Louisiana Military Retired Pay and Service Pay Exemptions

Louisiana does not tax military retired pay. Under the Federal Retirement Benefits Exclusion at R.S. 47:44.2, federal retirement benefits received by federal retirees, both military and nonmilitary, may be excluded from Louisiana taxable income. Federal benefits received from a military survivor benefit plan may also be excluded, and so may Railroad Retirement benefits. That covers the two things retirees ask about in one statute: the retired pay and the Survivor Benefit Plan annuity a spouse receives afterwards. Social Security benefits that are taxed on the federal return may be excluded from Louisiana taxable income. Military disability retirement pay and VA disability compensation are not taxed. Dependency and Indemnity Compensation is not taxed. Combat pay and hazardous duty pay are exempt. A separate and smaller provision, R.S. 47:44.1(A), lets a person 65 or older exclude up to $12,000 of annual retirement income. A military retiree whose retired pay is already fully excluded under 47:44.2 does not need it for that income, but it is available against other retirement income. Married taxpayers filing jointly who are both 65 or older can each exclude up to $12,000; if only one spouse has retirement income the exclusion is capped at $12,000. The rate context changed recently and it changes how much the exclusion is worth against other states. For tax years 2009 through 2021 Louisiana ran graduated rates topping out at 6 percent, from 2022 through 2024 at 4.25 percent, and for tax years 2025 and after there is a flat 3 percent. A veteran comparing Louisiana with a state that taxes retired pay at a graduated rate is now comparing against a 3 percent baseline. For people still serving, two rules decide almost every question. First, domicile. For taxable years beginning on or after January 1, 2023, only military personnel who have elected Louisiana as their domicile are required to file a Louisiana return on wages earned from the military. That is a meaningful narrowing, and it means a servicemember who has not elected Louisiana domicile is not filing here on military wages. Second, the deduction for serving away. A Louisiana resident who is a member of the armed services and who was stationed outside the state on active duty for 120 or more consecutive days is entitled to a deduction of up to $30,000. Count the days, because 120 consecutive is the test and a deployment broken by leave in state can be argued either way. This came from Act 161 of the 2021 Regular Session. For spouses, a nonresident spouse of a servicemember stationed in Louisiana under military orders is exempt from Louisiana income tax on Louisiana wages, provided the spouse has not elected Louisiana residency and is in the state solely to accompany the servicemember. Returns are due on or before May 15 of the following year, and R.S. 47:103 gives an automatic six-month filing extension with no form to file. The extension does not extend the time to pay.