How You Can Maximize Military Tax Breaks in Retirement sponsored by Aaron Steele

aaron steele
April 24, 2021

When retired from the military, filing your taxes may seem simpler than when you are still in active service. However, veterans can still benefit enormously from the tax code. We spoke to experts who provided helpful information for veterans filing their taxes.

Federal Taxes

You’ll pay federal taxes on your military retirement pay. However, if you participate in the Survivors Benefit Plan, which provides support for your beneficiaries when you die, your premiums would not be taxable. Your military pay isn’t considered earned income for calculating Social Security tax, and no Social Security payroll tax would be deducted from your pay.

Veteran education benefits you get for education and training through the Department of Veterans Affairs (VA) are tax-free. Disability benefits received from VA are also not taxable. This includes disability compensations and pension payments, grants for a vehicle or home modification, and benefits under the Dependent Care assistance program.

Note: Individuals recently granted Combat-Related Special Compensation or increased disability ratings might be eligible for a tax refund. However, this only applies to the years when the VA recessed your disability level. And you may need to file for an amended return.

Other benefits from the VA that are not taxed include:

The interest you get from VA life insurance policies
Money paid to survivors of members of the armed forces who died after September 10, 2001
Benefits received under a dependent-care assistance program
Payment received under the compensated work therapy program
Any bonus pay received from a state, county, city, or town due to service in a combat zone

Individuals with missing money from stimulus checks may still obtain it from the IRS Recovery Rebate Credit. The IRS uses information from the VA to issue the stimulus checks. Anyone who received partial payments based on their last year’s information can file for a recovery rebate.

Even if you don’t owe any taxes for 2020, you are still eligible for the stimulus check and payments for eligible children provided you earn within the specified income limit.

State Taxes

States usually limit their tax benefits to only veterans who are honorably discharged or released honorably
State tax benefits often include tax exemptions on property taxes
The benefits accrued to an honorably discharged veteran can be transferred to the spouse
Most states have additional tax benefits for disabled veterans
Every states’ revenue website outlines the state’s benefits for veterans and the steps to apply for them

Disabled veterans are usually eligible for property tax exemptions at the state level. These tax breaks are often tied to specific disability ratings and can help veterans save thousands in taxes. It is advisable to verify the structure of a state’s tax benefits for veterans and the taxpayer assistance center, state office, or tax professionals’ eligibility. Click here to see a list of all property tax exemptions.

Here Are Some Tax Breaks for Veterans From the Specific States

California: the state waives state and local business license taxes and fees for veterans that sell goods except for alcohol. The state also waives specific property taxes for veterans and disabled veterans.
Florida offers a $5,000 reduction in property assessed value for veterans with a 10% disability rating. Veterans with permanent disability related to their service and those using wheelchairs qualify for a total exemption from property taxes.
Georgia: A qualifying disabled veteran can get up to $60,000 or more exempt from property taxes. Veterans with a 10% disability rating may qualify for exemptions from any occupational taxes, administrative fees, and other fees imposed by the local government for up to ten years.

A disabled veteran who receives a vehicle modification grant from the VA may be exempted from paying sales taxes upon selling the vehicle.

New Mexico: veterans may get up to $4,000 worth of property taxes exemption. A property fully or jointly owned by a veteran with 100% disability may be exempted from property taxes if the property is the veteran’s principal residence.
New York: the state provides several property taxes for veterans that offer partial or full tax breaks depending on the year the veteran served and when the property was purchased.

Aaron Steele

After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

Disclosure: Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.