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2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 26 * August 2024 26-1 VOLUME 7B, CHAPTER 26: “STATE TAXES” SUMMARY OF MAJOR CHANGES Changes are identified in this table and also denoted by blue font. Substantive revisions are denoted by an asterisk (*) symbol preceding the section, paragraph, table, or figure that includes the revision. Unless otherwise noted, chapters referenced are contained in this volume. Hyperlinks are denoted by bold, italic, blue, and underlined font. The previous version dated July 2020 is archived. PARAGRAPH EXPLANATION OF CHANGE/REVISION PURPOSE All Updated this chapter with hyperlinks and formatting to comply with current administrative instructions. Revision 2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 26 * August 2024 2

deral income tax is withheld from BRS lump sum payments in the same manner as described in paragraph 3.1. DoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 25 * June 2025 25-6 REFERENCES CHAPTER 25 – COMPUTATION OF FITW 2.0 – RATES FOR REGULAR AND ADDITIONAL WITHOLDING OF FITW 2.1 IRS Publication 15, (Circular E) 2.4 26 U.S.C. § 871 26 CFR 1.861-4 26 U.S.C. § 1441 3.0 – RATES OF FITW FOR ONE-TIME PAYMENTS 3.1 IRS Publication 15, (Circular E), Section 7 26 CFR § 31.3402(g)-1 Revenue Ruling 82-200 3.2 26 CFR § 31.3402(g)-1 Revenue Ruling 66-190, 1966-2 CB 457 10 U.S.C. § 1415(b)

NTION The retired pay of a member of the FR/FMCR, who is transferred to the retired list after being found physically unqualified for retention in the FR/FMCR, is subject to FITW. See Chapter 2. DoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 24 * May 2025 24-10 REFERENCES CHAPTER 24 - COMPUTATION OF WAGES SUBJECT TO FEDERAL INCOME TAX WITHHOLDING (FITW) 2.0 – GROSS RETIRED PAY AND FITW 2.1 26 CFR 31.3401(a)-1(b) 2.2.1 26 U.S.C. § 104(a)(4) 26 U.S.C. § 104(b) 26 U.S.C. § 104(b)(2)(A) 2.2.2 26 U.S.C. § 104(a)(4) 26 U.S.C. § 104(b)(2)(B) 2.2.3 26 U.S.C. § 104(a)(4) 26 U.S.C. § 104(b)(2)(C) DoDI 1332.18, Disability Evaluation System (DES), November 10, 2022 2.2.4 26 U.S.C. § 104(a)(4) 26 U.S.C. § 104(b)(2)(D) 3.0 – EFFECT OF DISABILITY COMPENSATION AWARD ON FITW 26 U.S.C. § 1

.C. § 1450(b) and (k) 38 U.S.C. § 103 12.0 –ELIGIBLITY VERIFICATION PRIOR TO AUGUST 2023 DoDI 1332.42, December 30, 2020 10 U.S.C. § 1447(11) 13.0 – ANNUAL ELIGIBILITY VERIFICATION EFFECTIVE AUGUST 2023 PL 117-81, Section 605, NDAA FY 2022 13.2 & 13.3 44 Comp Gen 208, A-3551, October 12, 1964 2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 46 * July 2024 46-39 REFERENCES (Continued) 14.0 – TAXABILITY OF ANNUITIES 14.1 26 U.S.C. § 3405 14.2 26 U.S.C. § 3402(o)(3) 14.3 26 U.S.C. § 3405(a)(1) and (2) and (4) 26 CFR 35.3405-1T(b-8) 26 C.F.R. 31.3405(a)-1 14.4 26 U.S.C. § 101 26 CFR 1.122-1(b) 26 CFR 1.122-1(d) IRS Publications 575 and 939 14.5 IRS Publication 950 15.0 – MINIMUM INCOME WIDOW/SURVIVING SPOUSE 15.1.4 10 U.S.C. § 1448 15.2 10 U.S.C. § 1448 10 U.S.C. § 1450(i) 42

ls on heroism pay refer to Chapter 1. 2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 7 * March 2024 7-10 6.0 RETIRED PAY AND ACTIVE SERVICE A retired member who elects to receive compensation for periods of active duty or inactive duty training must waive 1 day of retired pay for each calendar day while serving on active duty, inactive duty training, or in an active Reserve status. See Chapter 12. 2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 7 * March 2024 7-11 Figure 7-1. Recomputation After Recall to Active Duty Examples of Retired Pay Recomputation After Recall to Active Duty 1. Final Basic Pay Method E-7 retired 8/1/2006 with exactly 27 years of service Retired Pay Entitlement $4,113.60 (E-7 over 26/2006 pay rates) X 67.5% (27 years X 2.5%) = $

gent will use the unreduced gross retired pay in the denominator of the conversion fraction, even if the member elects to receive a lump sum payment. Using the unreduced gross retired pay for the denominator 2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 29 * February 2026 29-22 ensures that the numerator and denominator are computed in an equalized manner (i.e., the same variables are used and one is not reduced). 6.9 Orders Issued Before June 26, 1981, That Did Not Divide Retired Pay Any court order that contains a retired pay award that was issued before June 26, 1981, will be honored if it otherwise satisfies the requirements and conditions shown in this chapter. If a pre-June 26, 1981 decree or property settlement incident to the decree did not divide the member’s

ars of an annuity are paid, then an additional Form 1099-R is issued to each claimant to whom the arrears were paid. 2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 31 * March 2024 31-5 REFERENCES CHAPTER 31 – DEATH OF A SURVIVOR ANNUITANT 1.0 – GENERAL 1.1 Title 10, U.S.C. § 1450(b)(2) 2.0 – SETTLEMENT OF THE ARREARS 2.3 Title 31, U.S.C. § 3702(b) 3.0 – TAXABILITY Title 26 U.S.C. § 3405

2.50 32 blank 80.00 35 blank 87.50 26 1 65.20 29 1 72.70 32 1 80.20 35 1 87.70 26 2 65.43 29 2 72.93 32 2 80.43 35 2 87.93 26 3 65.63 29 3 73.13 32 3 80.63 35 3 88.13 26 4 65.83 29 4 73.33 32 4 80.83 35 4 88.33 26 5 66.05 29 5 73.55 32 5 81.05 35 5 88.55 26 6 66.25 29 6 73.75 32 6 81.25 35 6 88.75 26 7 66.45 29 7 73.95 32 7 81.45 35 7 88.95 26 8 66.68 29 8 74.18 32 8 81.68 35 8 89.18 26 9 66.88 29 9 74.38 32 9 81.88 35 9 89.38 26 10 67.08 29 10 74.58 32 10 82.08 35 10 89.58 26 11 67.30 29 11 74.80 32 11 82.30 35 11 89.80 2BDoD 7000.14-R Financial Management Regulation Volume 7B, Chapter 3 *October 2025 3-47 Table 3-4. Post-1981 – Pre-2018 Retirement Percentage Multiplier Conversions (Continued) POST-1981 – PRE-2018 RETIREMENT PERCENTAGE MULTIPLIER CONVERSIONS Service Multiplier Service Mul