Tax and the Department of Veterans Affairs have multiple points of intersection, primarily concerning the taxation of veterans’ benefits. It is essential for veterans to grasp the tax consequences of VA benefits to guarantee precise reporting to the Internal Revenue Service. Here are some of the incomes that need to be reported.
Retirement pay from the military is usually subject to federal income tax, with the exception of payments made for the Survivor Benefit Plan (SBP), which are not taxed. There are no Social Security taxes deducted from military retirement pay.
Additionally, the Military Disability Retirement Pay is typically not subject to taxes if it is received as a result of personal injury or illness incurred during active duty in the military.
These conditions must be met, including entitlement before September 25, 1975, combat-related injuries, or eligibility for VA disability compensation.
Next on the list are the Veterans’ Benefits. These benefits are not subject to federal income tax.
These cover a range of benefits such as education/training allowances, disability compensation/pension payments, grants for accessible housing or vehicles, insurance proceeds/dividends, dependent-care assistance, death gratuity, and compensated work therapy program payments.
Following this is the Retroactive VA Disability Determination. If you receive a service-connected disability rating from the VA after retiring from the military, you may be eligible to claim a refund for taxes paid on retirement pay.
It depends on the amount of VA disability benefits that would have been received.
Veterans should be aware that they are required to file taxes just like civilians. This will help prevent any issues with the IRS and courts due to unintentional errors.
If a veteran needs assistance with filing their taxes, there are online resources available to help them navigate the process. They also have the option of hiring a professional to handle their tax preparation for a fee.
Read also: Sen. Tammy Duckworth Spearheads Vote on Nationwide IVF Access Protection Bill
What benefits can veterans receive?
Veterans may be eligible for different tax advantages at both the federal and state levels. Government benefits consist of disability compensation that is not taxed, pension payments, and funding for home modifications provided by the VA.
Furthermore, military retirement pay is subject to federal income tax but is not taxed by Social Security. State benefits usually involve property tax exemptions for honorably discharged Veterans and their spouses, often determined by disability ratings.
It’s important for Veterans to file taxes before the April 18 deadline to maximize their savings through exemptions.
If disability ratings or combat-related special compensation have recently increased, a tax refund may be warranted for the corresponding year of reassessment. Every state details its unique benefits for Veterans on its revenue website.
Read also: March CalFresh Recertification Deadline: Ensure Continued Benefits by Applying Before Month’s End
