Veterans Pensions Exempt from Income Tax for the State of Iowa
The federal government provides retirement benefits to low-income veterans of the United States military who served during wartime. As with all types of income, government agencies may consider veterans' pensions a form of taxable income. All American states maintain different laws regarding such taxes, and residents of every state must obey federal tax laws. Whether Iowa taxes veteran's benefits depends upon the type of benefit in question. The state provides various benefits to military veterans, including some tax breaks.
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Federal Veteran's Pensions
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The United States Department of Veteran's Affairs awards pensions, or retirement pay, to low-income American veterans who served at least 90 days of active duty during wartime. Generally, veterans who entered the military after 1980 must serve at least 24 months active duty to receive a VA pension. Only those aged 65 or older receive such a pension, though individuals permanently or totally disabled by service-related injuries may begin receiving disability pension benefits at age 55.
Iowa Tax Laws
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Iowa maintains very specific laws regarding the taxing of veteran's benefits in the state. As per these laws, any military member may exempt as much as $12,000 of veteran's benefits annually if jointly filing taxes and as much as $6,000 if filing individually as of 2011. Iowa exempts all benefits for disabled individuals from taxation. This includes disability pensions paid to veterans. Thus, only low-income, non-disabled veterans receiving more than $6000 in pension benefits annually must pay taxes on those benefits in Iowa, and only on benefits paid in excess of $6000 each year.
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Federal Tax Laws
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All Iowa residents must comply with federal and state tax laws. As per federal laws, military retirement pay qualifies as a form of taxable benefits. In most cases, the federal government exempts benefits paid to permanently or completely disabled veterans from taxation, including VA pension benefits for disabled veterans. Low-income individuals receiving VA retirement benefits must report all income earned from those benefits, though may prove exempt from taxation if earning below a certain amount. This amount varies annually based on various considerations, including other sources of income and benefits, such as Social Security.
Iowa Veteran's Benefits
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In addition to providing various levels of tax exemption for pensions and other military benefits, Iowa awards various benefits to veterans living in the state. These benefits include a tax-exempt housing grant valued at $5000 in 2011, property tax exemptions, grants for injured veterans and various types of financial aid, primarily reserved for the children of veterans. Furthermore, Iowa exempts $25,000 of Social Security benefits annually from taxation for individuals and $32,000 for couples. Thus a low-income individual receiving both Social Security and VA pension benefits filing jointly with a spouse may exclude as much as $44,000 worth of benefits from taxation.
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References
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