DTrim99 · Nov 9, 2026
diff --git a/changelog.d/veteran-retired-pay-fixes.fixed.md b/changelog.d/veteran-retired-pay-fixes.fixed.md
@@ -0,0 +1 @@
+Count military retired pay and survivor annuities in New Mexico's modified gross income and Oklahoma's credit gross income.
diff --git a/policyengine_us/parameters/gov/states/nm/tax/income/modified_gross_income.yaml b/policyengine_us/parameters/gov/states/nm/tax/income/modified_gross_income.yaml
@@ -11,6 +11,9 @@ values:
     - child_support_received
     - rental_income
     - pension_income
+    # NMSA 1978 § 7-2-2(L)(9), (11): annuities and pensions, including military
+    # retired pay and survivor annuities, which pension_income leaves out.
+    - military_retirement_income
     - retirement_distributions
     - total_unemployment_compensation
     - irs_employment_income
@@ -27,5 +30,7 @@ metadata:
   reference:
     - title: New Mexico Income Tax Act, Chapter 7 - Taxation, 7-2-2. Definitions, L
       href: https://nmonesource.com/nmos/nmsa/en/item/4340/index.do#!fragment/zoupio-_Toc140503656/BQCwhgziBcwMYgK4DsDWszIQewE4BUBTADwBdoAvbRABwEtsBaAfX2zgEYAWABgFYeAZgBsfYQEoANMmylCEAIqJCuAJ7QA5BskRCYXAiUr1WnXoMgAynlIAhdQCUAogBknANQCCAOQDCTyVIwACNoUnZxcSA
+    - title: 2025 PIT-RC instructions, modified gross income (an annuity, pension, retirement pay)
+      href: https://taxsim.nber.org/historical_state_tax_forms/NM/2025/NM_PIT_RC_INST.PDF#page=10
     - title: 2025 PIT-RC instructions, line 11 (income from an estate or trust)
       href: https://taxsim.nber.org/historical_state_tax_forms/NM/2025/NM_PIT_RC_INST.PDF#page=4
diff --git a/policyengine_us/parameters/gov/states/ok/tax/income/credits/gross_income_sources.yaml b/policyengine_us/parameters/gov/states/ok/tax/income/credits/gross_income_sources.yaml
@@ -16,6 +16,10 @@ values:
     - estate_income
     - dividend_income
     - pension_income
+    # OAC 710:50-15-96(c) and Form 538-S line 6: pensions and annuities, taxable
+    # or not, including military retired pay and survivor annuities, which
+    # pension_income leaves out.
+    - military_retirement_income
     - debt_relief
     - total_unemployment_compensation
     - workers_compensation

diff --git a/policyengine_us/tests/policy/baseline/gov/states/nm/tax/income/nm_modified_gross_income.yaml b/policyengine_us/tests/policy/baseline/gov/states/nm/tax/income/nm_modified_gross_income.yaml
@@ -110,3 +110,16 @@
   output:
     # § 7-2-2(L): "undiminished by losses". max(-5,000, 0) = 0, so 20,000.
     nm_modified_gross_income: 20_000
+
+- name: NM modified gross income includes military retired pay and survivor annuities
+  period: 2025
+  input:
+    state_code: NM
+    irs_employment_income: 20_000
+    military_retirement_pay: 30_000
+    military_retirement_pay_survivors: 6_000
+  output:
+    # § 7-2-2(L)(9), (11): annuities and pensions, so military retired pay and
+    # a survivor annuity count:
+    # 20,000 + 30,000 + 6,000.
+    nm_modified_gross_income: 56_000
diff --git a/policyengine_us/tests/policy/baseline/gov/states/ok/tax/income/ok_gross_income.yaml b/policyengine_us/tests/policy/baseline/gov/states/ok/tax/income/ok_gross_income.yaml
@@ -70,3 +70,15 @@
     ok_ssp: 480
     ok_gross_income: 12_408
     ok_ptc: 0
+
+- name: OK gross income counts military retired pay and survivor annuities
+  period: 2025
+  input:
+    irs_employment_income: 10_000
+    military_retirement_pay: 15_000
+    military_retirement_pay_survivors: 2_000
+    state_code: OK
+  output:
+    # Form 538-S Part 3 counts taxable and nontaxable income, line 6 other
+    # pensions and annuities: 10,000 + 15,000 + 2,000.
+    ok_gross_income: 27_000
Original file line number	Diff line number	Diff line change
		@@ -0,0 +1 @@
		Count military retired pay and survivor annuities in New Mexico's modified gross income and Oklahoma's credit gross income.