Ohio Military Tax Exemptions: Income, Property, and Combat Pay

Ohio offers a wide set of military tax exemptions: active duty pay earned while stationed outside the state, all uniformed-services retirement pay, survivor benefit plan payments, combat zone compensation, and certain state-specific grants are deductible from Ohio adjusted gross income, and disabled veterans qualify for a homestead property tax reduction worth $58,000 off their home’s taxable value. Most are claimed on the Ohio Schedule of Adjustments filed with your IT 1040; the property tax break is handled by your county auditor.

Active Duty Pay

Under Ohio Revised Code 5747.01(A)(21), an Ohio resident can deduct military pay and allowances earned on active duty as long as the duty station was outside Ohio.¹ The deduction reaches every branch, including reserve components and the National Guard. The catch surprises people: if you are an Ohio resident stationed at an Ohio base, that pay does not qualify. Duty station location controls, not domicile.

When Guard members or reservists are called to active federal service and deploy outside Ohio, pay during that activation qualifies. Weekend drills and annual training performed at an Ohio facility do not, because the service member is stationed in state during those periods.

Military Retirement and Survivor Benefits

Ohio Revised Code 5747.01(A)(23) allows a full deduction for retired personnel pay from the uniformed services, reserve components, or the National Guard, with no cap on the amount.¹ This covers retirement from any branch, including the Coast Guard and the commissioned corps of the Public Health Service.

The same subsection covers survivor benefit plan payments. A surviving spouse or former spouse receiving SBP payments after a retiree’s death may deduct those payments from Ohio adjusted gross income to the extent they appeared in federal adjusted gross income.¹

One wrinkle for second-career federal retirees: if your federal civil service pension includes credit for prior uniformed service, only the portion attributable to military service is deductible. The civilian portion remains taxable in Ohio.

Combat Pay, VA Disability, and Other Tax-Free Military Income

VA disability compensation does not appear on your Ohio return because it does not appear on your federal return. Under 38 U.S.C. § 5301, VA benefits are exempt from taxation at every level of government.² Ohio’s income tax starts from federal AGI, so the exclusion carries through automatically and no separate Ohio entry is needed.

Combat zone pay works the same way. Enlisted service members may exclude all compensation earned during any month of qualifying service in a designated combat zone under 26 U.S.C. § 112; commissioned officers get an exclusion capped at the highest enlisted pay rate.³ Ohio Revised Code 5747.024 confirms that pay excluded federally under § 112 is also excluded from Ohio adjusted gross income.⁴ Combat pay appears as Code Q in Box 12 of your W-2.

Ohio provides separate deductions for payments from the military injury relief fund under ORC 5747.01(A)(24) and for veterans bonus payments from the Ohio Department of Veterans Services under ORC 5747.01(A)(25).¹

Nonresident Service Members and Military Spouses

If your legal residence is in another state and the military orders you to Ohio, federal law blocks Ohio from taxing your military pay. Under 50 U.S.C. § 4001, a service member’s compensation is not treated as income earned in a state where the member is present solely because of military orders.⁵ Ohio recognizes this, and nonresidents deduct their military pay on the Ohio Schedule of Adjustments.⁶

The protection is limited to military compensation. A nonresident service member who works a part-time civilian job off base or earns rent from Ohio property owes Ohio tax on that income.⁶

Spouses get the same residency shield. A spouse who moves to Ohio to be with a service member under orders does not gain or lose tax residency in any state because of the move.⁵ The same statute lets married military couples elect one of three states as their tax residence for the year: the service member’s state of legal residence, the spouse’s state of legal residence, or the permanent duty station state. A couple stationed in Ohio where one spouse keeps legal residency in a no-income-tax state can elect that state and owe Ohio nothing on the spouse’s wages.

Property Tax Relief for Disabled Veterans

Ohio’s homestead exemption reduces the taxable value of a qualifying veteran’s primary residence. A veteran with a 100 percent service-connected disability rating receives a $58,000 reduction for tax year 2025 real property; the figure is adjusted periodically.⁷ The surviving spouse of a disabled veteran who occupied the homestead at the time of the veteran’s death may also qualify.

Applications go to the county auditor’s office, typically between January and the first Monday in June of the year for which you want the reduction. Bring proof of your VA disability rating and documentation showing you own and occupy the home as your primary residence.

School District and Municipal Income Taxes

Many Ohio school districts levy their own income tax on top of the state tax. Nonresident service members stationed in Ohio are not liable for school district income tax at all.⁶ Ohio residents who are service members may still owe it on non-military income, but the state-level military deductions generally reduce school district taxable income as well. The Ohio Department of Taxation recommends filing Form SD 100 even when the result is zero, to prevent automated notices.⁸

Municipalities also impose income taxes, administered locally. A member called to active duty under a presidential executive order or act of Congress may request a filing and payment extension from the municipal tax administrator, lasting for the duration of active duty plus 180 days afterward. Because the process varies by city, contact the municipal tax office directly if you owe one.

Claiming the Deductions on Your Ohio Return

Every military income deduction flows through the Ohio Schedule of Adjustments filed with the IT 1040. The relevant lines:⁹

Line 32: active duty pay earned while stationed outside Ohio (Ohio residents)
Line 33: military pay earned by a nonresident service member
Line 34: uniformed services retirement income
Line 35: military injury relief fund grants and disability severance payments
Line 36: reimbursements and benefits for Ohio National Guard service

Your W-2 is the primary supporting document, showing the income, your state of residence, and any Code Q combat pay. Keep your Leave and Earnings Statements too; they break down pay by month and duty location, which matters when you were stationed in Ohio for part of the year and elsewhere for the rest. Forms, instructions, and adjustment codes are posted by the Ohio Department of Taxation.⁸

Because the deductions often zero out Ohio-taxable income, many service members end up owing nothing. File the IT 1040 anyway. The Department of Taxation specifically recommends it to prevent automated non-filer notices.⁸

Combat Zone Filing Extensions

Service members deployed to a combat zone or contingency operation get automatic extensions to file both federal and Ohio returns. The federal extension covers the period of combat zone service plus at least 180 days after leaving the zone.¹⁰ Ohio generally follows the same timeline. If you are currently deployed, confirm with the Ohio Department of Taxation that your federal combat zone extension carries over to the state obligation before relying on it.

1
Ohio Legislative Service Commission. Ohio Code 5747.01 – Definitions
2
Office of the Law Revision Counsel. 38 USC 5301 – Nonassignability and Exempt Status of Benefits
3
Office of the Law Revision Counsel. 26 USC 112 – Certain Combat Zone Compensation of Members of the Armed Forces
4
Ohio Legislative Service Commission. Ohio Code 5747.024 – Military Pay Not Included in Adjusted Gross Income
5
Office of the Law Revision Counsel. 50 USC 4001 – Residence for Tax Purposes
6
Ohio Department of Taxation. Military
7
Ohio Department of Taxation. Real Property Tax – Homestead Means Testing
8
Ohio Department of Taxation. Military Servicemembers and Ohio Income Taxes
9
Ohio Department of Taxation. Individual Income Tax and School District Income Tax Booklet
10
Internal Revenue Service. Filing Extensions and Tax Return Preparation Assistance for Military Personnel Stationed Abroad or in a Combat Zone