No state income taxes on military retirement pay proposed

Minnesota is one of only a handful of states that taxes military retirement income. A bill that would allow retired military personnel to deduct state income tax from their retirement checks is on its way to the House Taxes Committee.

Sponsored by Rep. Josh Heintzeman, (R-Nisswa), HF299 was approved by the House Veterans Affairs Division Monday. Sen. Paul Gazelka (R-Nisswa) sponsors a companion, SF40, which was laid over in the Senate Tax Reform Division.

Beginning with the 2015 tax year, those who have retired from active military duty would not have to pay income tax on their retirement pay, which most likely was earned in another state or country, said advocates.

Critics said the bill should include a maximum on the amount of military retirement income taxes that can be deducted, due to the potential fiscal impact.

Heintzeman and others said taxing military retirement pay impedes retirees from returning home or relocating to Minnesota because of the tax disadvantage.