No. Arizona allows a subtraction for 100% of military retired or retainer pay received from the uniformed services of the United States. If your military retirement pay is included in your federal adjusted gross income, you can subtract the full amount on your Arizona return.
This subtraction applies to:
- Military retired pay
- Military retainer pay
- Benefits, annuities, and pensions received as retired or retainer pay of the uniformed services of the United States
If both spouses receive qualifying military retirement income and file jointly, each spouse may subtract 100% of the qualifying amount received.
Surviving Spouses
Arizona also allows a surviving spouse of a deceased military veteran to subtract 100% of qualifying payments received from the uniformed services of the United States.
Where to Report the Subtraction
The Arizona subtraction for military retirement income is entered on Form 140, Line 29b - Exclusion for Retired or Retainer Pay of the Uniformed Services of the United States. The Arizona instructions confirm that the allowable subtraction is 100% of the amount received.
Program Entry
To enter military retirement income in the software:
- Go to State.
- Select Arizona and edit the return.
- Open Subtractions from Income.
- Enter the amount of qualified benefits, annuities, and pensions received as retired or retainer pay of the uniformed services.
Arizona Form and Instructions
For additional reference, the military pension subtraction is discussed in the Arizona Form 140 instructions under Line 29b.