Our active and veteran military members honor our Country with their service. Unfortunately, this service is often without reward. Many veterans struggle following their service, with mental health and physical challenges, as well as problems establishing a career. To honor military service and to help alleviate their financial burdens, the IRS and states offer numerous tax incentives to veterans.
For example, the IRS offers free tax preparation services for qualifying individuals, the Volunteer Income Tax Assistance (VITA) and the Tax Counseling for the Elderly (TCE) programs. The VITA is for people who make less than $54,000 per year, and the TCE is for people who are aged 60 and older.
In addition, the IRS offers tax incentives to employers who hire veterans who have been out of work, as well as offering its own IRS Veterans Employment Program aimed at providing internships and jobs to help veterans build employment skills for their resumes.
State of Illinois Property Exemptions
The state of Illinois offers several property tax exemptions for qualifying veterans, which include:
- Returning veterans homestead exemption—this is a $5000 exemption for veterans who have returned from active duty from armed conflict and are liable for property taxes on their residence.
- Disabled veterans standard homestead exemption—this is an exemption that reduces a disabled veteran’s “equalized assessed value” (EAV) of his or her home. The amount of exemption increases based on the percentage of disability the veteran has been assessed by the VA.
- Specially adapted housing tax exemption—this exemption applies to residences where federal funds have been used to remodel the home to accommodate a veteran’s disability.
- Mobile home tax exemption—disabled veterans are eligible to exempt the full value of a mobile home for property tax purposes.
IRS Tax Exemptions
The IRS also offers the following tax exemptions to qualifying veterans:
- Disability pension—while military retirement pay is generally taxable, the same is not true when it comes to the disability retirement benefits paid to disabled veterans. Eligible veterans who have been assessed as disabled by the VA do not have to report these benefits as income to the IRS.
- Education expenses—veterans who are receiving education benefits from the VA, for purposes of further education or training, are entitled to exclude this money from their income when they prepare their tax return.
IRS Tax Refunds
In addition, the IRS provides for the potential of a tax refund for disabled veterans if one of the following changes takes place:
- The disabled veteran’s percentage of disability increases; or
- The disabled veteran is granted “Combat-Related Special Compensation”.
The veteran taxpayer will have to file an amended tax return, Form 1040X, along with any accompanying proof from the VA to support this amendment.
Call Robert S. Thomas, An Experienced Tax Attorney
The Law Offices of Robert S. Thomas proudly offers tax advice and advocacy for Illinois taxpayers. If you have served this country or are currently serving this country, it would be my honor to assist you. I have a Master of Law Degree (LLM) in Taxation and am licensed to practice in the United States Tax Court. If you are having an IRS tax dispute or just need some tax advice, contact me. Call the Law Offices of Robert S. Thomas at 847-392-5893 to schedule a consultation or visit our website today.