According to this New York Department of Taxation and Finance booklet, Military Retirement is not taxable and should not be included on the state return.
In order to exclude this income from your New York state return, please go to,
- State Section
- New York Return
- Subtractions From Income
- Certain Pension Income is Excluded from New York taxable income
- Enter the Taxable Pensions received from New York State, Local, and Federal governments