“Educating” Yourself on Tax Allowances

Veterans Can Take Advantage

There are a number of tax deductions or credits our Veterans can take advantage of – all well deserved. Education front and foremost.

And with tax season looming ever closer, Veterans and civilians alike are gathering their W2s, 1099s, 1098s, and other combinations of letters and numbers. As a Veteran, you still have to file taxes every April just like everyone else, but there are a few deductions our Veterans can take advantage of to provide some tax relief.

These include:

  • Interest earned from insurance still in deposit with the Veterans Administration (VA)
  • Home grants for wheelchair-accessible homes
  • Benefits for loss of limbs
  • Public welfare fund benefits
  • Death gratuity for survivors
  • Dependent-care assistance benefits
  • Vehicle grants for Veterans who lost limbs or sight
  • Education allowances

In this particular communication, let’s talk about continuing education. Know that payments you receive for education, training or subsistence under any law administered by the VA are tax-free. So, you don’t include these payments as income on your federal tax return. This can be an important benefit for those returning to civilian life and returning to the workforce.

If you qualify for one or more of the education tax benefits, you may have to reduce the amount of education expenses qualifying for a specific tax benefit by part or all of your VA payments. This applies only to the part of your VA payments that are required to be used for education expenses.

Financial pie chart

Example: You have returned to college and are receiving two education benefits under the latest GI Bill: (1) a $1,534 monthly basic housing allowance(BHA) that is directly deposited to your checking account, and (2) $3,840 paid directly to your college for tuition. Neither of these benefits is taxable and you don’t report them on your tax return. You also want to claim an American opportunity credit on your return. Your total tuition charges are $5,000. To figure the amount of credit, you must first subtract the $3,840 from your qualified education expenses because this payment under the GI Bill was required to be used for education expenses. You don’t subtract any amount of the BHA because it was paid to you and its use wasn’t restricted.

For details, you may want to visit the VA website for specific information about the various VA benefits for education.

The Tax Information for Students webpage is an additional resource that provides links to a broader range of student-related tax topics.

The GI Bill has always been an important part of the benefits available to our American heroes. For many, it is the stepping stone for the “American Dream,” well deserved by the men and women who heroically served our country. This applies equally to Veterans with disabilities.

Internal Revenue Service (IRS)

The Internal Revenue Service (IRS) is committed to helping all Veterans. The government agency works with community and government partners to provide timely federal tax-related information to Veterans about tax credits and benefits, free tax preparation, financial education and asset-building opportunities available to Veterans.

Above and beyond, many Veterans are eligible for various tax credits including the Earned Income Tax Credit, a refundable federal income tax credit for low- to moderate-income workers and their families. Roughly two million Veterans and military households receive the EITC, the refundable component of the Child Tax Credit or both, according to the Center on Budget and Policy Priorities. The credits provide a tax break for eligible service members, allowing them to keep more of what they’ve earned and built a financial cushion for unexpected emergencies. The Tax Credits for Working Families organization produced a video sharing how tax credits are a vital resource for many who have served our country.

Get In Touch With Us!

At Jan Dils, Attorneys at Law, we have the highest regard for the military and are daily advocates for those returning to civilian life, particularly those returning with disabilities that are often left in the shadows. As a result, we continue to offer resources to help our Veterans. If you ever need our legal services to navigate the complex system, never hesitate to call us at 877.JANDILS or visit our website.

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