designated combat zone is excluded from federal gross income. That exclusion flows through to Georgia automatically because state tax starts from federal AGI. No separate state-level claim is needed.

Claiming the Exclusion on Your Georgia Return

The exclusion is not entered on the main Georgia Form 500. It is calculated on Schedule 1, which adjusts your federal AGI. Retirees under 62 report the military retirement exclusion on Schedule 1, Line 7b for the taxpayer and Line 7e for a spouse, after completing the military retirement income exclusion worksheet on page 3 of Schedule 1.⁷

The net adjustment from Schedule 1, Line 14 then flows to Line 9 on page 2 of Form 500.⁷ That negative adjustment subtracts qualifying military retirement pay from your federal AGI to produce Georgia AGI, which is the figure Georgia actually taxes. Skip Schedule 1 or enter the wrong figure on Line 7b, and the entire pension gets taxed at Georgia’s flat rate.

Retirees 62 and older do not use the military-specific lines. Their military pension is folded into the general retirement income exclusion calculated elsewhere on Schedule 1. If SB 31’s full exemption takes effect for 2026, expect the Department of Revenue to update Schedule 1 with new line items or instructions. Pull the current version of Form 500 and Schedule 1 from the Department of Revenue before you file.⁵

1
Georgia General Assembly. Senate Bill 31 (LC 50 1003)
2
Georgia General Assembly. Fiscal Note for Senate Bill 31 (LC 50 1003)
3
Internal Revenue Service. About Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
4
Justia Law. Georgia Code 48-7-27 – Computation of Taxable Net Income
5
Georgia Department of Revenue. Retirement Income Exclusion
6
Internal Revenue Service. Veterans Tax Information and Services – Section: Benefits Excluded From Taxable Income
7
Georgia Department of Revenue. GA500 Individual Income Tax Return