Military Retirement Pay Income Tax Exclusion
Up to $31,110 per year of pension/retirement income (including military retirement pay) excluded from Kentucky state income tax; military retirees with pensions exceeding $31,110 may exclude additional amounts via Schedule P based on pre/post-1998 service.
State BenefitKentuckyTax Benefits
Verified May 12, 2026 against revenue.ky.gov
At a glance
- Benefit type
- Tax Benefits — Kentucky
- Who it's for
- Veterans
- VA rating needed
- No rating requirement
- Estimated value
- Up to $31,110 income exclusion (general pension exclusion; more available via Schedule P)
- Where it applies
- Kentucky
- Last verified
- May 12, 2026
What is Military Retirement Pay Income Tax Exclusion?
Military Retirement Pay Income Tax Exclusion is a Kentucky tax benefits benefit for veterans. Up to $31,110 per year of pension/retirement income (including military retirement pay) excluded from Kentucky state income tax; military retirees with pensions exceeding $31,110 may exclude additional amounts via Schedule P based on pre/post-1998 service. The listed value is Up to $31,110 income exclusion (general pension exclusion; more available via Schedule P).
Who qualifies
- Veterans
- Available to any veteran
- Kentucky residency
Who is eligible
Eligibility
All Kentucky taxpayers receiving pension or retirement income (including military retirement). The $31,110 exclusion is a general pension/retirement income exclusion that applies to all retirement income — not just military.
What Military Retirement Pay Income Tax Exclusion covers
For military retirees
Retired before January 1, 1998: 100% of military retirement pay is excluded. Retired after December 31, 1997: may exclude up to $31,110 per year (this is the general exclusion, shared with other retirement income). Service spanning both periods: may use Kentucky Schedule P to exclude additional amounts above $31,110 based on years of service before/after the 1998 cutoff.
Kentucky's flat income tax rate is 3.5% for tax year 2026 (reduced from 4% via HB 1). At 3.5%, the maximum tax savings is approximately $1,089/year for post-1997 retirees with no other retirement income.
How to apply for Military Retirement Pay Income Tax Exclusion
How to apply
Claimed on Kentucky income tax return; use Schedule P if service spans the 1998 cutoff or if military retirement exceeds $31,110.
Verified information & sources
- Last verified
- May 12, 2026
- Official source
- revenue.ky.gov
Compiled and fact-checked against the official source linked above. Benefit rules and dollar amounts change over time — always confirm current details at the official source before applying. A county Veterans Service Officer (VSO) is a free, accredited advocate who can review your eligibility and help you file at no cost.
How VetUnlock verifies benefitsFrequently asked questions about Military Retirement Pay Income Tax Exclusion
Who qualifies for Military Retirement Pay Income Tax Exclusion?
Military Retirement Pay Income Tax Exclusion is for Veterans; available to any veteran; kentucky residency. See the eligibility details on this page and confirm with the official source before applying.
How much is Military Retirement Pay Income Tax Exclusion worth?
The listed value is Up to $31,110 income exclusion (general pension exclusion; more available via Schedule P). Amounts can change — confirm the current figure at the official source linked on this page.
How do I apply for Military Retirement Pay Income Tax Exclusion?
Apply through the official source linked on this page. A county Veterans Service Officer (VSO) can review your eligibility and help you file at no cost.
Where can I verify Military Retirement Pay Income Tax Exclusion?
Benefit rules and dollar amounts change, so always confirm current details at the official source linked on this page. A free, accredited county or state Veterans Service Officer (VSO) can also verify your eligibility and help you apply.
Other Kentucky Tax Benefits
- Active Duty Military Pay Income Tax ExclusionAll active duty military pay is 100% exempt from Kentucky state income tax.
- VA Disability and Military Disability Retirement Pay Tax ExclusionVA disability compensation, DIC, and military disability retirement pay are fully excluded from Kentucky income tax.
- Homestead Property Tax Exemption (100% Disabled)$490-$590/year in property tax savings$49,100 deducted from assessed home value for 100% disabled veterans, saving approximately $490-$590/year.
- Motor Vehicle Property Tax Exemption (100% Disabled) - PROPOSED, NOT ENACTEDNot currently available (proposed legislation did not pass)Proposed exemption from state property tax on up to two motor vehicles for 100% disabled veterans. NOT currently law — the 2023 bill (HB25) died in committee.