Benefits

Tax Breaks for Veterans

Individuals who have served our country have made a great sacrifice. As a token of gratitude for that service veterans have been provided some specials tax breaks and benefits that they need to know are available.

Eligibility for Veteran Tax Benefits.

The Internal Revenue Service (IRS) has its own definition of “veteran.”  For tax purposes, a veteran is someone who has served at least 24 consecutive months on active duty and received an honorable or general discharge.  Someone dishonorably discharged is not a veteran. For anyone whose enlistment period began before September 8, 1980, no minimum length of service is required to qualify as a veteran.  “Active duty” means the person served full time in the Army, Navy, Air Force, Marines, Coast Guard, or as a commissioned officer in the Public Health Service, the Environmental Services Administration, or the National Oceanic and Atmospheric Administration.

The IRS may require proof of veteran status.  The best evidence of veteran status is a Veteran ID card (VIC).  If you do not have one, you can apply to the VA online.  You will go to:  https://www.va.gov/records/get-veteran-id-cards/.  You will need the following documents:

  • Your Social Security Number
  • A digital copy of form DD214, DD257, or NGB22, which you can scan to create a digital copy to submit online.
  • A copy of a current government ID like a passport or drivers’ license. Again, scan and upload to the website.
  • A digital color photo of yourself from the shoulders up.

Tax Friendly Benefits Offered by the Federal Government.

There are free tax preparation services for veterans around the country.  The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) both work with veterans in need of tax preparation help. TCE works mainly with people over the age of 60, and AARP can direct veterans to a volunteer tax preparer.  If you made $69,000 or less during the past tax year, you are eligible through IRS Free File for brand-name tax preparation software at no cost.  Contact the IRS for additional information.

Some veteran’s benefits are not taxable.  Those include:

  • Disability Pension: This benefit is available to wartime veterans over the age of 65 with limited or no income, or who are permanently and totally disabled as a result of a non-service-related condition.  The VA’s website can provide more information about the program.
  • Disability Compensation: This benefit is for veterans who suffered a service-connected disability while on active duty.  In addition, The Combat Injured Veterans Tax Fairness Act of 2016, provides that those veterans who separate from the military with a combat injury may not be taxed on the one-time lump sum, disability service payments they receive.  If you qualify and were taxed on your disability severance payment, go to: https://www.irs.gov/individuals/military/combat-injured-veterans-tax-fairness-act-claim-information-available.  The site can tell you how to get a refund.
  • Education Benefits from the G.I. Bill. I. Bill benefits are on a tiered system.  They are not taxable income. The amount and duration of benefits is based on the length of time on active duty. 
  • Survivor Benefits: Some, but not all, survivor benefits are tax exempt.  Please check the VA website for specifics.
  • Housing grants: some disabled veterans may be eligible for non-taxable grants to modify and adapt their homes for their special needs.
  • Compensated work therapy: This program is designed for veterans who are unable to work and support themselves due to issues like psychiatric illness, substance abuse, and homelessness. It provides individually tailored vocational rehabilitation.

Retirement pay from career military service is considered taxable income.  However, there are exceptions for disability retirement pay received as a pension as well as for some other disability payments. 

Arizona State Tax Benefits for Veterans.

There are four states, Connecticut, Iowa, New Mexico, and Wyoming with property tax breaks for all veterans.  Most states, including Arizona, however, limit property tax exemptions to disabled veterans.  If you are a disabled Arizona veteran and own property in the state, contact your county assessor’s office for information on property tax exemption requirements. 

Arizona also offers other veteran benefits that can impact tax liability and the veteran’s income picture.  Veterans and their dependents are eligible for in-state tuition.  When a veteran and his or her family move to Arizona after leaving the military, the family is granted immediate residency for purposes of paying college tuition.  To qualify the veteran must live in Arizona or provide proof of Arizona residency such as:

  • Arizona voter or vehicle registration
  • Arizona Drivers License
  • In-state employment history or transfer of banking services
  • Change of permanent address.

Eligibility requires the veteran to have been discharged from active duty within the last 36 months for a period of active duty lasting 90 days or more.  The veteran’s spouse and dependent children are also eligible under these criteria.  The veteran must also be using VA Chapter 30 or 33 benefits.

When Joe Average applies to an Arizona school, he will be ineligible for in-state tuition unless Joe has lived in Arizona for more than a year prior to the last day of the registration period for the semester he plans to attend.  When you compare the costs, the instant residency offered to veterans and their families is a great money-saving perk.  On average, out of state tuition runs 62% higher than in-state.  Currently, in-state tuition for Arizona State University is $28,048.  For those not qualifying as Arizona residents, the out of state tuition is $45,562.  Arizona college campuses also offer veteran support programs like peer mentoring and counseling programs to help with adjustment to academic life.

Additional state financial benefits for veterans include the following items. Veterans who join police agencies or fire departments will have their time in military service counted in computing length of service toward a state retirement plan.  Federal payments to retired military and civil service members are exempt from state income tax up to $2,500 per year.  Arizona veterans who are 100% disabled, are exempt from paying vehicle license taxes on their personal vehicles.

Conclusion

As a fellow veteran, I urge all the veterans out there to get a VIC and apply for any and all benefits available to you.  Don’t waste your G.I. Bill benefits.  I went to law school on the G.I. Bill.  I couldn’t have afforded to go back to school without it.  Take advantage of all the job counseling and placement services, free tax preparation services, and all available tax breaks.

Resources

https://www.irs.gov/individuals/information-for-veterans

https://www.irs.gov/individuals/military/combat-injured-veterans-tax-fairness-act-claim-information-available

https://militarybenefits.info/arizona-veterans-benefits/ 

This website has been prepared for general information purposes only. The information on this website is not legal advice. Legal advice is dependent upon the specific circumstances of each situation. Also, the law may vary from state-to-state or county-to-county, so that some information in this website may not be correct for your situation. Finally, the information contained on this website is not guaranteed to be up to date. Therefore, the information contained in this website cannot replace the advice of competent legal counsel licensed in your jurisdiction.

Privacy Policy | Terms of Use

feedback