10 Worst States for Military Retirees

9. Delaware

• Lowest tax rate: 2.2 percent (on taxable income from $2,001 to $5,000)
• Highest tax rate: 6.6 percent (on more than $60,000 of taxable income)

Delaware offers a relatively modest exemption. Up to $12,500 for pension and other types of retirement income that are paid to those aged 60 or older and up to $2,000 for those younger than age 60.

The types of retirement income that are eligible for exemption include interest, net rental income from real property, dividends, capital gains, and qualified retirement plans such as IRAs, 401(k) plans, or Keogh plans.

10. Rhode Island

• Lowest tax rate: 3.75 percent (on up to $64,050 of taxable income)
• Highest tax rate: 5.99 percent (on more than $145,600 of taxable income)

Rhode Island exempts some types of retirement income from state taxes; however, if you’re a retired veteran who benefits from an IRA account, you could face a large tax bill.

Keep in mind that the first $15,000 from your retirement income (no matter the source) is exempt from state income taxes only if you have the full Social Security retirement age. Apart from that, you should have an income of up to $83,450 if you decide to file alone or an income of up to $104,350 for joint filers.