New York Military Pension and Military Pay Income Tax Exemption
Military pension payments are totally exempt from New York State, New York City, and Yonkers income tax, with no dollar cap and no age test. A nonresident service member pays no New York tax on military pay at all, and combat zone pay is excluded for residents too.
Also called: income tax, military retirement, military pension, Yonkers, New York City, IT-225, S-119, combat pay, nonresident.
New York does not tax military retired pay. The Department of Taxation and Finance states it plainly: military pension payments received as retired military personnel, or as their beneficiary, are totally exempt from New York State, New York City, and Yonkers income taxes.
Three things make that stronger than the partial exclusions other states offer. There is no dollar cap. There is no age threshold. And the exemption reaches the New York City and Yonkers local income taxes, which are the taxes that actually hurt a retiree living in the five boroughs.
Because the exemption covers a beneficiary as well as the retiree, a Survivor Benefit Plan annuity, a Reserve Component SBP annuity, and a Retired Serviceman's Family Protection Plan annuity are also outside the New York tax base.
For a resident still serving, military pay is generally taxed the way it is federally, with two exceptions New York carves out: combat zone pay, and compensation paid to a prisoner of war or to someone missing in action during the Vietnam era. Both are excluded.
For a nonresident, military pay is not subject to New York income tax at all. A nonresident service member stationed in New York can stop New York withholding by filing Form IT-2104-MS with the military finance officer. A part-year resident is taxed only on military earnings attributable to the period of New York residence. Under the federal Military Spouses Residency Relief Act, a nonresident spouse of a nonresident service member stationed in New York is likewise not taxed on wages earned in New York.
VA disability compensation, VA pension, and Dependency and Indemnity Compensation are not in federal adjusted gross income to begin with, and New York taxable income starts from that federal figure, so none of them are taxed here either. Military disability retirement pay for a service-connected disability is treated the same way.
How to claim it. The pension is subtracted on Form IT-201, line 26 (Form IT-203, line 25), "Pensions of New York State and local governments and federal government", which the instructions say includes the federal government's "agency or instrumentality ... (including the military)"; it is not entered on Form IT-225. Modification S-119 on Form IT-225 is a different subtraction: military pay received by a nonresident, or by a part-year resident for the period of nonresidence. Read the current year's instructions before filing.
Thresholds
Thresholds for New York Military Pension and Military Pay Income Tax Exemption
Gate
Rule
Receipt of a military pension, with no rating or age test
The exemption turns on the payment being a military pension, not on a disability rating, an age, or an income level. The rating filter never hides this benefit.
Source removed: “New York military and veterans benefits, Army benefits library”.
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Disclaimer
VetTOC is not affiliated with the U.S. Department of Veterans Affairs or the Department of Defense. Information is for reference only and is not an eligibility determination. Verify with VA, the relevant state or territory, or an accredited VSO.