Your status as a veteran makes you eligible for many services and benefits come tax time. Even though these services are designed to help you, navigating the tax landscape can be confusing. Here are a few tips that will help you be better prepared to use your veterans benefits during the next tax season.
Know your eligibility status
Not all tax benefits have the same eligibility requirements. Generally, to qualify as a veteran you must have served at least 24 months of continuous active duty. If you have completed your tour of duty, you must have received an honorable discharge. Activity duty requires service in the Army, Navy, Air Force or Marine Corps. It also extends to commissioned officers serving federal agencies.
If you are a disabled veteran, eligibility for some programs depends on whether you experienced certain physical losses or loss of use of certain body parts. Eligibility for tax benefits also extends to widows, children and parents of a deceased or disabled veteran.
Stay organized
Once you know you’re eligible, you’ll need to be able to prove it. Keep your records organized so that you can document your service. You want everything ready to go in case you need to prove your status to your tax preparer or during an audit. Contact the Department of Veterans Affairs as soon as possible if you are unable to locate your paperwork. If you are claiming disability benefits, keep track of your medical paperwork as well.
Monitor your tax liability
Getting hit with a high tax bill probably isn’t the thanks you wanted from the government. While you’re still active, taxes are not withheld from your military pay. If you leave and enter another job, you’ll need to use Form W-4 to calculate your withholding. Once you’ve retired, you’ll use Form W-4P for your pension/annuity payments. If you’re unsure how much to withhold for your specific situation, a tax preparer can help.
Know when you do and don’t have to pay taxes
As a veteran, you qualify for tax credits and breaks on several types of income. If you receive any of these payments, you do not have to report them on your federal tax return:
- Disability pension
- Disability compensation
- Education and training, also known as the Post-9/11 G.I. Bill
- Dependent and survivor benefits (individual program requirements vary)
- Life insurance
- Housing grants for disabled veterans
- Compensated Work Therapy (CWT)
While there are many tax breaks available, keep in mind that you still need to claim income for retirement pay and any severance on your federal tax return. If you receive healthcare through the VA, you do not qualify for the tax credit.
Stay updated on new changes
Tax law changes frequently. The Tax Cuts and Jobs Act of 2017 made large changes to how we file taxes and you may still be adjusting. You can check the IRS’ page for veterans regularly for updates.
As a veteran, you and your family deserve the best financial support. MCG Solutions is here to help you navigate your taxes so that you can use your benefits. Contact us today to learn more. Thank you for your service!