Military and Veterans Tax Refunds Guide


By Raven Stewart / Posted: Feb 10, 2020 / 0 Comments / Posted in Personal Finance

Military background gives you access to special tax advantages

Serving in the military is not only an honor, but it can also help you get tax breaks. If you are a veteran or if you are currently serving in the military, then you must educate yourself about your tax advantages.

You can save money and be able to get tax refunds. But all of these procedures can usually be confusing if you don’t know what you are doing.

It’s important that you know your gross income and what is left after every tax and fee is deducted. Here you have some tips that can help you get a better understanding of your military tax advantages and make your financial plans.

 

Tax Tips for Veterans and Military Members

Keep an Eye of Your Moving Expenses

The tax breaks for moving expenses got suspended by the 2018 tax law. This doesn’t apply for military members on active duty who get relocation orders. A lot of soldiers, together with their families, move every three to four years. To do the math, if you spend 25 years in the military, you’re going to move around eight times in total. Plus, if you move overseas, the expenses grow even more. The IRS specifies that expenses that surpass your allowances are deductible from your income.

Inspect Your Pay Records

Your regular pay at the military falls under the federal income tax, but the same doesn’t happen for combat pay. If you receive other kinds of reimbursements or allowances, they might be deducted from your income for the sake of federal taxes. Make sure to double-check or even (triple check if you must), your Leave and Earnings Statement, so that you know your earnings are accurate. It is more than common for that statement to have typos or errors in it. So be careful and closely examine all of your pay records.

Choose Your Tax Professional Wisely

Different members of the military have different tax circumstances based on their current duty position and other factors. When choosing your tax professional, make sure to ask about the resources they have that can help with your tax returns as a military family. Also, see if they can meet deadlines before the end of the year while there is time to make adjustments. The IRS’ Free File program offers free software to military members with balanced gross salary beneath specific edges. The Military OneSource MilTax program can interface military individuals with free software and human assistance.

Know That You Are Eligible

Eligibility is much broader than you might think it is. You must do your research and know what you are eligible for and what rules apply to you that are different for others. In case if you are a veteran and you suffer from major physical losses, or you cannot use certain limbs in your body, then you might be eligible for a Specially Adapted Housing Grant. You could go online or ask around to have more information on your situation and what might apply to your eligibility. Some people miss out on benefits because they are not well informed.

For your information: being on benefits makes your perfect eligible for loans with guaranteed approval and many other types of loans. In case of necessity, take your time a make a research to know how to get a loan if you are on benefits.

Stay Updated with Tax Benefits

Keep in mind that tax benefits change every single year. You should keep researching more and more about them every year. Check the eBenefits and make sure that you are not missing out on new tax breaks for the military. In 2019 military families received a three-percentage point reduced in their reduced taxes. But on the other hand, there was an increase in child tax credit and also another increase in the standard deduction. This year might present new military tax deductions, and different states present different benefits for their veterans and their military members. The only way to know is to be informed.

Stay Informed About the Residency Status of Your State

Different states have different tax rules that apply to your income. A veteran might not have to pay retirement tax in one state but in another state might get tax breaks on property tax. Again, here you have to pay close attention to your Leave and Earning Statement. And make sure to research all about the tax rules in your state and what are the benefits that you get as a military member. Staying informed is the best way to profit off the tax breaks for military and tax benefits that apply to your situation.

Eligibility for Tax Benefits

To be able to profit from the tax benefits for VA or military members, you must be eligible. You must have been on active duty and must not have been released on the ‘dishonorable’ status. You must have also been on active duty for at least 24 months, but this doesn’t apply for those who have been on active duty before September 8, 1980. Active duty means that you have been part of the Army, Navy, Air Force, Marine Corps, Coast Guard, etc., full-time.

A veteran is a past member of the military who has been discharged, and benefits are different from someone who is currently on active duty, for tax purposes. Besides veterans and military members, their families might also be eligible for some benefits in certain circumstances. Eligible family members include spouses, parents, and children.

Tax Benefits for Veterans

Are VA benefits taxable? If you are retired from the military or if you are honorably discharged, you can get great tax benefits that might help you with your financial situation. There are a number of benefits that cover veteran families. This coverage is offered as free taxes for veterans at a federal level. Some are taxable, and some not.

Tax-Free Benefits

Disability Pension

Veterans who are 65 years or older that have no income and or are permanently disabled get this benefit. To qualify for a disability pension, you should:

  • Have 90 days (at least) of active duty out of which at least one day of wartime duty
  • Be permanently disabled
  • Be 65 years or older
  • Receive nursing care
  • Receive Social Security Disability Insurance or get Supplemental Security Income

The disability pension will not be counted as a part of the income for tax purposes, which means it is exempt from federal and state taxes. So, you won’t have to pay the veteran’s disability tax.

Disability Compensation

To get this benefit, veterans must have suffered a disability connected to their service. You are eligible to get this benefit if the disability you currently have occurred during service. There is a list of health conditions that might be counted as a disability that qualifies you for this benefit.

  • Hearing loss
  • Blindness
  • PTSD
  • Mental Disability
  • Paralysis
  • Muscle Injuries
  • Loss of limbs
  • Limitation of motion

A rating system is used to determine the gravity of the disability and the number of benefits that the veteran is going to get. Also, this benefit is tax-free.

Training and Education

This benefit will help eligible veterans to finance their graduate education or on-the-job training. To qualify for this kind of benefit, you must:

  • Have at least 90 days of aggregate active duty after September 10, 2001;
  • Be an honorably discharged veteran;
  • Be discharged after 30 days with a disability that is service-connected.

This benefit is not considered taxable income and doesn’t need to be declared as a part of your income. This is a tax help for veterans.

Survivors

There are a number of benefits for dependents and survivors, and some of them are:

a) Spouses and children might qualify for healthcare benefits. This benefit is not taxed.

b) Dependent and surviving children and spouses might qualify for education and training benefits. This benefit is exempt from taxes.

c) If the survivor spouse and children have a low income, they might get the benefit of a survivor’s pension.

d) Death gratuity is tax-free and is paid only once at the sum of $100,000 to help the family members deal with the accompanying of the servicemember.

There are also other tax-free benefits such as loan programs, life insurance options, etc.

Taxable Benefits

Retirement Pay

Service members who have been serving for at least 20 years or who have been on active duty get this benefit. The type of retirement and the payment amount depends on the length of your service and your age. Retirement pay is usually taxable.

Severance Pay

If you get injured during active duty, you can have a disability severance pay once you get discharged from the military. This severance pay is fully taxable in the year that you receive it.

Healthcare

Veterans get a number of benefits when it comes to healthcare, and some of them are:

  • Hospital care, dental, prothetic and pharmaceutical services;
  • Residential care;
  • Treatment of Military Sexual Trauma;
  • Programs for homeless veterans;
  • Alcohol and drugs addiction therapy.

Veterans can decide whether they want to buy their own healthcare or continue with their coverage. If they choose to buy their own healthcare, they might qualify for a tax credit.

Keep in mind, that any kind of healthcare services that don’t fall within the military or veteran coverage can be easily covered with a fast cash loan.

Tax Benefits for Military Members

If you are serving in the military, you may qualify for some really great tax benefits. It is true, especially if you served in a combat zone.

Tax-Free Benefits

Combat Zone Exclusion

If you’ve been paid to serve in a battle territory, direct battle bolster region or qualified unsafe obligation zone, you might have the option not to pay a part of your taxes for your payment. This means your general taxable pay gets diminished, which decreases your general tax obligation. You could wind up owing nothing in charges or in any event, getting cashback from the state.

Deadline Extension

Managing your tax returns can be very hard if you are currently serving in a combat zone. One of the benefits that you will get is a deadline extension for filing your tax returns and paying them. The extension is usually for 180 days after you leave the combat zone. In order to avoid the fees and late charges, you get this benefit that helps you somehow to have more time.

Forgiven Taxes

In the case that the worst happens, and an active member of the military dies during combat, their family’s tax bill is forgiven for that year. Even if they already paid them, they might get a refund. They even get paid $100,000, which is not taxable.

Taxable

Reservists

While on active duty, if you have financial hardships due to moving and your duty is more than 100 miles away, then you might withdraw from your 401k or your retirement plan. The IRS might not hold the 10% penalty for withdrawal. However, the withdrawal is considered as income and thus taxable.

Any kind of financial hardship and a desperate situation can be overcome by means of unsecured personal loans. Just be careful and read the fineprint before signing a loan agreement.

Allowances

Allowances for education and training are usually tax-free. But allowances for active-duty Reserve Officers Training Course is still taxable.

Free Tax Help for Veterans and Military Members

Do disabled veterans have to file taxes? How about military members? All the above benefits are great and can help people save a lot of money. However, not everyone can understand the procedures behind them, and people might get confused. Fortunately, some programs that do free tax filing for veterans and military members. FreeTaxUsa offers free military edition that helps you with your taxes.

If you live near a military base, you might be able also to get in-person tax help for free. That means even an expert who can help you better understand the military tax return calculator. Just make sure to ask around before you do everything on your own.

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