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Bill introduced into House to exempt veterans from pay state income tax on their retirement from service

By Tom Latek
Kentucky Today

Legislation that would establish an exemption from paying state income tax by Kentucky veterans following their retirement from the Armed Forces has been introduced in the General Assembly.

Rep. Kim Moser of Taylor Mill speaks with Rep. Fleming who is sponsoring a bill to exempt veterans from state income tax. (LRC photo)

Rep. Ken Fleming, R-Louisville, is the sponsor of House Bill 125, which would create a deduction of the first year’s income for retired veterans who remain in or immediately move to Kentucky upon retirement.

“These men and women have dedicated their lives to the service of their country,” Fleming stated.  “Now, it is our responsibility to ensure they receive the benefits that they have rightfully earned.”

The bill would require permanent residency within the state for at least three consecutive years following to remain eligible. If the three-year residency requirement was not satisfied, the person would be liable to repay the deduction to the state. Federal income tax liability would not be affected by this legislation. In addition to supporting Kentucky’s veterans, supporters point out that the measure has the potential for significant economic and workforce development across the state.

Among the supporters of the measure, back to when Fleming first proposed it last year, are Rep. Walker Thomas, R-Hopkinsville, and Rep. DJ Johnson, R-Owensboro.

“These are highly skilled, hardworking individuals,” said Thomas. “They bring expertise and experience that would be invaluable to our state.”

Of the 41 states that tax personal income, there are currently 23 that do not tax military retirement pay.

Kentucky is among the remaining states that include partial exemptions, only exempting veterans who retired before 1997 and whose retirement pay does not exceed $31,110. This measure would give exemption to all veterans who retire in or move to Kentucky, regardless of income.

“Veterans have a lot of options as far as where to retire,” Johnson said.  “We want Kentucky to be the best option for them.”

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