CPA, JD, Managing Partner - Tax
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Key Tax Benefits Available to Veterans
On November 11, we celebrate Veterans Day to honor the thousands of women and men who served in the United States military. For their part, the Internal Revenue Service and each of the 50 states are committed to demonstrating their respect for veterans through their oversight and administration of various federal, state, and local tax breaks and incentives. However, as with most things tax-related, the rules can be technical, the programs are not always intuitive, deadlines vary, and determining veteran eligibility and availability can require careful review. Often, veterans may not be aware of the benefits available to them.
Below are a few highlights of the various tax benefits available to veterans. This list is intended only to broadly illustrate the types of benefits available. The list is not exhaustive. We encourage all veterans to take advantage of these valuable programs, and thank all veterans for their service.
Below are a few highlights of the various tax benefits available to veterans. This list is intended only to broadly illustrate the types of benefits available. The list is not exhaustive. We encourage all veterans to take advantage of these valuable programs, and thank all veterans for their service.
California offers special benefits for its military service members and veterans including a Business License, Tax, and Fee Waiver for qualified veterans. This program waives certain municipal, county, and state business license fees and taxes for veterans who hawk, peddle, or vend any goods, wares, or merchandise owned by the veteran, except potable alcohol products. Honorably discharged veterans who engage in certain sales activities may be eligible for the waiver. Eligibility criteria differs based upon local jurisdiction. To learn more, read this guidance.
Display your patriotism this Veterans Day. Connecticut, like several states, exempts sales of U.S. flags from its sales and use tax. Sales of Connecticut’s state flag are also exempt from the sales and use tax.
New Jersey offers a $3,000 personal income tax exemption for military veterans who were honorably discharged or released under honorable circumstances from active duty. Veterans must provide official documentation confirming military service and honorable discharge. The most common form of documentation is a copy of the Certificate of Release or Discharge from Active Duty, DD-214. The exemption is claimed directly on the veteran’s New Jersey income tax return. Read guidance.
Property tax exemptions are a common benefit designed to assist veterans with home ownership. New York City, for example, provides two different property tax exemptions available to veterans. The Alternative Veterans’ Exemption is available to eligible veterans of foreign wars, expeditionary medalists, those honorably discharged, the spouses/widows of veterans, and Gold Star parents. The property must be the veteran’s primary residence. Similarly, the Eligible Funds Exemption is available to veterans who purchased a home using “eligible funds,” including pensions, bonuses, insurance, and mustering out pay. Both exemptions reduce the assessed value of the recipient’s property before taxes are assessed on it. Read guidance.
The New York State Department of Taxation and Finance administers certain tax incentives that are intended to assist veterans as they transition into civilian life. For example, New York offers two state business credits that are intended to encourage businesses to hire veterans. Employers that have hired veterans who began working on or after January 1, 2014, but before January 1, 2020, may qualify for a state business tax credit worth as much as $15,000 per veteran. To be eligible, the veteran must have worked for one year or more and for at least 35 hours each week. The amount of the credit is equal to 15% of the total wages paid to a disabled veteran during their first full year of employment. The credit is allowed up to $15,000 per disabled veteran. For nondisabled veterans, the credit is equal to 10% of the total wages, up to $5,000 per nondisabled veteran. To claim the credit, an employer must have the veteran certify that they qualify as an eligible veteran using Form DTF-75, Employee Affidavit for the Hire a Veteran Credit. Read guidance.
North Carolina offers real property tax relief for certain disabled veterans. This program excludes up to the first $45,000 of the appraised value of the permanent residence of a disabled veteran. A disabled veteran must have a total and permanent service-connected disability, or receive benefits for specially adapted housing. There is no age or income limitation. The tax relief is also available to a surviving spouse of a disabled veteran (who has not remarried) or the spouse of a veteran who died due to a service-connected condition. Complete application.
Texas provides an exemption from the Texas Franchise Tax for new veteran-owned businesses, if the business was formed between January 1, 2016 and January 1, 2020. The new business entity must be 100% veteran owned, each owner of the newly formed entity must have been honorably discharged, and each veteran owner must submit certification of their status. The exemption is available for the business’ first five years of operations. Read guidance.
Virginia localities impose a tax on personal property, namely on automobiles. Disabled veterans who meet certain criteria may be granted relief from the personal property tax on their car. For example, in Prince William County, a veteran who is permanently disabled and who meets certain income and net worth requirements may qualify for tax relief for their car and the vehicle registration/license fee. An applicant must, among other requirements, have a total household income of not more than $87,073 (less certain exclusions) and must have a combined financial net worth for the applicant and spouse of not more than $340,000 (excluding a principal residence and up to twenty-five acres of land it occupies). Read 2018 Citizen’s Guide.
Through various acts of Congress, the Internal Revenue Service administers numerous federal tax breaks and incentives. For example, among many other benefits, veterans who currently serve or served in the military, and who are receiving education benefits through the Department of Veterans Affairs, are entitled to exclude the value of those benefits from taxation. Veterans receiving payments for education, training, or subsistence under any law administered by the Department of Veterans Affairs are thus tax free. For information on this exclusion from taxation of education benefits available to veterans, see IRS Publication 970. Read guidance.
Overall, the range of federal, state and local tax credits, deductions, exemptions, exclusions, and incentives are intended to provide tax assistance to veterans and their families. However, the rules can be technical and raise many questions, such as: are you eligible? Is your spouse eligible? What documentation do you need to prove eligibility? How do you claim the benefit? Have the rules recently changed from prior years? Are the benefits available at the state or local-level?
Veterans should therefore feel comfortable in seeking the assistance of a tax professional before claiming tax benefits or filing tax returns or amended returns based upon veteran status or disability determinations. Claims based on improper interpretations of the tax law could subject a veteran to liabilities for back taxes, interest, and penalties. More importantly, these tax breaks are intended to assist veterans and their families, and professional advice may help ensure veterans are claiming all tax benefits properly available to them. Here at CohnReznick, we consider it an honor to assist veterans with these issues.
Overall, the range of federal, state and local tax credits, deductions, exemptions, exclusions, and incentives are intended to provide tax assistance to veterans and their families. However, the rules can be technical and raise many questions, such as: are you eligible? Is your spouse eligible? What documentation do you need to prove eligibility? How do you claim the benefit? Have the rules recently changed from prior years? Are the benefits available at the state or local-level?
Veterans should therefore feel comfortable in seeking the assistance of a tax professional before claiming tax benefits or filing tax returns or amended returns based upon veteran status or disability determinations. Claims based on improper interpretations of the tax law could subject a veteran to liabilities for back taxes, interest, and penalties. More importantly, these tax breaks are intended to assist veterans and their families, and professional advice may help ensure veterans are claiming all tax benefits properly available to them. Here at CohnReznick, we consider it an honor to assist veterans with these issues.
For more information, please contact Patrick J. Duffany, Managing Partner – Tax at Patrick.Duffany@CohnReznick.com or 959-200-7000.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.