Updated October 4, 2026. Quick answer: Partly. Virginia lets a retiree subtract military retirement income from taxable income, and the Form 760 instructions say the “maximum amount of the subtraction is $40,000 for Taxable Year 2025” per person. Income above the cap is taxed on the regular schedule.
State retirement-income forms, line by line: Virginia age deduction.
Next door, the District of Columbia’s treatment of military retired pay: does District of Columbia tax military retirement.
How Virginia treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | Military retirement income, qualified military benefits and Survivor Benefit Plan payments to a surviving spouse can be subtracted up to the cap |
| Cap | $40,000 per person for Taxable Year 2025 and after; if two married military members both receive qualifying benefits on a joint return, each may take the maximum |
| Age | The instructions print no minimum age |
| Limit | The subtraction is not allowed if a credit, exemption, subtraction or deduction is claimed for the same income under another provision of Virginia or federal law |
| Rates on the rest | 2% up to $3,000; 3% from $3,001 to $5,000; 5% from $5,001 to $17,000; 5.75% over $17,000 |
A $30,000 example
A retiree with $30,000 of military retired pay is under the $40,000 cap, so the whole $30,000 is subtracted and none of that pay is left to tax.
With $50,000 of retired pay, $50,000 minus $40,000 = $10,000 is left on the rate schedule above.
Optional adviser-matching service
Plan military retirement income alongside your investments
For U.S. investors with $250,000 or more in investable assets. Want help coordinating retirement income with your investments? Request adviser introductions through WiserAdvisor.
This is investment-adviser matching, not tax-return preparation.
WiserAdvisor is an independent matching service. Free to request, with no obligation to hire. Request up to three adviser introductions; a match is not guaranteed. Submitting its form allows calls, texts and emails from WiserAdvisor and up to three advisers.
Clear Money Guide may earn a referral payment for a qualifying completed form. Advisers pay for introductions; an introduction is not a Clear Money Guide recommendation.
Compare investment advisersOpens on WiserAdvisor’s site in a new tab.
What changes in 2026
The 2025 Form 760 instructions print no change to the military benefits subtraction for 2026; they print only a fixed IRC conformity date of December 31, 2025 from the 2026 General Assembly Session. The $40,000 maximum is printed as applying to Taxable Year 2025 and after.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Publication 3, Armed Forces’ Tax Guide.
Related: whether Virginia taxes pensions, how Virginia taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- 2025 Form 760 Resident Individual Income Tax Booklet Instructions: https://www.tax.virginia.gov/sites/default/files/vatax-pdf/2025-760-instructions.pdf
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.