Is military retirement pay taxed in Alabama?
By a Navy veteran. Updated October 2026.
No
Alabama: Fully exempt. Federal income tax still applies to retired pay in every state.
What this means for your plan
Alabama exempts military retired pay, so your retired pay is not reduced by state income tax. Other income, such as a second job, a spouse’s wages or business profit, is generally still taxed under Alabama’s normal rules.
VA disability pay is not taxed by the federal government, and most states follow that treatment.
Local taxes in Alabama
Some cities charge occupational taxes on wages. Retirement pay is generally not wages.
Questions
Does Alabama tax military retirement pay?
No. Fully exempt.
Is VA disability pay taxed in Alabama?
VA disability compensation is not taxed by the federal government, and most states follow that treatment. Confirm with the Alabama Department of Revenue.
Where do I confirm the rules for Alabama?
Use the Alabama Department of Revenue and the DFAS retired pay tax page. Rules change, so check the current year before you decide where to live.
See it for your family
The free planner puts your retired pay, VA pay and Alabama tax on one 24-month timeline, so you can see the month money gets tight. The States tab in the full version compares all 50 states and DC side by side.
Open the plannerSource and method
This summary comes from the state treatment data in the Runway planner, compiled from published state guides. It is not an official ruling. For the official rule, see the Alabama Department of Revenue and the DFAS retired pay tax page.