By IRS.gov    January 2026

When you transition from active military duty to retirement, your tax situation will change significantly, primarily because tax-free allowances become taxable income, your total income may vary on your situation, and your state residency and tax obligations will shift. As you prepare for your next chapter – that of a Retired Soldier, filing your taxes will look different. The next tax season will be here before you know it, and we want to make sure that you are prepared. Now is the best time to verify everything is correct in your myPay account so you can retrieve your tax documents when you need to file. 

Start with myPay 

The best tool DFAS offers to ensure a smooth tax season is myPay. The most important step to take is to log in to your myPay account and ensure your mailing address is correct. 

An easy, online stop for your tax season needs, myPay offers printing or downloading of your tax statements for your retired pay. You will have earlier access to your tax documents through myPay; 1099Rs are generally available in myPay in late December, while paper copies are mailed in mid-to-late January. If you haven’t logged in to myPay recently, this is a good time to log in and update your password before the busy tax season. 

Changing Federal Tax Withholding 

It’s easy to review your current federal withholding status in myPay. If needed, you may adjust it through the corresponding menu option or view withholding amounts on your latest Retiree Account Statement (RAS). The form for federal withholding changes can be found on the DFAS website.

Use the IRS Tax Withholding Estimator 

The Internal Revenue Service (IRS) has an online Tax Withholding Estimator to help you determine how much tax you need to have withheld. The calculator helps taxpayers estimate if the right amount is withheld from their income to cover their tax liability. The estimator uses a simple, six-step question-and-answer format using information like marital or filing status, income, withholding, adjustments, deductions, and credits.  DFAS cannot provide tax advice. Please consult a tax professional or the IRS. 

State Taxes for Retirees 

Retirees can start, stop, or change their State Income Tax Withholding (SITW), but only if that state has an agreement in place allowing DFAS to withhold state tax. In some states, portions of your retired pay may be tax exempt. Because tax obligations vary from state to state, contact your state's department of revenue regarding taxability of your military retired pay. 

Any changes to SITW must be made in writing, by submitting a DD 2866 form or by using myPay. DFAS can only withhold income tax for one state at a time, and the designated state must have signed the standard written SITW agreement with the Department of Defense (DoD). Additional details on changing SITW are available on the DFAS website .  

Federal Taxability of Retired Pay 

Military retired pay is paid for many different reasons under many different laws. There are differences in the types of pay a military retiree might receive and the tax laws that apply to them. Whether a portion or all an individual’s military retired pay is subject to federal income taxes depends on his/her individual circumstances.

A military retiree can either use myPay or send an IRS Form W-4 to alter the amount DFAS withholds for federal income taxes from their military retired pay. An individual’s choice to have no withholding for federal taxes does not impact whether the individual’s military retired pay is subject to federal income taxes. Ultimately, the IRS will determine the amount of taxes owed on military retired pay.