“Thank you for your service.” We could all probably say those words more often to thank the servicemen and servicewomen in our lives. They have dedicated their time, intelligence, and passion to putting themselves on the line for our country. Nonetheless, we’re grateful for holidays like Veterans Day that bring attention to this sacrifice and hard work. And we’re grateful for the tax benefits available to help them out.
In the spirit of the holiday, we wanted to do a roundup of tax credits and other finance-related benefits specifically geared towards veterans and those transitioning out of the military. The IRS compiled a short list of benefits on its website, so we’ve added to that list and broken them down.
Read, send to a veteran, and be sure to thank them for us!
There are a number of tax credits commonly utilized by many veterans. They can save you some serious money when filing taxes or when money is tight.
The EITC reduces the amount of tax you owe and can even give you a refund. Specifically, it’s designed for working people with low to moderate income. To qualify, you’ll need to meet certain eligibility requirements.
If you’re raising a family, you may be able to reduce your tax bill—assuming you meet the requirements and income threshold. While this credit can’t push your tax liability into the refund range, it’s still beneficial. If you have another child, you can deduct up to $1,400 per child with the Additional Child Tax Credit.
Here’s a video from the Tax Credits for Working Families organization explaining how tax credits help:
Financial education and coaching are important steps toward your financial future. Fortunately, there are multiple programs, which assist veterans with their financial goals.
The Stakeholder Partnerships, Education and Communication (SPEC) office and its national and local partners incorporate financial education and other services, like debt counseling, banking education, home ownership into their other offerings. See #3 for more on that.
The Bureau of Consumer Financial Protection, Office of Servicemember Affairs created a financial coaching initiative. They designed it for veterans, inactive service members, and the families of service members who have died on active duty. This program provides free access to individualized financial support from certified financial coaches.
Many taxpayers are eligible for IRS Free File, which gives you access to free tax filing software. However, tax preparation services typically come at a cost.
However, some veterans may qualify to have their taxes prepared for free by IRS-certified volunteers through the Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. So far, volunteers have prepared about 1.3 million free tax returns for veterans.
Suffering a life-changing injury or disability can be an incredibly challenging part of your post-service life. Veterans who have suffered combat-related injuries or who receive disability compensation can typically access tax relief.
As the IRS explains, “Under this federal law, Veterans who suffer combat-related injuries and are separated from the military are not to be taxed on the one-time lump sum disability severance payment they receive from the Department of Defense.” This law requires the DoD to identify veterans who have been taxed; then, the veterans can file an amended return and a full refund.
Disability payments from the VA are not included in your income, which means you aren’t taxed on them. These are some of the payments you won’t be taxed on:
There are a number of other veteran-focused programs the IRS recommends, but the IRS isn’t the only group offering credits and benefits to those who have served. Many states offer their own tax breaks and financial benefits to veterans that can help you on your state return!
We may only have a few holidays each year to officially honor the contributions of our service members. But at Edge Financial, we appreciate you each and every day. We hope you found this listing of tax benefits and services insightful and can put it to good use!
We know from experience that some of the biggest financial relief comes during tax season after you’ve filed a strong return and maximized your refund. You’ve served your country; now let your taxes serve you.