How Preparing Taxes For Veterans Is A Little Different
Every citizen must file for tax appropriately. If you are a veteran, there are specific benefits that you can take advantage of to reduce your tax liability. Before embarking on any endeavor to access these tax cuts, ensure that you consult a professional accountant. You don’t want the IRS to start investigating you. It is essential that you scrutinize all your compensation so that you learn which ones are exempt. While you were on active duty, you most likely received numerous tax advantages, but now that you are a civilian, you’ll start noticing a more substantial tax burden.
How Do You Become Eligible for Tax Benefits for Veterans?
According to tax law, veterans are classified as individuals who have served for at least 24 months in continuous active duty. They also shouldn’t have been dishonorably discharged. People who are also eligible for veteran tax benefits include:
Parents of a dead or disabled veteran.
Children of a veteran.
Spouse of a deceased or disabled veteran.
What Are the Non-taxable Benefits?
The veteran doesn’t have any responsibility for reporting the following sources of income to the IRS for tax purposes:
Disability pension: Those veterans who are more than 65 years old or those that have a permanent disability receive this pension. Such a benefit is exempt from state and income tax.
Disability compensation: This is paid to those veterans that suffered from a disability-causing injury when they were in active service. It isn’t taxable in either state or federal tax systems.
Life insurance: Veterans are eligible for life insurance that caters to them and their family members when they are on active duty. When a person in this category benefits from such an insurance policy, they aren’t subject to tax.
Housing grants: Is available to certain disabled veterans such that they can make any adjustments they deem necessary to cater for their different needs. The person benefiting from such a grant doesn’t have to report it when filing their returns.
Tax Advantages on House Loans
Veterans can purchase a house utilizing VA home loans, which makes it easier for them to get financing. Such loans don’t always need a down payment and are extended via private lenders guaranteed by the Department of Veteran Affairs. There are certain tax benefits veterans receive:
They can claim tax deductions on mortgage interest, discount points, and origination fees.
Those married are allowed to sell their properties tax-free up to $500, 000. The only limitation applicable is that they have to live in the house for two years. Singles can avoid tax up to $250,000.
If needed, veterans should seek expert assistance from a competent tax professional before filing their returns to determine their tax burdens. Any claim or exemption not allowed by tax law can create legal ramifications.
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