Thursday, September 29, 2022

Federal Tax Exemptions For Disabled Veterans

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Yes for some disabled veterans and families. The following are eligible for the exemption:

  • Veterans receiving Disability Compensation at a rating of 50% or higher
  • Veterans receiving Non-Service Connected Pension
  • Veterans collecting permanent military retirement pay for a medical military retirement
  • Surviving spouses of veterans who had received the exemption Application

The exemption level varies from town to town. State law mandates a minimum $10,000 exemption, although towns are given the option of increasing the exemption to $40,000. The exemption reduces the appraised value of the home prior to the assessment of taxes. For example: An eligible veteran lives in a home valued at $200,000. The veterans town provides a $20,000 exemption. The veterans home will be taxed at $180,000. Veterans who would like to have their town increase their exemption must go through their towns local procedures for having a measure placed on an election ballot for town voters to consider.

The exemption only applies to homes that are owned by the veteran or survivor and is the primary residence. Veterans or survivors who rent their homes can not pass this exemption on to their landlord.

Proof of eligibility is provided by the U.S. Department of Veterans Affairs . Our recommendation is to call the VA no later than April 1st to request this documentation. The proof of eligibility may also be obtained through ebenefits

  • U.S. Department of Veterans Affairs Benefits – 827-1000

States With Full Property Tax Exemption For 100 Disabled Veterans

I hope you enjoy reading this blog post.

If you want to learn how to implement these strategies to get the VA benefits you deserve, to speak with a VA claim expert for free.

In this post, we list and explain the 18 states with full property tax exemption for 100 disabled veterans .

While all 50 states offer some sort of property tax exemptions for disabled veterans, our research and analysis uncovered 18 states with no property tax for disabled veterans, meaning eligible veterans are exempt from paying ANY property tax on their primary residence.

Okay, lets jump into the top states that offer complete homestead property tax exemption for 100 percent disabled veterans and surviving spouses.

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State Tax Exclusions For Veterans

If you are fortunate enough to live in one of the seven states without a state income tax on individuals, you will only need to file your federal tax return and pay income taxes to Uncle Sam. Otherwise, for active-duty members and veterans who are residents of other states, knowing what types of income are subject to or excluded from a state’s income tax is critical. Don’t forget that even states without income taxes will impose taxes on other property, including real estate and vehicles.

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Tax Breaks Depend Partly On Where You Live

The tax breaks you qualify for often depend on where you live in the United States. While there are some tax breaks at the federal income tax level, other tax breaks may vary from state to state.

For instance, property tax exemptions often exist for disabled veterans who are also homeowners.

  • Each state has its own rules for who qualifies for a property tax exemption and how much that exemption is.
  • These exemptions won’t show up on your state income tax return, though. They’ll show up on your property tax bill.

Some of these tax breaks may only apply if you have a certain level of service-related disability.

For example, Florida uses this measure when deciding property tax exemptions:

  • A veteran with at least a 10% service-related disability may get a $5,000 property tax exemption.
  • Meanwhile, a 100% service-related disabled veteran may get a full property tax exemption.

Indiana’s property tax exemption takes things one step further with both a disability requirement and an age requirement:

  • If you’re under 62, you must have a 100% service-related disability rating and served honorably during any period of wartime to get a $24,960 deduction form the assessed value of the property.
  • If you’re 62 or older, you only have to have at least a 10% service-related disability to get the benefit.

Utah Property Tax Exemption

Disabled American Veterans Notification Of Denial Of Exemption Form ...

Utah veterans with a VA disability rating of 10% or higher may qualify for a property tax exemption on their primary residence, according to the Utah State Tax Commission. Exemptions are based on the percentage of disability, up to a maximum $283,964 exemption for a 100% VA disability rating in 2022.

Surviving spouses and orphaned minor children of honorably discharged veterans with at least a 10% disability rating may also qualify for the exemption.

See all Utah veterans benefits.

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Medical Expense Tax Credit

You can claim the cost of certain medicines, devices and treatments to get a medical expense tax credit.

You can claim these expenses for yourself, your spouse or common-law partner, or your children.

You may get the tax credit for expenses such as:

  • changes you made to your home or car to make it more accessible
  • accessible computer software
  • braille printers

You usually need a prescription to claim disability supports.

You may get the disability supports deduction even if you’re not eligible for the disability tax credit.

Tip #: Know Your Eligibility

Don’t make assumptions about what you’re eligible for. Every benefit stipulates its own eligibility rules, some more detailed than others. For example, to receive a Specially Adapted Housing grant, veterans must prove they are experiencing very specific physical losses or loss of use in certain body parts.

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Connecticut Property Tax Exemption

Honorably discharged wartime veterans in Connecticut may qualify for a $1,500 property-tax exemption on the assessed value of their primary residences.

To qualify, veterans must have served at least 90 days of active duty during wartime. According to MyArmyBenefits, the Armys official military benefits website, individual municipalities also provide exemptions based on income or disability. In some cases, surviving spouses are also eligible for these tax breaks.

See all Connecticut veterans benefits.

What Is A Property Tax Exemption

New tax exemption for 100% disabled veterans

Property tax is an annual tax on real property based on the assessed market value of your land and buildings. Each stateand sometimes, countyhandles property assessments and taxes differently.

A property tax exemption is the elimination of some or all of the property taxes you owe. A property may be eligible for exemption in a few different ways, including based on the existence of a homestead, whether its used as a place of worship, and whether its owned by a veteran.

Also Check: What Is A Social Security Disability Freeze

Military Onesource Resources For Transitioning Service Members And Families

Military OneSource is a program funded by the Department of Defense that provides a range of free resources for Veterans and their immediate family up to 365 days after separation or retirement from the military. MilTax, Military OneSources tax services, provides online software for eligible individuals to electronically file a federal and up to three state returns for free through the Military OneSource website. The service also includes tax consultants available by phone to answer tax questions related to deployment, multi-state filing, and combat pay. They also share information on military-specific and civilian tax deductions and credits.

Military OneSource is available 24/7 at and online at MilitaryOneSource.mil.

Illinois Property Tax Exemptions

Qualifying Illinois veterans who have at least a 30% VA disability rating may qualify for property tax exemptions on a sliding scale based on the percentage of the disability rating, according to Illinois Revenue.

VA-rated disabilities at 70% or higher are eligible for a full property tax exemption on a qualifying primary residence. Illinois veterans with service-connected disabilities who own specially adapted housing may receive an additional tax break.

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Eligibility For Veterans Tax Benefits

To take advantage of veteran tax benefits, you must first confirm your status as a veteran. You must be a veteran of the U.S. Armed Forces, which means you were an officer or enlisted personnel controlled by the Secretaries of Defense, Army, Navy, Marine Corps, Air Force, or Coast Guard. Merchant Marines U.S. civilian mariners and American Red Cross members are not members of the Armed Forces. With some exceptions, such as hardship, you must also meet these requirements:

  • You served on active duty for a minimum of 24 months.
  • The 24 months were continuous.
  • Your discharge status was not “dishonorable.”

Military Disability Retirement Pay

Fillable Form Otc998

If you receive military disability retirement pay, it is excluded from taxable income and is not part of your gross income calculations. This nontaxable amount includes any annuity, pension or other service-connected disability compensation you receive as a disabled veteran.

The U.S. Department of Veterans Affairs determines whether you are a disabled veteran. Generally, you can obtain disabled veteran status with the VA if your disability is from a combat-related injury or sickness that meets any one of these requirements:

  • Arose during service
  • Worsened or intensified during service
  • Was a direct result of your service

What if the VA grants disabled veteran status after you have retired and after you have already paid taxes on military retirement pay based on your years of service?

Your retroactive disabled veteran status, which is based on your service-connected disability, entitles you to claim a refund on the taxes you previously paid on your military retirement pay pay which you would have been able to exclude from income taxes based on your disabled status. Of course, to get your refund, you’ll need to file an amended return for every year you paid taxes.

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California Property Tax Exemptions

California provides two levels of tax exemptions for disabled veterans and their surviving spouses.

To qualify for Californias disabled veterans exemption, veterans must be rated 100% disabled or at the 100% rate because of unemployability, according to the California State Board of Equalization.

The exemption varies annually according to inflation. In 2022, the basic exemption is $161,083. The low-income exemption is $241,627 for households earning no more than $72,335 per year.

Senate Bill SB-1073, introduced in April 2022 could provide partial property tax exemptions to disabled veterans with less than a 100% disability rating.

Senate Bill SB-1357 would extend a full property tax exemption to veterans who are fully blind or who have lost two or more limbs, regardless of their disability rating.

See all California veterans benefits.

Vermont Property Tax Exemption

Veterans in Vermont may qualify for property tax exemptions beginning at $10,000 on a primary residence, according to the Vermont tax department.

Municipalities may increase the exemption to a maximum of $40,000.

To qualify, veterans must be receiving:

  • Disability compensation for a disability with a rating of 50% or higher
  • Non-service connected pension, AKA the improved pension
  • Military retirement pay for a permanent medical military retirement

Surviving unmarried spouses may also be eligible.

See all Vermont veterans benefits.

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Taxability Of Military Retirement Pay

Military retirement pay based on age or length of service is taxable and must be included as income for Federal income taxes. The amount of your pay that is deducted for the Survivors Benefit Plan is excluded from taxable income. For Social Security tax purposes, military retirement pay is not considered earned income and no Social Security is withheld.

Military Disability Retirement Pay shouldn’t be included in taxable income if your disability or injury was caused by combat or if you get military disability instead of VA disability for your injuries.

Tax Credits And Exemptions Available Specifically To Disabled Veterans

Bill filed to help disabled veterans utilize state’s property tax exemption

The IRS allows disabled veterans to claim a federal tax refund based on certain criteria. If an increase in the veterans percentage of disability is determined by the VA or if the combat-disabled veteran is granted Combat-Related Special Compensation, the disabled veteran can file an amended tax return to receive a refund based on these determinations.

Many disabled veterans receive compensation benefits from the VA. The payments you receive from VA disability compensation are tax-free, so you wont have to count them in your income calculations when you file your taxes.

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Earned Income Tax Credit

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 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 build 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.

Nebraska Property Tax Exemption

Disabled veterans who are Nebraska state residents may be eligible for a homestead exemptions if they fall into one of these categories:

  • Seniors over the age of 65
  • Veterans with wartime service with a total non-service connected disability or illness
  • Qualified disabled individuals
  • Qualified totally disabled veterans and their surviving spouses
  • Veterans whose homes the VA substantially contributed to
  • Individuals with a developmental disability

These tax exemptions are for primary residences.

According to the Nebraska Department of Revenue, veterans with service-connected disability with a VA rating of 100% are exempt from paying state property taxes, regardless of income level or value of the property. In many cases, surviving spouses may be eligible to apply.

The amount of the exemption for all other categories ranges from 0 to 100% depending on household income and the assessed value of the property.

See all Nebraska veterans benefits.

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Kentucky Property Tax Exemptions

Kentucky offers a homestead exemption based on age or disability, according to the Kentucky Department of Revenue. Disabled veterans can apply for this tax break to reduce the assessed value of their primary residence by up to $40,500 for 2022.

The state adjusts the amount for inflation every two years. Veterans with a service-connected disability rated by the VA as permanent and total do not have to reapply for the benefit each year.

See all Kentucky veterans benefits.

Disabled Veterans Property Tax Exemptions By State

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Veterans with service-connected disabilities are eligible for tax breaks and discounts in many states. In most cases, the tax breaks reduce taxes by lowering the propertys assessed value.

Veterans and their spouses may be able to save thousands of dollars at tax time. But, not all states offer the same tax breaks, and qualifying criteria varies by state.

Certain property tax exemptions may focus on the disability rather than on the applicants status as a veteran other exemptions may be dependent on having a Department of Veterans Affairs-rated disability. Veterans may also need to register for tax benefits in some states and recertify their eligibility annually.

State tax laws are always subject to change.

Discuss your states tax exemptions for the current tax year with a professional to make sure the past years exemptions or other tax benefits apply in the current tax year.

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More Tax Information For Active Military & Veterans

  • IRS Members of the Military Tax InformationA list of nine IRS documents focusing on federal income tax preparation for military members, including those in combat zones.

  • IRS Filing Extensions and Tax Return Preparation Assistance for Military Personnel Stationed Abroad

  • Guidance and forms that employers can use to claim the tax credit for hiring veterans.

GI Bill is a registered trademark of the U.S. Department of Veterans Affairs. More information about education benefits offered by VA is available at the official U.S. government Web site.

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Disabled Veterans May Be Eligible To Claim A Federal Tax Refund Based On:

  • an increase in the veteran’s percentage of disability from the Department of Veterans Affairs or
  • the combat-disabled veteran applying for, and being granted, Combat-Related Special Compensation, after an award for Concurrent Retirement and Disability.

To do so, the disabled veteran will need to file the amended return, Form 1040-X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040-A or 1040-EZ. An amended return can be e-filed or filed by paper for most returns. For tax years 2019 and later, a paper filed original return can be amended electronically or by paper. Disabled veterans should include all documents from the Department of Veterans Affairs and any information received from Defense Finance and Accounting Services explaining proper tax treatment for the current year.

Please note: It is only in the year of the Department of Veterans Affairs reassessment of disability percentage or the year that the CRSC is initially granted or adjusted that the veteran may need to file amended returns.

Under normal circumstances, the Form 1099-R issued to the veteran by Defense Finance and Accounting Services correctly reflects the taxable portion of compensation received. No amended returns would be required, since it has already been adjusted for any non-taxable awards.

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Certain Tax Breaks Apply Automatically

In some cases, you may not have to file any paperwork or claim a deduction or tax break on your tax return. Certain tax breaks automatically apply.

One example is disability benefits received from the Department of Veterans Affairs. These benefits should not be included in your gross income, so they shouldn’t be taxed.

Non-taxed disability benefits include:

  • Disability compensation which are paid to either veterans or their families
  • Grants for vehicles for veterans who lost the use of their limbs or their sight, or homes designed for wheelchair living
  • Benefits under dependent-care assistance programs

If you accidentally claimed some of this income as taxable on your federal tax return, continue reading to see how you might get a refund. This requires filing an amended tax return, which TurboTax can help with.

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