Does Rhode Island Tax Military Retirement? Subtraction and Eligibility

Rhode Island does not tax military retirement pay. A 2022 law, effective for tax years beginning January 1, 2023, lets you subtract the entire amount of your military service pension from your Rhode Island taxable income, with no dollar cap and no age or income restrictions.¹ You still have to file a state return and claim the subtraction on the right line; skip that step and the state will tax the pension like any other income.

How the Full Subtraction Works

Rhode Island’s income tax runs from 3.75% to 5.99% and starts with your federal adjusted gross income. The state then allows “modifications” that reduce that figure before tax is calculated. The military retirement subtraction sits in Section 44-30-12(c)(11) of the Rhode Island General Laws and lets you remove the full taxable amount of your military pension from the base.¹

Before 2023, military retirees in Rhode Island could only use the general pension and annuity modification, which carries age and income limits. The military-specific subtraction removed those barriers. A retired officer earning a six-figure civilian salary subtracts the same amount as a retiree with no other income: the whole pension.²

Who Qualifies

The subtraction covers retirement pay from the Army, Navy, Air Force, Marine Corps, Space Force, and Coast Guard. National Guard and Reserve retirees who earned a pension also qualify. The statute uses the federal definition of “military service” at 20 C.F.R. § 212.2.¹

Surviving spouses who receive a military pension on behalf of a deceased service member can claim the subtraction on their own returns.²

One limit applies: the military subtraction, by itself or combined with the general pension modification under subsection (c)(9), cannot exceed the military pension you actually received that year.¹ If you report your pension accurately, that limit never bites.

How to Claim It on Your Return

You need two documents: your Form 1099-R from the Defense Finance and Accounting Service, and Rhode Island Schedule M.

DFAS issues the 1099-R each January and makes it available through the myPay portal; you can also request a mailed copy.³ If you receive more than one 1099-R (say, a retirement payment and a separate survivor benefit), add them together for your Schedule M entry.

File Schedule M with your RI-1040. The military retirement subtraction goes on Line 1(v) of Schedule M, in the section for modifications decreasing federal adjusted gross income.⁴ Enter the gross distribution shown in Box 1 of your 1099-R. That amount carries over to your RI-1040 and reduces your taxable income. Omit Schedule M and the state will tax the pension as ordinary income.

Make sure the name on your 1099-R matches the name on your return to avoid processing delays, and hold onto both documents for at least three years in case the Division of Taxation requests verification.⁵

When to File

Rhode Island individual returns for the 2025 tax year are due April 15, 2026.⁶ You can submit the RI-1040 and Schedule M through the Division of Taxation’s electronic filing system, through approved third-party software, or on paper mailed to the Rhode Island Division of Taxation, One Capitol Hill, Providence, RI 02908.⁷ Electronic returns typically process in two to three weeks; paper returns can take six to eight weeks during peak season.

If you need more time, Form RI-4868 gives you an automatic six-month filing extension to October 15. It does not extend the time to pay — any balance owed is still due by April 15, so estimate and pay with the extension to avoid penalties and interest.⁸

VA Disability, CRDP, and CRSC

VA disability compensation is fully exempt from both federal and state income tax. It applies to every rating level and includes Veteran Readiness and Employment payments and GI Bill education benefits.⁹ Because it never enters your federal adjusted gross income, it never reaches your Rhode Island return. No subtraction is needed.

Retirees who receive both military retired pay and VA disability compensation may also get payments under one of two restoration programs, and they are treated differently for tax purposes:¹⁰

Concurrent Retirement and Disability Pay (CRDP) is taxable like regular retired pay. It appears on your 1099-R, and you subtract it on Schedule M Line 1(v) along with the rest of your pension.
Combat-Related Special Compensation (CRSC) is not taxable at the federal or state level. Like VA disability, it stays out of your adjusted gross income and needs no entry on your Rhode Island return.

Other Retirement Income Is Treated Separately

The military subtraction only covers your military pension. If you also draw a civilian pension, 401(k) distributions, or annuity income, those fall under a separate modification in Section 44-30-12(c)(9) that caps the subtraction at $20,000 per person and requires you to have reached Social Security full retirement age and to fall below an income threshold that varies by filing status.² IRA distributions, including traditional, Roth, and SEP IRAs, do not qualify for that modification at all. Keep your military pension on Line 1(v) where it has no caps, and the statute bars counting the same dollars under both modifications.¹

1
Rhode Island General Assembly. Rhode Island Code 44-30-12 – Rhode Island Income of a Resident Individual
2
Rhode Island Division of Taxation. Rhode Island Retirement Income Tax Guide
3
Defense Finance and Accounting Service. Getting Your 1099-R
4
Rhode Island Division of Taxation. 2025 RI Schedule M – RI Modifications to Federal AGI
5
Cornell Law School. 280 RICR 20-70-12.10 – Requirement for Record Retention
6
Rhode Island Division of Taxation. Free File 2026
7
Rhode Island Division of Taxation. Contact Us
8
Rhode Island Division of Taxation. RI-4868 – Personal Income Tax Extension
9
VA News. Tax Season Guidance for Veterans
10
Defense Finance and Accounting Service. CRSC and CRDP Payment