If there’s one thing we can count on every year, it’s tax season. As a veteran, you are required to file taxes for any income you receive — from both your private-sector job and the military. However, there are many tax benefits and resources available to veterans, and you should make an effort to take advantage of as many as you can.
If you haven’t filed already, here are seven tax tips that could help save you loads of money in 2015:
1. Know which VA benefits are exempt from federal taxes – Income from disability pensions, disability compensation, Post 9/11 GI Bill, life insurance proceeds, housing grants and Compensated Work Therapy Programs are exempt from taxes. You do not have to report them as income.
2. If applicable, amend past returns – If you were awarded a disability pension this year, you should amend past tax returns if the VA issues a retroactive directive. A retroactive directive means the VA recognizes you were disabled on a date prior to their decision. If the retroactive directive says you were disabled in the years prior, you can amend past tax returns by filing a 1040x form for each year you qualify. You should receive a refund on the taxes you paid during those years because the IRS recognizes that you should have been receiving tax-free disability payments instead of a taxable pension.
3. Make use of free or discounted tax preparation programs offered to veterans – Many tax software services offer free or discounted filing for veterans, and it’s not uncommon for professional accountants to offer military discounts. You might also check around your community to see if there are tax preparation programs available to veterans. If you are currently serving, or very recently retired, you may be eligible to use MilitaryOneSource, the Department Of Defense’s official tax preparation program.
4. Contact your state Veterans’ Affairs office to see which state tax benefits you qualify for – Every state has different tax benefits for veterans, so it’s important to find out the specific ones your state offers. For example: many states will reduce or eliminate property taxes for certain qualifying veterans.
5. Keep your records in a safe place – In order to take advantage of veteran tax benefits, you need to provide proof of military service. If you have lost any records, contact the VA immediately for replacements.
6. If you are retiring, remember to fill out Form W-4P – This form will tell the Defense Finance & Accounting Service how much tax you’d like withheld from each retirement check. If you do not fill it out, you will not have an taxes withheld. Keeping track of your tax liability will reduce the likelihood of owing at the beginning of the year.
7. Don’t forget to take deductions available to everyone – For example, if you re-entered the civilian workforce this year, you can deduct any costs you incurred from finding a new job, such as resume help, transportation and networking events.
Preparing taxes is never a pleasant experience, but hopefully these tips will make the process a little less painful (and, dare we say it, get you a refund). Good luck, and happy filing!