Yes, the retirement portion is taxable, and is reported to you on your 1099-R. The disability from the VA is not taxable and not reportable, as you know.
Some states offer exclusions for military retirement pension, or for disabled taxpayers. Which state return do you file?
I am in Alabama and does not tax my military pension.
Yes, the retirement portion is taxable, and is reported to you on your 1099-R. The disability from the VA is not taxable and not reportable, as you know.
Some states offer exclusions for military retirement pension, or for disabled taxpayers. Which state return do you file?
I am in Alabama and does not tax my military pension.
<a rel="nofollow" target="_blank" href="http://militaryintransition.com/military-pension-tax-rates-state/">http://militaryintransition.com/military-pension-tax-rates-state/</a>
Hello. If this is the case, what is the purpose of the 1040-X form and the ability in accordance with the combat-injured veterans tax fairness act of 2016 to request up to three years back pay? Severance-pay is not on-going like monthly retirement (pension) which would account for the back-pay of up to three years.
Thanks in advance.
That is because the pay was not reported correctly to start with ... those affected were able to make the correction. Since then the income has been properly reported. If you do not understand how your retirement/VA payments are or aren't taxed then talk to DFAS or the VA to be educated.
The Combat-Injured Veterans Tax Fairness Act of 2016, enacted December 2016, allows certain veterans who received lump sum disability severance payments additional time to file a claim for credit or refund of an overpayment attributable to the disability severance payment. The law directed the Secretary of Defense to identify disability severance payments paid after January 17, 1991, that were included as taxable income on Form W-2, Wage and Tax Statement, but were later determined to be nontaxable and to provide notice of the amount of that payment. The Department of Defense is mailing letters to affected veterans (letters 6060-A and 6060-D) in July 2018.
What about this statement from page 18 of the IRS Pub 525
Service-connected disability. You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services.
• The armed forces of any country
Conditions for exclusion. Don’t include the disability payments in your income if any of the following conditions apply.
1...
4. You would be entitled to receive disability compensation from the VA if you filed an application for it. Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA.
I have been told DFAS is changing retired pay to exempt if show proof of 100% service connected permanent and total, page 18 of Pub 525 and memo requesting change. This is confusing or are they seeing what they want to see.
For taxation purposes when you receive a form 1099-R from DFAS for retirement pension that is taxable income and reported by entering your 1099-R information. This pay is for years of service.
When you receive disability payments from the VA they are not reported to you on a tax form and you do not enter them anywhere on your tax return; this is a disability pension.
If a veteran is receiving full retirement and full disability under concurrent receipt the retirement from DFAS is taxable and reported on the 1099-R while the VA disability is not reportable.
Everyone,
This is my first year receiving a pension and just about died at the tax bill. In any case Minnesota also does not tax military pensions either.
You are correct. Here is a link with information on the military retirement tax friendly states.
I am 100 percent disabled and draw a pension from the Air Force since 1995. Now I didn’t realize that my pension was taxable and have never filed taxes. So in this case what should I do?.
I appreciate your help.
Thank you,
Carolyn Barry
I am 100 percent disabled and draw a pension from the Air Force since 1995. Now I didn’t realize that my pension was taxable and have never filed taxes. So in this case what should I do?. I live in Delaware.
I appreciate your help.
Thank you,
Carolyn Barry
@CarolynCC137 Your pension distribution may be taxable if reported to you on a form 1099-R. You can enter that form in TurboTax to see if it affects your tax. You enter it in the Income and Expenses section of your federal tax return. Look for Retirement Plans and Social Security, then IRA, 401(k), Pension Plans (1099-R). Just complete that section by entering your form 1099-R information and answering the questions to see if your refund or tax due changes.
Did you ever find anything else out about this. I have asked and tried researching it myself to no avail. Although everyone I know has been approved for it.
I am starting my second year of military retirement and am 100% disabled as well- I've met vets that do not pay taxes on their retirement due to being 100% va disabled as per "page 18 of IRS PUB 525. While the publication reads pretty easy, filling out the paperwork is something that I have yet to get help with- any thoughts?
Please note (link below) that page 18 of IRS Tax pub 525 is being *incorrectly* interpreted by some VA rated Disabled Vets to exempt fed taxes on one’s military pension (a pension based on number of years of service). You have to read the pg18 wording carefully and note that it’s disability compensation that is excluded from fed taxes and that only in cases of disability retirement/disability pensions (not pensions based on number of years served ) do the provisions on page 18 apply. https://www.currentfederaltaxdevelopments.com/blog/2022/4/29/disabled-veteran-could-not-exclude-military-retirement-pay-in-excess-of-amounts-received-from-va-as-disability-
Also, just because one can convince DFAS to reduce their W-4 Fed tax withholdings based on one’s interpretation of Page 18 of IRS pub 525, it doesn’t mean that Military Pension Fed taxes aren’t still due to the IRS at the end of the tax year. The IRS (not DFAS) is the governing authority on taxable/non taxable income and their determinations on page 18 exceptions are stated on the link above. One’s tax withholdings, if under represented at the end of the tax year , can incur penalties. I hope this helps.
I am in the same boat looking into this topic. Initially I agreed with the premise that Military Retirement based off years of service is taxable and VA disability compensation is not. However, a friend of mine who also is retired, told me that his retirement is NOT being taxed as is his VA not being taxed. He sent me the packet he sent to DFAS. After reading through it, AND the appropriate tax law, the IRS gives a VERY SPECIFIC example of where BOTH should be tax free. This is listed as Example 19 from the IRS Publication 525, page 19. Not sure that it gets much clearer than this...
Example 19. You retired in 2014 and receive a pension based on your years of service. On August 3, 2020, you receive a determination of service-connected disability retroactive to 2014. Generally, you could claim a refund for the taxes paid on your pension for 2017, 2018, and 2019. However, under the special limitation period, you can also file a claim for 2016 as long as you file the claim by August 3, 2021. You can't file a claim for 2014 and 2015 be-cause those tax years began more than 5 years before the determination.
Thoughts from the group?