News Column

Nebraska, Iowa Make Military Retirement Pay Exclusion

August 1, 2014

OFFUTT AIR FORCE BASE, Neb., Aug. 1 -- The U.S. Air Force Offutt Air Force Base issued the following story:

Iowa and Nebraska recently implemented tax law changes concerning military retirement.

Iowa has signed into law an exclusion of military retirement benefits from Iowa individual income tax retroactive to the tax year beginning on or after Jan. 1, 2014. The exclusion also applies to military survivor benefits received under 10 U.S.C. 1447. The exemption is available for both residents and nonresidents of Iowa. It is in addition to the general $6,000 or $12,000 pension exclusion available for Iowa individual income tax for taxpayers 55 years of age or older.

Because the change is retroactive to Jan. 1, 2014, individuals receiving military retirement benefits may change or eliminate the amount of Iowa tax being withheld on their military pension.

For Nebraska, beginning July 18, 2014, certain military retirees may elect to exclude a portion of military retirement pay from Nebraska taxable income. The retiree must make the one-time election, using the Election to Exclude Military Retirement Benefits, Form 1040N-MIL, within two years after his or her retirement from the uniformed services, and may elect:

Option 1: To exclude 40 percent of his or her military retirement benefit income for seven consecutive taxable years, beginning with the year in which the election is made;

Option 2: To exclude 15 percent of his or her military retirement benefit income for all taxable years, beginning with the year in which he or she turns 67 years of age.

Although the election may be made beginning July 18, 2014, the exclusion is not available until tax year 2015.

Additional information for military retirees is available at by clicking on "Election to Exclude Military Retirement Pay from Income Tax."

This election is time sensitive and it is important to check out the Nebraska website.

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Source: Targeted News Service

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