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Michael Lawrence Varon, PLLC Michael Lawrence Varon, PLLC
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What Are The Tax Implications Of Veterans Benefits?

Taxes8

With tax season here, you may wonder about the tax implications of certain benefits you receive, such as veterans disability benefits. As a veteran, it’s important that you understand how taxes work and whether or not you have to pay taxes on your benefit amount. Otherwise, you could receive a tax bill from the IRS.

The amount you receive from your Department of Veterans Affairs (VA) benefits may seem small. You are probably worried enough about paying the bills. How can you pay taxes on the money as well? Here are some things you should know.

Military retirement pay is typically taxable as federal income. However, any amounts paid towards the Survivor Benefit Plan (SBP) are excluded from taxable income. Social Security taxes are not withheld from military retirement pay.

Military disability retirement pay is generally not taxable if you became injured or ill due to active service in the armed forces. However, certain conditions need to be met, such as combat-related injuries, eligibility for VA disability compensation eligibility, and entitlement before September 25, 1975.

There are also veterans benefits, which is the most common type of compensation. Some of these benefits are excluded from federal taxable income, such as education and training allowances, disability compensation and pension payments, death gratuity, and compensated work therapy program payments. Grants for accessible housing or vehicles, insurance proceeds and dividends, and dependent care assistance are also excluded from taxes.

Retroactive VA disability determination is another benefit. This benefit is paid out if a retroactive service-connected disability rating is received from the VA after retiring from the military. This retroactive benefit may be claimed for taxes paid on retirement pay.

Veterans may qualify for various tax benefits at both the state and federal levels. State benefits typically include property tax exemptions for honorably discharged veterans and their spouses. Federal benefits include tax-free disability compensation, pension payments, and grants for home modifications.

As a reminder, veterans are also obligated to file taxes that apply to civilians too. This will ensure that they do not get into any trouble with the IRS for mistakes. If a veteran is unsure of how to file their own taxes, there are websites that can help. Of course, hiring a tax professional or attorney is also an option.

Learn More About Veterans Benefits

Government benefits do not come free and clear. You will likely need to pay taxes on what you receive, although there are tax benefits available in certain cases.

Taxes can be tricky. A White Plains veterans disability benefits lawyer from The Law Office of Michael Lawrence Varon can help you understand your benefits and make sure you get all you deserve. Schedule a free consultation with our office today by calling 914-294-2145 or filling out the online form.

Source:

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