Missouri Income Tax on Military Retired Pay and Survivor Annuities

Missouri treats the retiree and the survivor under two different statutes, and the difference is worth real money. The retiree is covered by section 143.121.3(12), which subtracts from Missouri adjusted gross income one hundred percent of any retirement benefits received by a taxpayer as a result of the taxpayer's service in the Armed Forces of the United States, including reserve components and the National Guard of this state as defined in 32 U.S.C. 101(3) and 109, and any other military force organised under the laws of this state. There is no dollar cap, no age test, no years-of-service test and no income phase-out. Reserve retired pay and Missouri organised militia retirement are inside it by name. The surviving spouse is not. Section 143.121.3(12) reaches retirement benefits received "as a result of the taxpayer's service", and a Survivor Benefit Plan annuity is not paid for the annuitant's own service. An SBP, Reserve Component SBP or Retired Serviceman's Family Protection Plan annuity therefore falls to section 143.124, the general exemption for annuities and pensions provided by the United States, this state or any other state. Section 143.124 is capped. For all tax years beginning on or after January 1, 2012 the subtraction is one hundred percent of retirement benefits received from sources other than privately funded sources, "but not to exceed the maximum Social Security benefit available for such tax year". That term is defined in subsection 5 as $32,500 for the tax year beginning on or after January 1, 2007, increased each subsequent year by the percentage increase in the Consumer Price Index for All Urban Consumers. The figure for tax year 2025 was $47,633. It moves every year, so check the current number rather than quoting one. Two further conditions apply to the section 143.124 route and not to the retiree's. The subtraction is reduced by any Social Security benefit exemption taken under section 143.125, so a widow drawing both Social Security and SBP cannot take the full amount of each. And for all tax years beginning on or before December 31, 2023 the exemption phased out above $100,000 of Missouri adjusted gross income for married filing combined and $85,000 otherwise; for tax years beginning on or after January 1, 2024 a taxpayer is entitled to the maximum exemption regardless of filing status or income. The income ceiling is gone; the dollar cap is not. The practical result is that a retired colonel pays no Missouri tax on retired pay of any size, and that colonel's widow, receiving fifty-five percent of it as an SBP annuity, may pay Missouri tax on the part above the maximum Social Security benefit available and may lose part of the exemption to her Social Security. That asymmetry is not stated anywhere in the plain-language guidance and it is the thing to check before assuming a survivor is untaxed. One more point about the circuit breaker. Section 143.124(12) says the exemptions in that section do not affect the calculation of income used to determine the property tax credit in sections 135.010 to 135.035. The pension exemption reduces income tax; it does not help a claim for the property tax credit.