Personal income taxes: exclusion: Military Services Retirement and Surviving Spouse Benefit Payment Act.

Senator Seyarto's Military Services Retirement and Surviving Spouse Benefit Payment Act proposes new tax exclusions for military retirees and their surviving family members in California, allowing qualified recipients to exclude up to $20,000 in annual retirement pay or survivor benefits from their state taxable income between 2025 and 2035.

The legislation creates two distinct exclusions from gross income. Military retirees with adjusted gross incomes under $125,000 ($250,000 for joint filers) may exclude up to $20,000 in federal retirement pay received for service in the uniformed services, which encompasses the Armed Forces, National Guard, Public Health Service, and NOAA Commissioned Officer Corps. Similarly, surviving spouses and beneficiaries meeting the same income thresholds may exclude up to $20,000 in annual payments received through the Department of Defense Survivor Benefit Plan.

The bill's findings cite California's approximately 60,000 unfilled high-tech positions and note that military retirees often possess technical and management expertise valuable to employers. Authors assert the tax exclusions would help retain skilled veterans in California while bringing additional federal funds into local economies through retirement pay, second career earnings, and veterans' benefits. Both exclusions would automatically expire on December 1, 2035.