You put in years of service to your country, and now it’s time to enjoy the benefits. As a show of appreciation for the sacrifice veterans make, as well as a method to attract more residents, many states offer tax savings, especially to disabled veterans. Most states have exemptions for disabled veterans, but you’ll need to meet some state-specific qualifications to get the benefit.
Most states exempt disabled vets from paying state income tax, but you’ll also get an exemption on property tax based on your degree of disability and other qualifying factors.
VA Tax Exemptions and Breaks
The biggest state-related tax break for many disabled veterans comes in the form of a property tax cut. Every state has some form of exemption where this is concerned, but the minimum qualifications, as well as the amount that is exempt, will vary from one state to the next. In many states, though, you’ll get away property tax-free if you’re 100 percent disabled and meet other qualifications.
As you’re looking at VA benefits by state, taxability of your military disability pay will also come into play. If your disability occurred as a result of military service, you won’t be taxed on your payments, either at the federal or state level. This can bring an additional welcome cost savings each month.
VA Disability Ratings
The U.S. Department of Veterans Affairs gives veterans a disability status rating that then determines how they qualify for benefits. This rating also determines how much payment you’ll receive from the VA on a monthly basis, but it also comes into play when you’re qualifying for tax exemptions. The rating is scored on a scale from 10 percent disabled to 100 percent disabled.
The disability rating is important primarily because there is a dramatic difference in the amount you’ll bring in. Those rated 10 percent disabled will receive at least $140.05 a month, depending on their marital and dependent status, while 100 percent disabled veterans get up to $3.057.13 monthly if they're single with no children. Payment will also be adjusted upward for those who have specific injuries, such as the loss of a body part or blindness.
VA Property Tax Exemptions
No matter which state you choose for your residence, you should be eligible for a property tax break for disabled veterans, as long as you qualify. Each state has its own criteria for qualifying, usually specific to your degree of disability and the amount of exemption you’ll get. You also may need to meet location requirements, particularly regarding the home being your primary residence.
In Michigan and Oklahoma, you’ll get a full exemption on the property tax on your primary residence if you were designated as 100 percent disabled as a result of military service. In Oregon, though, you only have to be 40-percent disabled during military service to qualify for a partial exemption. In Massachusetts, you’ll be required to have lived in Massachusetts for six months prior to enlisting, have lived in the state for at least five consecutive years and be at least 10 percent disabled.
When you’re researching VA benefits by state, you’ll often find property tax exemptions under the label of Homestead Tax Exemptions. Florida has so many part-time residents that it rewards full-time residents a property tax exemption. In Georgia, you’ll get a partial homestead exemption if you’re disabled due to military service.
VA Disability Taxability by State
As you’re looking up VA tax exemptions, you may notice that very few states tax military retirement pay at all. Only California, Montana, New Mexico, North Dakota, Rhode Island, Utah, Vermont and Virginia require veterans to pay taxes on their retirement income. Many other states have state income tax, but VA and Social Security disability payments are tax-free in all states.
On a federal level, VA disability payments aren’t taxable at all. You won’t need to claim benefits you received, either, including education and training, grants for equipping your home for a wheelchair or interest on insurance dividends that remain with the VA. Families of veterans receiving these benefits also will qualify for an exemption based on the disability rating of their loved one.
Best States for Retired Vets
If you’re open to living anywhere, it’s important to look at the best VA benefits by state. Here are some of the best states to call home if you’re a retired veteran based on benefits offered.
- California – Despite taxing veteran retiree pay, California is among the best places to settle down if you’re a veteran. You’ll have plenty of choices if you need on-base care, thanks to the high number of military installations, and only New York and Wyoming have more VA healthcare facilities.
- Texas – Like California, you’ll find plenty of VA healthcare facilities and on-base amenities. You’ll also get access to something called the Veterans Land Board, which lets you borrow up to $150,000 at a low interest rate for the purchase of property.
- Colorado – If you hope to continue to work, Colorado offers a 10-point preference to disabled vets. You’ll also get both generous property tax and income tax exemptions.
Best States for Retirees
If you’re hoping to retire and live a relaxing life, quality of life is an important consideration. Since many states offer tax breaks for disabled veterans, you can narrow down your choices to the states with plenty of amenities and low costs of living. Here are some of the top states for retirees.
- Florida – This state usually falls toward the top of the most retirement-friendly states for a variety of reasons. You’ll get warm weather and a cost of living that’s among the best in the nation.
- Alabama – Florida’s northwestern neighbor has an affordability that rivals Florida’s, with weather almost as warm.
- South Carolina – Like Florida, you’ll enjoy warm weather and a low cost of living. If you choose a city like Charleston, you’ll also enjoy access to plenty of historic destinations for those post-retirement day trips.
Best States for the Disabled
If you’re disabled, you likely know how important it is to live in an area that considers the needs of all citizens. Amenities like wheelchair ramps and elevators in all of the buildings you’ll need are crucial. This is often more important than whatever tax break for disabled veterans you’ll receive. Below are some top-ranked states based on their disability-friendliness.
- Colorado – This state prioritizes accessibility, even including ramps and rails on many of its outdoor attractions.
- Minnesota – The Minnesota Council on Disability helps ensure the state’s communities know the importance of accessibility to their buildings and website.
- Pennsylvania – In addition to accessible public spaces, the Disability Rights Network of Pennsylvania works hard to spread awareness and advocate for disabled citizens.
Other Benefits for Disabled Veterans
In addition to a VA tax exemption, disabled veterans will qualify for discounts and benefits offered to veterans across the country. These benefits aren’t only available to you as a vet, but also to your immediate family members. You’ll get a military pension and tax cuts, of course, but you’ll also get special perks through the VA like education and training and employment assistance.
Your benefits aren’t limited to what you can get through the military, though. Many local organizations and benefits offer a discount to veterans, so it’s important to check around. But perhaps one of the most helpful benefits each year is the free help you can get with filing your taxes through the Volunteer Income Tax Assistance program.
- Veterans United: Full List of Property Tax Exemptions By State
- Military.com: State Retirement Income Tax
- VA Home Loan Centers: Veteran Disability Exemptions by State
- OVM Financial: Disabled Veterans May Qualify for Free Property Taxes
- Military Benefits: States that Do & Don’t Tax Military Retirement Pay
- Nolo: Are Disability Pensions and Benefits Taxable Income?
- Military Benefits: Best States with Veteran Benefits
- WalletHub: Best States to Retire
- IRS: Free Tax Return Preparation for Qualifying Taxpayers