VA vs FL: The Military Retiree Domicile Checklist
A side-by-side checklist for 20-year military retirees weighing Virginia's $40K tax subtraction against Florida's zero income tax, homestead cap, and vet exemptions.
Every year, thousands of Hampton Roads military retirees ask the same question: should I stay in Virginia or move to Florida? The math has changed. Virginia now offers a $40,000 military retirement subtraction that did not exist five years ago. Florida still has zero state income tax. The right answer depends on your pension amount, disability rating, property situation, and how much paperwork you are willing to do.
This is the checklist. Not theory, not opinion. A line-by-line comparison of what each state actually offers a 20-year retiree in 2026, with the statutes and dollar amounts attached.
How Does Virginia Tax Military Retirement Pay?
Virginia imposes a graduated state income tax ranging from 2% to 5.75% on taxable income. But under Va. Code Section 58.1-322.02, subdivision 18, military retirees can subtract up to $40,000 in qualifying military benefits from their Virginia adjusted gross income starting in tax year 2025.
There is no age requirement. The original 2022 legislation included an age-55 threshold, but the General Assembly removed it effective tax year 2024. A retiree who separated at 38 after 20 years of service qualifies immediately.
Important: The Virginia Tax FAQ page has historically contained stale language referencing the old age-55 requirement. Always verify against the Code itself, not the FAQ.
What Does the $40,000 Subtraction Save You?
The savings depend on your marginal rate. Virginia’s top bracket of 5.75% kicks in at $17,001 of taxable income, so most military retirees are in the top bracket on their pension income.
| Annual Pension | Subtraction | VA Tax Saved | Effective State Tax on Pension |
|---|---|---|---|
| $30,000 | $30,000 | $1,725 | $0 |
| $40,000 | $40,000 | $2,300 | $0 |
| $60,000 | $40,000 | $2,300 | ~$1,150 on the remaining $20K |
| $80,000 | $40,000 | $2,300 | ~$2,300 on the remaining $40K |
For a typical O-5 retiree with $60,000 in annual pension income, the subtraction eliminates tax on the first $40,000 but leaves approximately $20,000 still subject to Virginia’s 5.75% rate. The net Virginia tax bill on pension income alone: roughly $1,150 per year.
What Does Florida Offer?
Florida has no state income tax. Period. No tax on pensions, no tax on TSP withdrawals, no tax on investment income, no tax on Social Security. The comparison on income tax is binary.
But income tax is not the only line item. Florida offers additional benefits that matter for military retirees:
Homestead Exemption and Save Our Homes: Florida homeowners receive a homestead exemption reducing the assessed value of a primary residence by up to $50,000. The Save Our Homes amendment caps annual assessment increases at 3%, regardless of actual market appreciation. Over a decade of rising property values, this cap can save tens of thousands.
100% P&T Disabled Veteran Exemption: Under FL Stat Section 196.081, veterans with a 100% permanent and total (P&T) disability rating from the VA receive a full property tax exemption on their homestead. In a county with a 1.5% effective property tax rate on a $400,000 home, that is $6,000 per year in savings.
No Estate Tax: Florida imposes no state estate tax. Virginia also has no state estate tax, so this is a wash between the two.
The Side-by-Side Checklist
| Factor | Virginia | Florida |
|---|---|---|
| State income tax rate | 2% to 5.75% | 0% |
| Military pension subtraction | $40,000 (Va. Code 58.1-322.02(18)) | N/A (no income tax) |
| TSP/IRA withdrawal tax | Taxed at state rate (after subtraction used) | 0% |
| Social Security tax | Not taxed | Not taxed |
| Homestead assessment cap | None statewide | 3% annual cap (Save Our Homes) |
| 100% P&T vet property tax exemption | Partial (varies by county/city) | Full exemption (FL Stat 196.081) |
| State estate tax | None | None |
| Cost of living (Hampton Roads vs comparable FL metro) | Moderate | Varies widely; hurricane insurance adds cost |
Who Saves More by Staying in Virginia?
If your total military retirement pay is $40,000 or less, the Virginia subtraction effectively zeroes out your state income tax on pension income. Moving to Florida for tax savings alone produces almost no benefit, because your Virginia tax bill on pension income is already near zero.
If your pension exceeds $40,000 and you have additional taxable income from a defense contractor W-2, TSP withdrawals, or investment income, the savings from Florida’s zero rate compound. An O-6 retiree pulling $75,000 in pension plus $120,000 from a contractor job faces a meaningful Virginia tax bill even after the subtraction.
What Does Residency Actually Require?
Changing domicile is not just changing your address. Both states have documentation requirements, and getting it wrong can result in dual-state taxation.
To establish Florida domicile, you generally need to:
- File a Declaration of Domicile in your Florida county within 30 days of establishing residence
- Obtain a Florida driver’s license and register to vote in Florida
- Register vehicles in Florida
- Update your DD Form 2058 (State of Legal Residence) with DFAS
- File a final Virginia part-year return
To maintain Virginia domicile, you simply:
- Continue filing Virginia returns as a resident
- Keep your Virginia driver’s license and voter registration current
The DD Form 2058 is the critical document. DFAS uses it to determine which state (if any) withholds income tax from your retired pay. Filing this form incorrectly, or failing to update it, is the most common cause of dual-state withholding problems for military retirees.
What About TRICARE and VA Health Care?
TRICARE coverage follows you regardless of which state you live in. TRICARE Prime, Select, and For Life all operate nationally, though your regional contractor and network may change. VA health care eligibility is federal and does not depend on domicile.
The health care question is not whether you keep coverage. It is whether your local facility networks and specialists change. For retirees accustomed to Naval Medical Center Portsmouth or the Hampton VA Medical Center, moving to Florida means building new provider relationships. That is a quality-of-life factor, not a financial one, but it belongs on the checklist.
The Bottom Line
Virginia closed a significant gap with its $40,000 subtraction, but it did not close it entirely. For retirees with pension income above $40,000 and substantial other taxable income, Florida’s zero rate still wins on pure tax math. For retirees at or below the $40,000 pension level, the tax difference is negligible, and the decision comes down to property taxes, cost of living, family proximity, and whether you want to deal with hurricane insurance. We covered the full details of Virginia’s military retirement subtraction in a separate deep-dive for those who want the line-by-line breakdown.
The right answer is not the same for every retiree. Run the numbers on your specific situation. A fee-only fiduciary advisor who is registered in both states can model both scenarios without a commission incentive to push you toward either one. That is the point of the fiduciary standard: the recommendation follows your math, not the advisor’s revenue.
Ferrante Capital LLC is a registered investment adviser. Information presented is for educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. All investing involves risk, including the possible loss of principal.
FC and its principals may hold positions in securities or asset classes discussed in this article. This analysis is for educational purposes only and does not constitute a recommendation to buy, sell, or hold any security.
Forward-looking statements reflect Ferrante Capital’s current analysis and involve assumptions and estimates. Actual results may differ materially. Past performance is not indicative of future results.
Please consult a qualified financial professional before making investment decisions.
