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Do veterans get special tax exemptions?

        Money | Taxes

The U.S. pays tribute to its millions of veterans on Veterans Day of course, but what about come tax time? This picture was snapped during a 1978 Veterans Day ceremony at Arlington Cemetery.
The U.S. pays tribute to its millions of veterans on Veterans Day of course, but what about come tax time? This picture was snapped during a 1978 Veterans Day ceremony at Arlington Cemetery.
© Wally McNamee/Corbis

It seems like veterans should get a load of tax benefits. After all, they served the country selflessly and no doubt had their share of government bureaucracy in the process. In return, the least the system can do is give them some tax relief. How about a few years where filing just isn't required?

Unfortunately, the IRS doesn't have any get-out-of-jail-free cards, no matter how faithfully you served anything. Just like everyone else, veterans are stuck filing their tax return every single year. (Although, to be fair, if you're serving in a combat zone, you do get an extension for filing your return [source: IRS].)

As a veteran, you are entitled to a few special tax benefits. Don't think that your pension after retirement is one of them -- that income is fully taxable. But keep in mind that just applies to a retirement pension, and not to any disability payments. Disability payments don't need to be reported, as they are tax-free. That might go beyond simple payments and include grants that were given to you for a motor vehicle or home designed for certain disabilities [source: IRS].

Here's some bad news: Veterans aren't necessarily getting an across-the-board exemption for much of anything. There's no "credit" given for military service, for instance, or an exemption that applies to any disabled vet. But they may be eligible for certain benefits, like the earned income tax credit, that allows a nice subsidy for low-income working families.

Instead, the best bet is to check with your state to see what benefits it might offer to veterans. Many disabled veterans are offered property tax exemptions in their states; that might mean the entire cost is exempted, or a part of it [source: Duncan]. In some states, you have to petition or file for the exemption every year. But in other jurisdictions, it's a one-and-done deal: Claim it once and you're good to go.

So while there aren't necessarily credits or exemptions that always apply to veterans, there are a few ways to lower that tax bill. Check with your state or local jurisdiction to find some specific ways that your veteran status might bring an added tax benefit or two.


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