Tax exclusion for military retirement income approved

Individuals may exclude half of their military retirement benefit pay from state income tax under a bill passed by lawmakers Aug. 12.

Previously, individuals could, within two years after their retirement from the military, choose from two options to exclude military retirement benefit pay from state income tax.

LB153, introduced last session by Gordon Sen. Tom Brewer on behalf of Gov. Pete Ricketts, repeals those options and instead allows individuals to exclude 50 percent of their military retirement benefit income to the extent included in federal adjusted gross income.

The exclusion is for taxable years beginning or deemed to begin on or after Jan. 1, 2022.

The state Department of Revenue estimates that the bill will reduce state tax revenue by $5.4 million in fiscal year 2021-22 and an additional $13.3 million in FY2022-23.

LB153 passed on a vote of 46-0.