5 Helpful Tax Benefits for Veterans

Five simple words: “Thank you for your service.”

That sentence will never be enough, but it’s a start—a small way of thanking those who put themselves on the line.

We could all probably do more to thank the service men and women who have dedicated their lives to our country. Regardless, we’re still grateful to have holidays like Veterans Day that can bring attention to this sacrifice.

While the IRS won’t wipe away a significant tax debt because of military status, there are a number of tax credits and other finance-oriented benefits the IRS provides that can sharply reduce your tax obligation—and in some cases, put a refund into your pocket!

In the spirit of Veterans Day, we wanted to share some of them. The IRS has a short list located on its website, so we’ve added to that list and broken them down. So read on, and if you know a veteran who may benefit from this information, pass this article along!

1. Tax Credits

Technically, there aren’t tax credits specifically designed for veterans, but there are a few credits the IRS points out that many veterans do take advantage of—and they can save you some serious money.

  • Child Tax Credit. If you have a family and meet the requirements and income threshold to qualify, the Child Tax Credit can help you reduce your tax bill. It won’t push your tax liability into the refund zone—only to owing $0—that changes if you have more than one child. You can deduct up to $1,400 per child with the Additional Child Tax Credit.
  • Earned Income Tax Credit (EITC). The EITC is designed for working people with low to moderate income, but it can lower the amount of tax you owe—and it can even give you a refund. To use it, all you’ll need is to meet the eligibility

2. Financial Coaching

One of the best ways to prepare yourself for the future is to get a financial coach; there are multiple programs that assist veterans with reaching their financial goals.

  • Financial Coaching Initiative. The Bureau of Consumer Financial Protection, Office of Servicemember Affairs designed an initiative for veterans, inactive service members, and the families of service members who have died on active duty. The program offers free access to certified financial coaches who provide individualized financial support.
  • SPEC. The Stakeholder Partnerships, Education and Communication (SPEC) office and its national and local partners offer a number of services, including free debt counseling, home ownership and banking education, along with their primary service (that we’ll dive into in the next point!).

3. Free Tax Preparation Services

Assuming someone make less than a certain income in a given year, a taxpayer can get access to free tax filing software through IRS Free File. However, if you want someone to prepare your taxes for you, you’ll typically need to pay.

Through the Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs, some veterans may qualify to have their taxes prepared for free by IRS-certified volunteers. They can help walk you through credits and maximize your refund!

4. Injury and Disability Benefits

A life-changing injury or disability can be an incredibly challenging part of your life following your service; veterans who are receiving disability compensation or who have suffered combat-related injuries can usually receive some tax relief.

  • VA Disability. Your disability payments from the VA aren’t included in your income (so you aren’t taxed on them). A few of the payments that won’t be taxed include:
    • Disability compensation paid to veterans or their families.
    • Pension payments made to veterans or their families.
    • Benefits under dependent-care assistance programs.
    • Grants for vehicles for veterans who have lost their sight or use of their limbs.
    • Grants for wheelchair-accessible homes.
  • Combat-Injured Veterans Tax Fairness Act of 2016. According to the IRS, “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.” Basically, under this law, the DoD has to identify veterans who have been taxed when they shouldn’t have been; to receive a refund, you must simply file an amended return.

5. State Benefits

Many states also offer tax benefits and credits for veterans and service members. You may need to check with your local VA or state tax body for details, but they can help you unlock even more tax savings—or even a refund.

Thank you for your service.

These programs aren’t the only ones the IRS recommends, but they still help millions of veterans with their taxes every year. If you’re struggling with tax debt, we hope you’ve found a program you can use to reduce your tax debt and fight back against the IRS.

Of course, we’re always here to help. But even if you aren’t dealing with tax debt, we know how great a feeling it can be to file a great return—and get a big refund. You’ve proudly served; now let the IRS serve you.

Leave Comments

Free eBook

Tax Settlement Options

Download Now
Having a tax debt is stressful. We can help.