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Tax tips for veterans and members of the military

On Veteran’s Day, we remember the heroic efforts and sacrifices made by members of our nation’s military. Those who have served in the armed forces should feel tremendous pride in their heroism.

The Maryland Association of CPAs believes it is important that they know about the special tax relief available from the U.S. government.

Veterans’ pay is taxable, but benefits are not

Military retirement pay that is based on age or length of service is taxable, and must be included in your income. On the other hand, veterans’ disability retirement payments received from the U.S. Department of Veterans Affairs are generally tax free. Veteran’s benefits administered by the department are not includable in income. Veteran’s benefits include:

• Education, training and subsistence allowances paid to veterans or their families.
• Disability compensation and pension payments for disabilities paid to veterans or their families.
• Grants paid by the Department of Veterans Affairs for homes designed for wheelchair use or for vehicles for veterans who have lost their sight or the use of their limbs.
• Veterans’ insurance proceeds and dividends paid to veterans or their beneficiaries.
• Interest on insurance dividends left on deposit with the Department of Veterans Affairs.
• Dependent-care assistance benefits.
• Death benefits paid to survivors of military personnel members who died after Sept. 10, 2001.

Keep your military records handy

To qualify for many benefits, and to verify your status as a veteran, you may need access to your military records. You can find information on obtaining those records at the Department of Veterans Affairs Web site at http://www.va.gov/vaforms/.

Active members of the military

There are also tax accommodations for those who are currently on active duty in the military. For example, the
pay of enlisted personnel and warrant officers serving in combat zones is tax free, as is commissioned officers’ pay up to certain limits. There’s no tax on pay during hospitalization for those who were injured, within certain guidelines, and these soldiers don’t have to file or pay taxes during that time.

Armed forces members who serve in designated combat zones and civilians serving in support of these members, or those who are hospitalized outside the United States as a result of an injury received in a combat zone have also been given extensions on filing and paying their taxes.

They do not have to file or pay taxes until 180 days after their last day in the combat zone or hospitalization. The extension also generally applies to the spouses of military personnel who are serving in combat zones.  

More information can be found in IRS Publication 3, “Armed Forces’ Tax Guide,” which is available online. Go to www.irs.gov, then click on “Individuals” and look for “Tax Information for Members of the U.S. Armed Forces.” You can also call the IRS toll free at 1-800-829-1040.

Your CPA can help

For advice on what’s available to veterans, active military members and their families, turn to your local CPA. He or she can provide the answers you need to ensure you or a loved one receive the appropriate tax relief.

Only CPAs are equipped to address your full range of financial needs with integrity and insight. In Maryland, CPAs must pass a rigorous two-day examination, adhere to strict ethical and professional standards, and, beyond college, complete 80 hours of continuing education every two years to be certified by the state — accountants do not.

Your doctor is certified; your lawyer is certified. Make sure your accountant is a certified public accountant.

For CPA referrals in your area, contact the MACPA at (410) 296-6250 or click here.

The Maryland Association of Certified Public Accountants (MACPA) is a statewide professional association that provides leadership, information and services for its nearly 10,000 CPA members, who are employed in private practice, industry, government and education. CPAs are business and financial professionals who have passed a rigorous two-day examination in order to be licensed by the state. CPAs are committed to protecting the public interest, and must adhere to stringent ethical and professional standards and continuing professional education requirements.