Memorial Day provides us with an opportunity to remember and honor the service members who have died in military service to our nation.
“Freedom is not free.”
Federal & State Tax Relief
In an effort to acknowledge our Veterans for their service, both federal and state governments offer tax breaks to eligible Veterans, their families, and businesses that hire Veterans.
FEDERAL
Earned Income Tax Credit
Many Veterans may be eligible for the Earned Income Tax Credit (EITC), a refundable federal income tax for low-to-moderate income workers and their families. The tax credits provide a tax break for eligible service members, allowing Veterans to keep more of what they earn.
To qualify, Veterans must have an earned income. As defined by the Internal Revenue Code (IRC), earned income includes all the taxable income and wages you get from working for someone else, yourself or from a business or farm you own.
Tax-Free Income
Most military pensions are taxable, however, if a Veteran receives disability payments instead of or in addition to a pension, those payments are tax-free and do not have to be reported on tax returns. If a Veteran has a particular disability or is housebound, they may qualify for Aid and Attendance (A&A) benefits, which are exempt from federal and state income tax.
Educational Assistance
Benefits such as the Post-9/11 GI Bill (Chapter 33) provide educational assistance to Veterans and their children that help pay for undergraduate, graduate or on-the-job training. These nontaxable benefits do not need to be reported on the tax return.
Business Owners
If you hire a Veteran to work for your private-sector business, you could be eligible to receive the Work Opportunity Tax Credit (WOTC). Business owners can receive up to $9,600 annually by hiring Veterans who are a member of a family who received SNAP benefits, a Veteran who has been employed for four weeks in the year ending in the hiring date, a Veteran entitled to disability compensation, or Veterans who are qualified long-term unemployment recipients and were receiving federal unemployment compensation.
STATE
Typically, states offer tax benefits only to Veterans who were honorably discharged or released from active duty under honorable circumstances.
Every state’s revenue website outlines its state’s benefits for Veterans and how to apply for them. Such benefits usually include exemptions from property taxes, as well as the transfer of benefits to a spouse or surviving spouse of honorably discharged Veterans, among others.
Finally, it should be noted that military retirement pay may be taxed differently in each state.
questions?
Please do not hesitate to reach out with any tax related questions to info@libertasunlimited.com.