World military : Military Retirement Pay

Sunday, 10 February 2013

Military Retirement Pay

Military Retirement Pay Detail

When you joined the military as a young person and headed for basic training, retirement income might have been a small consideration. But if you’ve reached the age when retirement pensions and tax obligations play a role in your long-term planning, the Internal Revenue Service’s treatment of your military pension is of more immediate concern.

Military retirement is taxed by the federal government like any other income earned during a tax year. Many states however, offer full exemptions of military retirement pay for state income tax purposes. Other states might offer partial exemptions of this type of income.

If you receive a Department of Defense pension that’s based on your rank, time in service and final pay, the IRS treats this as new income and requires you to report it as income. Because these pensions weren’t funded by withholding from your paycheck, they’re subject to income tax as other earnings are. Report the amount of your military pension on lines 16a and 16b of your Form 1040 or 12a and 12b of your Form 1040A.