It seems that taxes confused even one of the brainiest guys in history—Albert Einstein—who famously said: “The hardest thing in the world to understand is taxes.” The American income tax system is complex and confusing, but that should not
deter Veterans from getting all the benefits they are eligible for under the tax code.
Here’s an outline of some of the key tax benefits for Veterans:
Federal Taxes
- VA disability benefits such as disability compensation, pension payments and grants for home modifications, are not taxable.
- Veterans education benefit payments from the VA for education and training are exempt from taxes.
- No Social Security taxes are applied to military retirement pay because it is not considered earned income. However it is subject to federal income tax. But if you participate in the Survivor Benefit Plan, which supports beneficiaries after a veteran dies; premiums are excluded from taxable income.
- If you had a recent increase in your disability rating or were granted combat-related special compensation, you may be able to claim a tax refund, but this can only be applied to the year VA reevaluated your disability level.
Money from VA that is not taxed
- Money paid to a survivor of a member of the armed forces who died after Sept. 10, 2001.
- Interest from VA life insurance policies.
- Benefits under a dependent-care assistance program
- Income from the compensated work therapy program.
State Taxes
The specific tax breaks offered to Veterans vary widely from state to state. For example, 18 states charge zero property tax for Veterans who have a 100% disability rating and many states do not tax military retirement pay. Before you file your taxes do a quick web search for tax breaks for Veterans in your state to find out what tax benefits you may be eligible for.
Two other things to remember: Tax advice that applies to civilians can benefit you, too and the filing deadline for 2023 is April 18 because the usual tax day, April 15, falls on a weekend.
The information contained in this article is not intended nor implied to be a substitute for professional tax advice, it is provided for informational purposes only. We encourage you to seek the advice of a tax professional before filing.
