President Trump has signed the bill to reopen the federal government, bringing an end to the recent shutdown. As the nation returns to normal operations, it’s a timely moment to acknowledge the men and women whose service allows our government—and our freedoms—to function.
Although Veterans Day was on Tuesday, appreciation for those who served extends far beyond a single calendar date. It’s equally important that veterans and their families understand the unique tax benefits available to them at both the federal and state levels.
Many veterans are unsure how their military service affects their taxes. Military retirement pay is taxable at the federal level, while disability compensation benefits and disability retirement pay are generally exempt. Most states fully exempt military retirement income from state income tax. However, several states still partially tax it, including California, Delaware, Georgia, Idaho, Kentucky, Maryland, Montana, New Mexico, Oregon, Vermont, and Virginia. The District of Columbia fully taxes military pensions.
There are several tax breaks and benefits that can help lower taxable income for veterans, though eligibility varies and not all retired service members will qualify for every provision. To help veterans better understand what may be available to them, below is an overview of key benefits highlighted in “Tax Breaks for Veterans: Retirement Pay, Disability and State Tax Exemptions to Know,” published November 11, 2025, in Kiplinger.
Tax Benefits for Disabled Veterans
Disabled veterans may be eligible for significant federal and state tax breaks. Benefits received from the Department of Veterans Affairs—including disability retirement pay, dependent care assistance, and other related programs—are excluded from gross income and are not taxable.
Education Benefits
Education, training, or subsistence payments from the VA are not considered taxable income. Veterans using these benefits to advance their skills or pursue degrees can do so without creating an additional federal tax burden.
Special Tax Refund Opportunities
In certain circumstances, retired service members may qualify for federal tax refunds. This can occur when a disability rating increases or when combat-related special compensation is granted after concurrent retirement and disability. Veterans should reassess eligibility each year and file amended returns when warranted.
Property Tax Exemptions
Many states offer property tax exemptions to veterans—especially those with service-connected disabilities. Rules and eligibility criteria differ, but the savings can be substantial. Adults age 65 and older may also qualify for property tax relief. Reviewing state guidelines annually can help ensure valuable exemptions aren’t missed.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit remains an overlooked benefit among eligible veterans and military households. For tax year 2025, individuals and families with earned income under $68,675 may qualify. The credit can reduce tax liability or, in many cases, generate a refund.
Sal’s Thoughts
The tax provisions available to veterans represent an important way our country honors their service, offering opportunities to ease financial pressure and support long-term stability. While every veteran’s situation is unique, understanding how these rules fit into an overall tax plan can make a meaningful difference. If you or someone you care about has questions or simply wants a clearer picture of how these provisions may apply to your circumstances, our team is here to help. It is both an honor and a privilege to support the men and women who have served our nation.
Disclaimer: This blog is for informational purposes only and should not be considered tax or legal advice. Veterans are encouraged to consult with a qualified tax professional for personalized guidance.
Source: Shared from “Tax Breaks for Veterans: Retirement Pay, Disability and State Tax Exemptions to Know,” published November 11, 2025, in Kiplinger.