Veterans’ Tax Benefits and Financial Tips for Those Who Served
This Veteran’s Day, we at Tax Pros HQ want to honor those who have served by highlighting tax benefits and financial strategies specifically designed to support veterans. Navigating taxes as a veteran can feel overwhelming, but understanding these key areas can make a big difference. If you’re a veteran or have a loved one who is, these insights may help you make the most of the financial benefits you’ve earned.
1. Veterans Disability Benefits Are Tax-Exempt
If you receive disability benefits through the Department of Veterans Affairs (VA), it’s important to know that these payments are generally tax-exempt. This includes benefits paid to veterans or their families due to disability or dependency. Additionally, VA grants for specially adapted housing, vehicle modifications, and VA-dependent care benefits are also non-taxable. Recognizing which portions of income are tax-free can reduce your taxable income significantly.
2. Property Tax Exemptions for Disabled Veterans
Property tax exemptions are a significant benefit for veterans, especially for those with service-related disabilities. Many states offer property tax exemptions that can either reduce or completely eliminate property tax obligations for qualifying veterans. The specific rules and benefits vary widely by state, so it’s worth checking with your local tax office or a trusted tax professional. Some states extend these exemptions to the surviving spouses of disabled veterans as well.
3. Military Retirement Pay and State Tax Exemptions
While military retirement pay is generally taxable at the federal level, several states offer complete or partial tax exemptions on this income for veterans. States like Florida and Texas don’t tax retirement income at all, while other states, like Alabama and Hawaii, provide partial tax relief specifically for military retirement pay. Knowing which states are tax-friendly for veterans’ pensions can help guide decisions, especially if you’re considering relocating post-retirement.
4. Federal Tax Credits for Veterans Seeking Employment
Transitioning to civilian life often comes with challenges, including finding new employment. The federal government offers the Work Opportunity Tax Credit (WOTC) for employers who hire veterans, especially those facing significant barriers to employment. This credit provides an incentive for businesses to hire veterans, increasing employment opportunities while helping veterans make a successful transition into civilian careers.
5. Free Tax Preparation Assistance for Veterans
Through the IRS’s Volunteer Income Tax Assistance (VITA) and the Armed Forces Tax Council, veterans can access free tax preparation services. This program provides assistance to those who may find tax season daunting, ensuring that veterans can take advantage of every credit and deduction available. In addition, many community organizations also offer free or discounted financial advice, especially during tax season, to help veterans make the most of their finances.
6. Capital Gains Exclusions and Home Sales for Veterans
For veterans who decide to sell their homes, the IRS offers an exclusion on capital gains from the sale of a primary residence—up to $250,000 for single filers and $500,000 for married couples filing jointly. While this exclusion applies to most taxpayers, veterans who have to move due to service requirements may still qualify even if they haven’t met the standard residency requirements.
7. Additional Deductions for VA Healthcare and Medical Expenses
If you’re a veteran who pays out-of-pocket healthcare expenses that are not covered by the VA, these costs may be deductible as medical expenses on your tax return. Veterans with high healthcare costs, including co-pays, prescription expenses, and specialized care, should keep records of these expenses throughout the year. Medical expenses that exceed a certain percentage of your adjusted gross income (AGI) can be deducted, further reducing taxable income.
We’re Here to Help
At Tax Pros HQ, we’re proud to serve those who’ve served. If you’re a veteran looking for financial or tax assistance, contact us. We’re here to help you keep more of what you’ve earned and ensure you’re taking advantage of every benefit available.
This expanded blog post provides veterans with a comprehensive overview of financial resources, tax exemptions, and support services to help them maximize their income and tax savings.
