Veterans Tax Breaks – Quick Guide 2024

Veterans are also entitled to another kind of benefit – tax benefits!

The US tax code has specific reservations for Veterans that may either directly lower their tax liability or offer deductions, exemptions, or credits that reduce Veterans’ taxable income. 

When it comes to tax exemptions for Veterans, they can vary widely, depending on the latest updates in legislation, the state and county you live in, as well as individual circumstances.

The tax season is now in full swing now and here are a few reminders about Veteran tax benefits available in 2024.

Tax Benefits for Veterans: Who is Eligible?

IRS has a strict set of criteria to determine who is eligible for tax benefits. Here is who is considered a qualifying taxpayer when we talk about tax breaks for Veterans:

  • A former US service member who served on active duty for at least 24 months and has a discharge record other than dishonorable
  • Immediate family members (spouse, children, parent) of a Veteran

The 2024 tax season due dates are right around the corner:

  • April 15
    The due date for filing an individual tax return or to request an extension for most of the U.S.
  • April 17
    Due date for Maine and Massachusetts residents
  • October 15
    The due date for those who filed an extension.

In 2024, disabled Veterans’ tax exemption (the amount free from taxation by regulators or government entities) increased from a household income limit of $72,335 in 2023 to $76,235. There are also other tax breaks you may be entitled to as a Veteran or a Veteran’s immediate relative.

Tax-Free Income for Veterans

Which Veterans’ income is considered taxable and which is not is probably one of the most complex topics that occurs every tax season. In short, your VA Disability benefits are considered tax-free income. You don’t even have to mention them in your tax return. However, your military pension is a different topic and it remains a federally taxable income.

Except for the VA disability benefits, the following income also remains tax-free for Veterans and their immediate relatives:

These benefits fall within the characteristics of VA disability benefits and are therefore considered non-taxable income as well.

Also, if before you received back pay from the VA and paid taxes on it, you can now be eligible for receiving a tax refund. Make sure to talk to a tax expert and check your eligibility. 

Taxes and Education Assistance for Veterans

Education assistance is usually tax-free, both for Veterans and their children. These programs are aimed at helping you undergraduate, graduate, or receive the necessary on-the-job training:

  1. GI Bill Benefits
    Education benefits provided through the GI Bill are not taxable. This refers to programs like the Post-9/11 GI Bill, or Montgomery GI Bill.
  2. Vocational Rehabilitation and Employment (VR&E)
    VR&E program helps Veterans with service-connected disabilities to prepare for, find, and maintain employment. 
  3. Tuition Assistance
    If a Veteran receives tuition assistance from their employer or another organization unrelated to the GI Bill or VR&E, the tax treatment may vary. TA remains tax-free if you are using the funds to cover qualified education expenses such as tuition, books, supplies, and other fees. However, non-educational expenses may make your TA a taxable income. For example, if you use the grant to pay rent, it is not tax-free anymore.

Earned Income Tax Credit (EITC) for Veterans in 2024

Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate-income working individuals and families. It’s intended to help offset the burden of Social Security taxes.

Many Veterans, especially those with disabilities, are eligible for EITC. Here are the criteria you need to meet to qualify for EITC in 2024:

  • Your earned income is below $63,398. For disabled Veterans, this income may also include VA disability benefits received before the minimum retirement age of 62.
  • Your investment income is below $11,000 in the tax year 2023
  • You have a valid Social Security number by the due date of your 2023 return (including extensions)
  • You have no foreign-earned income

If the tax credit amount exceeds the amount of owed taxes, you can receive the difference as a refund. That is why we strongly recommend you check your eligibility and claim your Earned Income Tax Credit. Remember that you have 3 years to file and claim a refund from the due date of your tax return. In other words, if you were eligible, you have until May 17, 2024 to claim EITC for 2020.

Property Tax Breaks for Disabled Veterans

Most states offer disabled Veterans property tax exemptions. You can save thousands each year, depending on the state where a Veteran lives and their VA disability rate.

Here is a general overview of property tax breaks for Veterans in 2024:

  • Full Property Tax Exemption
    Veterans with a 100% VA disability rate can receive a full property tax exception in:

    New Hampshire
    New Jersey
    New Mexico

    In some of these states, there can be restrictions on the exemption depending on how long you have your 100% VA disability rate and the size of your property. More details on property exemptions tax by state. 

  • Eligibility Criteria
    In most states, Veterans need to have at least a 50% VA disability rate to be eligible for the tax break. However, in Connecticut, Florida, Indiana, Massachusetts, and Utah, you can be eligible for a property tax abatement if you have at least a 10% disability rate.
  • Surviving Spouse Eligibility 
    In many states, surviving spouses of disabled veterans may also qualify for property tax exemptions, provided they meet certain criteria, such as remaining unmarried and occupying the primary residence.
  • Tax Exemption on Vehicles
    In South Carolina disabled Veterans with a 100% VA rate as well as Medal of Honor recipients, former Prisoners of War, and surviving spouses of eligible Veterans receive tax exemption on up to 2 vehicles. 

Since property taxation is very changeable, its criteria may depend on the county and state you live in as well as many other factors, we strongly recommend consulting a tax professional. Remember, even if you do not have a 100% VA disability rating, you may still be eligible for a reduction of property taxes. Make sure to consult with a professional who specializes in your state’s tax laws

Useful Tax Resources for Veterans

Here are some resources, where you can get help with your tax return:

  • MilTax e-filing software – Provides free tax services for Veterans and military personnel from the Department of Defense
  • IRS Free File – A guided tax preparation and free fillable form available to all taxpayers
  • IRS VITA – The IRS’s Volunteer Income Tax Assistance (VITA) program provides free basic tax return services to eligible taxpayers, including persons with disabilities 

Final Thoughts

Tax season can become an extremely confusing period and you may not even consider that there may be some benefits and exempts you may be entitled to!

Even if you are aware of certain tax breaks, the eligibility criteria can be pretty vague and even change from one year to another. Having a qualified professional by your side will save you a great deal of time, effort, and money and help you claim what is rightfully yours!

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