Quick Tax Tips for Veterans
by Brittany Slay
As a veteran, you may be wondering how to do your taxes and what credits or benefits you might qualify for. For tax purposes, a veteran is an individual who has served at least 24 continuous months in active duty and has not been released with “dishonorable” status upon discharge. To qualify for veterans’ tax benefits, you need to show evidence of your status as a U.S. veteran. Keep records handy when doing your taxes, and contact the Dept. of Veterans Affairs should you need a duplicate form or lost record.
Who else is eligible?
Spouses, children, and parents of a deceased or disabled veteran may also be eligible depending on the circumstances. For confirmation, please see your tax professional.
What resources are available for free?
There are plenty of resources that provide free tax-filing services to veterans. TurboTax, H&R Block, TaxACT, eSmart Tax, and TaxSlayer are just five that do so. I have personally used H&R Block and TurboTax for the last six years and found the software easy to use, intuitive, and, my favorite — free. Both have Q&A forums for questions, and offer help over the phone if needed.
Remember that this only applies to federal taxes as each state has its own rules, and unfortunately, its own fees with the exception of Florida, Texas, Washington, Nevada, Alaska, South Dakota, and Wyoming, who do not have income tax and do not require a state return. Tennessee and New Hampshire offer limited state income tax.
What about the Affordable Care Act?
In addition, all aforementioned software incorporates the new tax code changes with the Obama Administration’s Affordable Care Act. If you are enrolled in VA health care, this coverage is accepted in lieu of other insurance and waives any fees that the ACA would normally dictate.
If you’re wondering how the ACA would affect a tax return, The Simple Dollar makes it easy.
“The two biggest ways the ACA can affect your taxes are:
The advanced premium tax credit: If you enroll in health care through the marketplace you might be eligible to receive the advanced premium tax credit. This credit helps reduce the cost of your health insurance premium, but it is estimated and needs to be reconciled so that the amount of credit you receive is correct.
Penalties or Exemptions: If you do not have health insurance in 2014 you are supposed to pay a penalty unless you have an exemption. Exemptions to this mandate have been a hot topic lately because they have been changed several times.”
What if I have a new disability, one that has been determined to be retroactive, or has increased in percentage recently?
If you’re a veteran with a rated disability, you may be able to claim a federal tax refund based on an increase in your percentage of disability from the VA, to include retroactive pay. You can receive a refund for prior taxes on a pension because you are now considered to have been disabled during that time. To do so, you will need to file an amended return (1040X) with the IRS. For specific instructions, click here.
Benefits that are taxable:
Retirement income is fully taxable, however, if you suffer from a disability and receive disability income in lieu of retirement, this income is tax free. Severance pay is also considered taxable, but may be reimbursed to you in the future should you file an amendment after receiving a VA disability rating.
Benefits that are non-taxable:
You do not need to report disability income, disability pension, education and training benefits to include MHA, dependent and survivor benefits and pension, Compensated Work Therapy benefits, and Specially Adapted Housing Grants on your annual tax returns as this is considered tax free.
When looking for credits and benefits, remember, don’t make assumptions on what you might or might not be eligible for. Every benefit has its own rules, and some are more strict than others. For example, in a Specially Adapted Housing Grant, the veteran must prove that they are experiencing very specific physical loss or use of a body part. Without this proof, they would be unable to receive the benefit.
What are the most common benefits?
There are a number of tax benefits available to veterans and their families at the federal level. Some of the most common benefits include but are not limited to:
- Disability Pension
- Disability Compensation
- Education and Training Allowances
- Dependents and Survivors
- Life Insurance
- Housing Grants
- Compensated Work Therapy Program
Many states have varying benefits available to veterans with the most popular being waiver or partial waiver of property tax liability, meaning that the veteran will not have to pay the full amount of any amount of property taxes on a primary home depending on the disability rating and state guidelines.
Where can I find more about VA benefits and my pension/disability income?
Joining eBenefits.va.gov is the first step. eBenefits is the official partner website of the DoD and VA, which allows veterans to access needed documents, register and apply for various benefits, see their monthly payments, update payment and personal information, view disability rating and coverage, access housing and education benefits, Veterans Group Life Insurance, and more.
- **Nothing offered by AMVETS should be considered personalized investment or financial advice. For tax questions and other advice, consult your tax professional.
By Brittany Slay, Editor, American Veteran Magazine
(Republished with permission)
Brittany Slay is the Editor ofAmerican Veteran Magazine and a US Navy veteran, completing a 9 month deployment to Bahrain in 2014. She’s a fan of dark humor and enjoys writing, visiting breweries, and meeting people.
