Active-duty pay
Taxed
Active-duty pay taxable to MN residents; combat zone exempt.
State Guide · MN
Minnesota — Military Tax Treatment
Minnesota taxes active duty and Guard pay throughout service but fully exempts retirement. The MN disabled veteran property tax exclusion (up to $300K market value) is unusually generous.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable Minnesota income. MN has combat zone and deployment pay exclusions, but routine drill pay does not qualify.
Military retirement pay
Fully Exempt
Military retirement pay fully exempt as of 2016.
The numbers · verified for tax year 2025
Top marginal rate
9.85%
Retirement-pay exemption
Full
Minnesota allows a full subtraction of federally-taxable military retirement pay (active, reserve, and SBP) — no dollar cap, no age limit. A filer may instead claim the Credit for Past Military Service, but not both. (The $1,500/$3,000 cap people cite applies to active/Guard pay, a different subtraction.)
Standard deduction
For 2025 the standard deduction is $14,950 single / $29,900 married filing jointly (indexed; phases down above $238,950 AGI).
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Minnesota included.
Survivor Benefit Plan (SBP)
Follows retirement
Minnesota exempts military retirement — SBP annuities are generally exempt.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Minnesota, Minnesota cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Minnesota can keep Texas as their tax domicile and avoid Minnesota state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Minnesota exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01MN Schedule M1M for combat zone and deployment pay exclusions — routine drill does not qualify
- 02Guard drill pay: taxable MN income — withhold state taxes
Veteran-specific tax benefits
Disabled veteran property tax exclusion up to $300K market value.
Official authority
https://www.revenue.state.mn.us/ ↗State tax law changes annually. Verify current rules with the Minnesota Department of Revenue before making any tax decision.
Minnesota military tax — common questions
Does Minnesota tax military retirement pay in 2026?
Minnesota fully exempts military retirement pay. Military retirement pay fully exempt as of 2016.
Does Minnesota tax active-duty military pay?
Minnesota taxes active-duty military pay for state residents. Active-duty pay taxable to MN residents; combat zone exempt. Under the SCRA, Minnesota can only tax the military pay of service members who are legally domiciled in Minnesota — not those merely stationed there.
Does Minnesota tax National Guard and Reserve drill pay?
Minnesota taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable Minnesota income. MN has combat zone and deployment pay exclusions, but routine drill pay does not qualify.
Is VA disability compensation taxed in Minnesota?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Minnesota — taxes it as income.
If I'm stationed in Minnesota but claim another state, can Minnesota tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Minnesota cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides