For plenty of Americans, filing taxes this month was an overwhelming process. Our tax code is thousands of pages long. The rules are complex and the procedures vary by state -- even municipality.
And for our nation's veterans, filing as a civilian for one of the first times can be downright daunting after time spent in the service. As you likely experienced this year, other than disability pay, most of your income is now taxable. Certain tax advantages, like tax-free allowances, no longer apply.
Now that the deadline has come and gone, it might be tempting to take a big sigh of relief and forget about taxes until next April. But if you start thinking about your filing now, there are plenty of tricks to make next tax season less taxing.
With a little planning ahead, you can cash in a few money saving tips and make sure you don't end up paying too much.
First things first, understand if you qualify as a veteran.
For tax purposes, a veteran is an individual who has served at least 24 continuous months in active duty and has not been released with "dishonorable" status upon discharge.
Then get to know your benefits -- and your eligibility.
There are a number of benefits and entitlements that you and your family members receive that are not taxable at the federal level. Some of the most common benefits include:
- Disability Pension
- Disability Compensation
- Education and Training Allowances
- Dependents and Survivors
- Life Insurance
- Housing Grants
- Compensated Work Therapy Program
Keep in mind that each of these benefits stipulates its own eligibility rules.
Don't miss the deadline: you must file by April 17 in 2017.
While military personnel stationed in combat zones are granted automatic filing extensions, if civilians can't file by April 17, 2017, they need to request an extension. Extensions are generally granted until October 17. However, if you owe money, you still must pay by April 17 or face interest charges and penalties.
Consider where you live and work.
When deciding where to live and work after completing your service, it makes good sense to look up the income tax rates, as well as property tax rates, in the areas you're considering. For instance, if you decide to buy a home, some states offer property tax reductions for veterans.
Your new career may also offer tax breaks, so also consider researching common tax deductions used in your field. For example, if you join the National Guard, you may be able to deduct uniform expenses and mileage related to your service. Or if you work as a police officer, you can often deduct expenses for uniform cleaning or union dues.
Make the most of your tax deductions.
The first way to reduce your taxes is through deductions. The most common ones are your property tax, charitable contributions, mortgage interest, student loan interest, as well as medical and non-reimbursed job-related expenses that exceed a certain portion of your income.
For example, if you've searched for a job, you can deduct expenses for creating a résumé and cover letter, related transportation costs, hiring an employment agency, and business networking events, to name a few.
Recognize that deductions aren't automatic.
You have a choice between a "standard deduction" and taking an "itemized deduction." To get things like your mortgage interest or a write-off for a non-reimbursed, work-related expense deducted, you'll need to list them out on your tax return.
Consider tax credits to reduce the taxes you owe even further.
The most common tax credits are child or dependent care tax credits, education tax credits, energy tax credits, and earned income tax credits.
Take advantage of free services for help and advice.
There are plenty of resources that provide free tax-filing services to veterans. You may qualify for free online tax filing through the IRS, but be sure to check with your local tax authorities and the IRS.gov website because qualifying factors may change by location and situation. The Resource Center at Wounded Warrior Project can also connect you to local resources for free tax preparation.
Check your tax benefits every year.
Join eBenefits.va.gov, a joint website of the U.S. Department of Veteran's Affairs and the Department of Defense, to make sure you're taking advantage of every possible tax break every year. The eBenefits site houses the resources and self-service capabilities for veterans all in one place.
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