Filing taxes once you're retired from the military may seem less complicated than it was when you were still in the service, yet military veterans can still get important benefits from the tax code. You don't want to miss out on them.
To help with your 2022 tax filings, we spoke with CPA and tax expert Lisa Greene-Lewis of TurboTax, who provided helpful information specifically for military veterans. Remember to file your taxes before this year’s April 18 deadline. And don’t forget: Tax advice that applies to civilians can benefit you too.
You’ll owe federal income taxes on military retirement pay. But if you participate in the Survivor Benefit Plan, which supports beneficiaries after a veteran dies, premiums are excluded from taxable income. Additionally, your military retirement pay is not considered earned income for Social Security tax calculations, and no Social Security payroll tax should be withheld from that pay.
Veterans education benefit payments received through the Department of Veterans Affairs (VA) for education and training are tax-free.
Disability benefit payments from the VA aren’t taxable. This includes disability compensation and pension payments, disability grants for home or vehicle modifications (such as wheelchair ramps), and benefits under dependent-care assistance programs.
Note: If you recently had an increase in your disability rating or were granted Combat-Related Special Compensation, you may be eligible for a tax refund. However, this can be applied only to the year that the VA reassessed your disability level, and you may have to file an amended return.
Other money from the VA that is not taxed:
- Interest from VA life insurance policies
- Benefits under a dependent-care assistance program
- Money paid to a survivor of a member of the armed forces who died after Sept. 10, 2001
- Payments made under the compensated work therapy program