How Service Members & Veterans Can Make the Most of This Tax Season

Key Tax Benefits and Updates for 2025

State Tax Exemptions for Military Retirement Pay

• Virginia: For the 2024 tax year, Virginia offers a $30,000 exemption on military retirement pay, which will increase to $40,000 per year in 2025 and subsequent years. 
• New Mexico offers a $30,000 exemption on military retirement pay for tax years 2024 through 2026.

You can learn more about benefits on taxes for Veterans and service members in your state here.

In addition to state-specific tax benefits, military personnel and veterans can take advantage of several federal tax provisions designed to ease financial burdens:

Earned Income Tax Credit (EITC)

The EITC is a refundable tax credit aimed at low to moderate-income workers. For the 2024 tax year, the credit is worth up to $7,830. Notably, service members who receive nontaxable combat pay can elect to include it in their earned income for EITC purposes, potentially increasing the credit amount. This option can lead to a larger refund or a reduced tax liability.

Moving Expense Deductions

Active-duty service members who relocate due to a permanent change of station (PCS) may deduct unreimbursed moving expenses. Eligible expenses include the cost of transporting household goods, travel, and lodging during the move. Additionally, allowances received for PCS relocations are not taxable.

Combat Pay Exclusion

Income earned while serving in designated combat zones is excluded from federal income tax. This exclusion applies to both enlisted members and officers, though limits exist for officers. Understanding this benefit can lead to significant tax savings.

Tax Filing Extensions for Deployed Service Members

Service members deployed in combat zones or contingency operations are granted automatic extensions for filing tax returns and paying taxes. This extension typically lasts up to 180 days after leaving the combat zone, ensuring that service members are not penalized for late filing under these circumstances.

Tax Filing Resources for Military Members and Veterans

The IRS offers several programs to assist with tax preparation:

• MilTax: A Department of Defense program providing free tax return preparation and electronic filing software for federal income tax returns and up to three state income tax returns. This service is available to military members and some veterans, with no income limit (AAFMAA).
• Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE): These programs offer free tax help, with TCE specifically focusing on pensions and retirement-related tax questions.

Turn Your Tax Refund into Savings

Tax season isn’t just about filing returns—it’s an opportunity to build financial security. If you’re receiving a tax refund, consider using it to jumpstart or grow your emergency savings. Unexpected expenses happen, and having a financial cushion can help you avoid financial stress and the need to borrow money

One of the best ways to commit to saving is by taking the Veteran Saves Pledge. This pledge helps you set a savings goal and stay accountable. Whether you save all or just a portion of your refund, making a plan now can help you build financial stability throughout the year.

Tips for Maximizing Your Tax Benefits

• Start Early: The earlier you begin preparing your tax documents, the more time you'll have to identify and utilize available benefits.
• Keep Detailed Records: Maintain organized records of all income, deductions, and credits to ensure accurate and beneficial tax filings.
• Consult Professionals: If you're uncertain about any tax provisions or benefits, seek advice from tax professionals familiar with military and Veteran tax issues.

Take the Veteran Saves Pledge today and make your tax refund work for your future!