Victory for Veterans: California Approves Military Retirement Tax Exemption

After years of tireless advocacy, California’s veteran and military community is celebrating a long-overdue and well-deserved win: the Governor and Legislature have enacted a state income tax exemption for military retirement pay. 

Until now, California stood alone as the last state to fully tax military pensions, putting us at a competitive disadvantage and making it more difficult to retain and support retired service members who call our state home. That changes with the passage of the Military Retirement Exclusion, included in the 2025-26 state budget. 

Beginning in tax year 2025 through 2029, eligible veterans and surviving family members will receive a state tax exclusion of up to $20,000 on: 

• Military retirement pay from federal service 

• Survivor annuity payments under the Department of Defense Survivor Benefit Plan (SBP) 

The exemption applies to individuals with incomes up to $125,000 (or $250,000 for joint filers). 

This marks more than just a budget win—it is a first step in reshaping how California values and supports its veteran population.

It sends a strong message: that those who have served deserve not only our gratitude, but meaningful, lasting support. 

At VetFund Foundation, we believe that policy victories like this one create real-world impact. For years, we’ve worked to bring visibility to the challenges veterans face and to advocate for smart, sustainable solutions that make California a better place for veterans and their families to thrive. 

We extend our sincere thanks to the Governor, legislative leadership, and the many partners, advocates, and organizations who helped make this moment possible. California has long led the way in delivering services and support to our veteran community, and this tax exemption ensures we continue to lead not just in spirit, but in action. 

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