Updated October 4, 2026. Quick answer: Yes, with a partial exclusion. Publication 1032 says “Military retirement pay is taxable” by California when a California resident receives it. A 2025 exclusion of up to $20,000 for each type of payment applies when federal adjusted gross income is $125,000 or less ($250,000 for a joint return).
How California treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | Taxable to a California resident; nonresidents are not taxed on it |
| Exclusion | For taxable years 2025 through before 2030, military retirement pay and Survivor Benefit Plan annuity payments are each excludable up to $20,000 |
| Income test | Federal adjusted gross income may not exceed $125,000, or $250,000 for a surviving spouse or spouses filing a joint return |
| Where it is written | FTB Publication 1032 and the 2025 Schedule CA (540) instructions; the documents read print no rate schedule or age threshold |
A $30,000 example
A resident under the income limit with $30,000 of military retired pay excludes $20,000, which leaves $30,000 minus $20,000 = $10,000 to tax at California’s rates.
A filer over the income limit is outside the exclusion as the documents describe it, so the whole $30,000 is in income.
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What changes in 2026
No 2026 change is printed in the documents read. The $20,000 exclusion is printed as applying to taxable years 2025 through before 2030.
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 California taxes pensions, how California taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- 2025 FTB Publication 1032, Tax Information for Military Personnel: https://www.ftb.ca.gov/forms/2025/2025-1032-publication.pdf
- 2025 Instructions for Schedule CA (540): https://www.ftb.ca.gov/forms/2025/2025-540-ca-instructions.html
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.