Updated October 4, 2026. Quick answer: No. Arizona’s Form 140 instructions say “you may subtract 100% of the amount you received.” from retired or retainer pay of the uniformed services. A surviving spouse of a deceased veteran may exclude 100% of the payments too.
How Arizona treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | 100% subtraction of retired or retainer pay of the uniformed services (Form 140 line 29b) |
| Joint returns | If both spouses receive such income, each may subtract 100% of the amount received |
| Statute | A.R.S. 43-1022(26) sets the full amount received for taxable years beginning after December 31, 2020 |
| Rate on other income | 2.5% (.025) on Arizona taxable income |
A $30,000 example
A retiree with $30,000 of retired pay subtracts all $30,000, so none of that pay is left to tax.
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What changes in 2026
No 2026 change is printed in the documents read; the instructions are for tax year 2025.
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 Arizona taxes pensions, how Arizona taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- 2025 Form 140 Resident Personal Income Tax Instructions: https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140i.pdf
- A.R.S. 43-1022 Subtractions from Arizona gross income: https://www.azleg.gov/ars/43/01022.htm
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.