New Bill Would End California Military Pension Tax
California fully taxes military retirement pay but proposed legislation would change that to provide tax relief to Veterans.
 
 
Military retirees residing in California potentially pay more taxes on their military retirement pay than they would in other states. That’s because California is the only U.S. state that fully taxes military pensions. (The District of Columbia does as well.) But proposed legislation would exempt military retirement income from California state income tax — at least for the next ten years.
“We need to make the state more Veteran friendly and honor the many sacrifices of our armed services personnel and their spouses.” Assemblymember James C. Ramos (D-San Bernardino) said in a release regarding the bill.
Assembly Bill 46 recently passed the California Assembly in a bipartisan 77-0 vote. Ramos introduced the measure and authored similar previous proposals in the past that failed to advance.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
 
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
AB 46: Proposed California tax exemption for military pensions
- If passed, California AB 46 would exclude military retirement pay from gross income for state income tax purposes.
- The exemption would be in place for ten years (i.e., tax years beginning on or after January 1, 2024, and before January 1, 2034).
- Annuity payments received from a U.S. Department of Defense (DoD) Survivor Benefit Plan would also be excluded from California gross income for the same ten-year period for eligible taxpayers.
- Currently, If you’re a California resident, your military retirement pay is taxable, including all military pension income, according to the California Franchise Tax Board (FTB). Retirement pay is reported on IRS Form 1099-R.
In a statement addressing the potential impact of AB 46 and the need for tax-friendliness, Ramos noted, “Military retirees bring benefits to our state such as stability, job skills used in second careers, and federal funding.”
California is reportedly home to the most active-duty military personnel in the U.S. Federal government data show that as of January 31, 2023, more than 140,000 military retirees resided in the Golden State.
Retirees fleeing California?
However, California has been losing residents in recent years — including military retirees — according to numerous studies based on IRS and U.S. Census Bureau data. Since 2020, the state has lost nearly half a million residents overall. DoD actuarial data show that over the last ten years or so, the number of military retirees residing in California fell by about 15 percent.
Meanwhile, lower-tax states like Nevada, Arizona, Florida, and Texas saw increased numbers of residents coming from higher-tax states like California, with some military retirees among them. And while there are many reasons why residents and retirees move to different states, studies show the cost of living, including whether a state is considered “tax-friendly,” is a key factor.
In a release, Jeffrey Breiten, USN (Ret.) and vice president of legislative affairs of the California Council of Chapters Affiliated Military Officers Association of America (CALMOAA) emphasized how the loss of military retirees is problematic for California.
“Military retirees contribute to the state's workforce development where they chose to retire,” Breiten stated, adding, ”Our state loses out on millions of dollars in federal funds that follow military retirees after retirement.”
CALMOAA reports on its website that according to DoD estimates, “military retirees bring a $4.1 billion annual inflation-protected stream of federal funds, to California’s economy each year.”
AB 46 is sponsored by several groups representing Veterans including the Military Officers Association of America. To become law, the bill, which is currently delayed, would have to clear several stages of the California legislative process before it could ultimately be signed by Gov. Gavin Newsom.
Also on Kiplinger
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
- 
 The Original Property Tax Hack: Avoiding The ‘Window Tax’ The Original Property Tax Hack: Avoiding The ‘Window Tax’Property Taxes Here’s how homeowners can challenge their home assessment and potentially reduce their property taxes — with a little lesson from history. 
- 
 Is Mint Mobile's Home Internet a Game-Changer or Just Another Option? Is Mint Mobile's Home Internet a Game-Changer or Just Another Option?Mint Mobile recently unveiled its new home internet service. We break down how it works so you can determine if it's a great value for your needs. 
- 
 The Original Property Tax Hack: Avoiding The ‘Window Tax’ The Original Property Tax Hack: Avoiding The ‘Window Tax’Property Taxes Here’s how homeowners can challenge their home assessment and potentially reduce their property taxes — with a little lesson from history. 
- 
 Social Security Tax Limit Rises Again: Who Pays More in 2026? Social Security Tax Limit Rises Again: Who Pays More in 2026?Payroll Taxes The Social Security Administration has announced significant changes affecting millions as we approach a new year. 
- 
 Three Critical Tax Changes Could Boost Your Paycheck in 2026 Three Critical Tax Changes Could Boost Your Paycheck in 2026Tax Tips The IRS predicts these tax breaks may change take-home pay in 2026. Will you get over $1,000 in tax savings? 
- 
 The Rubber Duck Rule of Retirement Tax Planning The Rubber Duck Rule of Retirement Tax PlanningRetirement Taxes How can you identify gaps and hidden assumptions in your tax plan for retirement? The solution may be stranger than you think. 
- 
 RMDs, Roth, and SS: Test Your Knowledge of Retirement Tax Rules RMDs, Roth, and SS: Test Your Knowledge of Retirement Tax RulesQuiz Don't let the IRS catch you off guard. Take our quiz to reveal common retirement tax rules that could save (or cost) you thousands. 
- 
 IRS Updates 2026 Tax Deduction for People Age 65 and Older IRS Updates 2026 Tax Deduction for People Age 65 and OlderTax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026. 
- 
 IRS Reveals New 2026 Child Tax Credit and other Family Credit Amounts IRS Reveals New 2026 Child Tax Credit and other Family Credit AmountsTax Credits Key family tax breaks are higher for 2026, including the Earned Income Tax Credit and the Adoption Credit. Here's what they're worth. 
- 
 Standard Deduction 2026 Amounts Are Here Standard Deduction 2026 Amounts Are HereTax Breaks What is the standard deduction for your filing status in 2026?