California Offers $20,000 Tax Credit for Military Retirees

New law also cracks down on fraud targeting veterans' benefits

Published on Feb. 11, 2026

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More than 1 million veterans in California will be eligible for a new $20,000 state income tax credit on their military retirement pay and Survivor Benefit Plan income starting this year. The tax break is part of a broader effort to support veterans financially and curb fraud targeting those seeking federal benefits.

Why it matters

The $20,000 state income tax credit could help keep more military retirees living in California by making the state more financially friendly to veterans. It comes alongside a new law that strengthens consumer protections for those who served in the U.S. military.

The details

For the first time, veterans receiving military retirement pay and families receiving payments from the federal Survivor Benefit Plan (SBP) will be able to exclude up to $20,000 of their income each year from California state income taxes. The tax change is part of the 2025-2026 state budget. The new veteran consumer protection law, SB 694, was introduced by Democratic State Senator Bob Archuleta and will limit who may charge fees for assistance with benefits claims administered by the federal government.

  • The $20,000 state income tax credit goes into effect for the 2025 tax year.
  • SB 694, the new veteran consumer protection law, was signed by Governor Gavin Newsom on Tuesday.

The players

Gavin Newsom

Democratic Governor of California who signed the new veteran consumer protection law.

Bob Archuleta

Democratic State Senator from Pico Rivera who introduced SB 694, the new veteran consumer protection law.

Sabrina Cervantes

Democratic State Senator from Riverside who released a statement praising SB 694.

Rob Bonta

California Democratic Attorney General who released a statement celebrating the signing of SB 694.

Alex Beene

Financial literacy instructor at the University of Tennessee at Martin who provided commentary to Newsweek.

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What they’re saying

“It's been a long road, but Senate Bill 694 will finally provide a framework to protect our veterans from being defrauded when seeking assistance to apply for the benefits they deserve from the VA. I want to thank Senator Archuleta for his hard work on this important issue, and Governor Newsom for signing SB 694 into law.”

— Sabrina Cervantes, Democratic State Senator (California State Senate)

“Today, I am proud to stand with a coalition of veterans organizations in celebration of the signing of SB 694, legislation that continues our commitment to vigorously protect those who have sacrificed so much to protect us. Claim sharks pose a financial risk to veterans who need help with their benefits claims. SB 694 will degrade and deter the ability of these predatory individuals or companies to exploit veterans seeking help accessing their benefits.”

— Rob Bonta, California Democratic Attorney General (California Department of Justice)

“California's new law includes a state income tax benefit letting veterans and their families exclude up to $20,000 of military retirement pay or Survivor Benefit Plan income from their state taxable income each year. That $20,000 tax break applies to military retirees and surviving spouses filing in California as part of a greater push to support veterans financially while cracking down on fraud.”

— Alex Beene, Financial literacy instructor (Newsweek)

What’s next

In the long term, the tax credit could help keep more military members living in California by making the state more financially friendly to veterans.

The takeaway

California's new $20,000 state income tax credit for military retirees and their families, combined with stronger consumer protections against benefits fraud, demonstrates the state's commitment to supporting those who have served in the U.S. armed forces.