Does Missouri Tax Military Retirement? A Comprehensive Guide
For Missouri residents who have served their country, the thought of retirement can be a dream come true. After a lifetime of dedication and hard work, it’s comforting to know that you can rely on your military pension to provide for your retirement needs. However, many veterans wonder if they need to worry about taxes in the Show-Me State. In this article, we’ll delve into whether Missouri taxes military retirement income and what you can do to minimize your tax burden.
Does Missouri tax military retirement?
Short answer: Yes, Missouri taxes military retirement. The state of Missouri considers military retirement pay to be taxable income, like any other form of earned income. This means that you’ll need to include your military retirement pay on your state tax return (Form MO-1040) and pay taxes on it.
What you need to know
- Tax rate: The tax rate on military retirement pay in Missouri varies between 1.5% and 5.5%, depending on your adjusted gross income (AGI). The AGI is the total value of all your income and deductions before taxes.
- Tax exemption: For active-duty military members, the first $13,600 of military pay is exempt from state tax. This exemption is non-refundable, which means you won’t receive a refund if your taxable income is less than that amount.
- Portability: If you retire from the military and start receiving a pension, that pension is considered taxable income in Missouri. However, if you move to Missouri from another state and your pension is exempt from that state’s taxes, Missouri will recognize that exemption and not tax you on that portion of your pension.
Tax calculations
To calculate your taxes on military retirement pay, you’ll need to add your military retirement pay to your other income (like Social Security, interest income, and wages). The state of Missouri uses the following tax brackets:
- 1.5%: 0% – $1,000 of AGI
- 2.5%: $1,001 – $3,000 of AGI
- 3.5%: $3,001 – $6,000 of AGI
- 4.5%: $6,001 – $12,000 of AGI
- 5.5%: $12,001 – $100,000 of AGI
For example, let’s say your AGI is $4,000, and your military retirement pay is $2,000. The first $1,500 of that pay would fall under the 1.5% tax bracket (0% – $1,000 of AGI), and the remaining $500 would fall under the 2.5% tax bracket ($1,001 – $3,000 of AGI).
Strategies to minimize taxes
While it’s not possible to completely escape taxes on military retirement pay, there are a few strategies you can use to minimize your tax burden:
- Contribute to a tax-deferred retirement account: If you’re still working, you can contribute to a traditional IRA or a 403(b) plan to delay paying taxes on your earnings.
- Itemize deductions: If you itemize your deductions on Form MO-1040, you may be able to deduct certain expenses, like mortgage interest, property taxes, and charitable donations.
- Claim the maximum standard deduction: If you don’t itemize deductions, you can claim the maximum standard deduction ($5,300 for single filers and $10,600 for joint filers in 2022). This can help reduce the amount of income that’s subject to tax.
- Consult a tax professional: A tax professional can help you navigate the Missouri tax code and identify areas where you can reduce your tax liability.
Tables and charts
| Military Retirement Pay | Taxable Amount | Tax Rate |
|---|---|---|
| $13,600 or less | $0 | 0% |
| $13,601 – $31,500 | $8,000 | 2.5% |
| $31,501 – $63,000 | $16,500 | 3.5% |
| $63,001 – $100,000 | $25,000 | 4.5% |
Summary
In conclusion, the state of Missouri does tax military retirement pay. Understanding the tax rates and rules can help you plan ahead and minimize your tax liability. By contributing to tax-deferred retirement accounts, itemizing deductions, claiming the maximum standard deduction, and consulting a tax professional, you can take control of your tax strategy and enjoy a more prosperous retirement.
