1040 Tax form for veterans

Photo by Thomas Hamilton III, US Army Europe

This tax season, these 5 tips can help vets maximize their returns

Rebates, exemptions, and exclusions Oh my!

March 26, 2019 - 12:15 pm

This article was originally posted by Geen Ledger CPA and is reposted with their permission.

By Kristen Corey

As mundane as taxes are, we all get that spark of joy when we save money or find a simpler way to file. Military veterans and their families know their returns can sometimes bring more headache than relief. Which is why we have created a list of 5 tax tips that will hopefully make your filing and savings a bit more joyful.

Be sure to consider our bonus tips at the end!

1. Free Tax Preparation

The IRS certifies two programs that provide free tax return preparation for eligible individuals, The Volunteer Income Tax Assistance (VITA) program and Tax Counseling for the Elderly (TCE). The requirements under each of these programs differ slightly but if you make $55,000 or less, or are 60 years of age or older, you are likely eligible for one of the two programs.

With these services, you can ask questions about your particular return or even have complete support in filling it out. Most centers are in neighborhood community centers, libraries, shopping malls, or schools. To find a list of VITA and TCE locations near you, visit: https://irs.treasury.gov/freetaxprep/

RELATED: This Special Forces vet wants to help you... with your taxes.

2. Combat-Injured Veterans Tax Fairness Act of 2016

Did you receive a lump sum disability severance payment anytime after January 17, 1991? Good news! According to the Combat-Injured Veterans Tax Fairness Act of 2016, this payment can now be excluded from your income in the future or refunded if incurred in the past. Talk with your CPA about how to file for your disability severance refund.

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

3. Potential Tax Refunds for Disabled Vets

Similar to point 2, it is important to know what other compensation may help you obtain a tax refund. There are two main points veterans should know about when considering potential refunds.

A tax refund may be applied if the veteran has received an increase in their disability from the Department of Veteran Affairs or special combat-related compensation. If either of these has been received, then Form 1040X should be filed. This form can be found and filed with the help of your CPA.

Source: https://www.irs.gov/individuals/military/special-tax-considerations-for-veterans

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4. Don’t Include These in Your Income if you are a Vet

As you file your taxes you will find that your veteran status allows you to exclude some of your military related compensation. You will also find there are some benefits provided to military members, civilians can no longer take advantage of. A few of those are listed below as items you do not need to include in your income as you file your taxes.

Disability Pensions From The VA – Received by wartime veterans who are 65+ and with limited income. These are typically individuals who have been permanently disabled due to a non-service related event.

Disability Compensation – Typically afforded to those who encountered a disability while serving. This is excluded from both the state and federal level.

Education & Training – If you received the Post 9/11 GI Bill, the income from the financing does not need to be included in your income. However, there are some additional requirements in order for this to be properly excluded. It is best to speak with your CPA to confirm you can exclude this benefit.

Dependents & Survivors – Benefits include the VA’s Dependency and Indemnity Compensation payment, survivor’s pension, and death gratuity.

Life Insurance – Programs that may be excluded include, but are not limited to, Servicemembers’ Group Life Insurance Traumatic Injury Protection, Service-Disabled Veterans’ Insurance, and Veterans’ Mortgage Life Insurance.

Compensated Work Therapy (CWT) Program – This program is designed for veterans who have challenges with homelessness, substance abuse, or mental illness. Payments from this program do not need to be included in income.

Sources:

https://www.thesimpledollar.com/tax-guide-for-veterans/

https://www.irs.gov/publications/p907

https://www.irs.gov/pub/irs-pdf/p3.pdf

https://www.irs.gov/pub/irs-drop/rr-07-69.pdf

5. Sinai Peninsula Tax Exclusion

Did you serve in the Sinai Peninsula in 2015, 2016, or 2017? If so, you are eligible for a tax refund. Simply visit your finance office and request a Form W-2c, a corrected wage and tax statement form. If you are unable to obtain this form a Form 2040X can help you obtain the refund.

You will likely need to include other information such as military orders or letters of authorization. If you are struggling to obtain the proper paperwork, talk with your accountant or visit your local VA center to obtain the necessary support.

Source: https://www.irs.gov/newsroom/combat-zone-tax-benefits-now-available-to-armed-forces-members-who-served-in-the-sinai-peninsula-irs-accepting-retroactive-tax-refund-claims-back-to-2015

Bonus Tips

Eligibility – In order to be eligible for many of these benefits under the veteran status, the military member must have served a continuous 24 months. Often times these benefits extend to other family members, such as the veteran’s spouse, child, or even parent.

Free Tax Software – The following are tax software programs that can help you file your 2018 return. Some provide benefits for active duty members others offer free services to those under certain circumstances. Take a look at each to learn more about what fits you best.

TurboTax – https://turbotax.intuit.com/taxfreedom/

H&R Block - https://www.hrblock.com/online-tax-filing

eSmart Tax - https://www.esmarttax.com/

TaxAct Free Federal Edition - https://www.taxact.com/lp/file-taxes

TaxSlayer Free Federal Edition - https://www.taxslayer.com/

Property Taxes Eliminated for Vets, depending upon the state – Many states are doing away with property taxes for disabled veterans or allowing a good tax exemption. Visit this website (LINK: https://benefits.va.gov/benefits/offices.asp) to see how your state is going to handle your property tax.

Unreimbursed Moving Expenses – This one is not new for military members but you may have heard unreimbursed moving expenses are no longer deductible from your civilian friends. While this is true for them, there is an exception for military members. Continue to deduct those unreimbursed expenses.

Mileage Rates for receiving medical care – Driving to the VA for a medical appointment? Be sure to keep good records! The cents per mile allowed went up 2 cents! Deduct 20 cents per mile driven.

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