These Are My Crankypants: Four-Figure Tax Breaks for Students and Disabled Veterans

It's no surprise the government tends to hang on to more of our money than we're generally comfortable with, but every once in a while a circumstance comes along that allows us to get a little back. Unfortunately - and again, unsurprisingly - these breaks are not widely publicized and hence not taken advantage of as often as they should be. This is my small attempt to stick it to the man.

There are substantial tax breaks available for 1st- or 2nd-year college students (including part time) and Veterans of the US Armed Forces who have been medically discharged from service. Both exemptions can make a significant difference (from $1500 to $7500 for me personally) in your Federal Tax refund. Not to sound like I'm shilling for Intuit, but I've always used Turbo Tax Free to file and find it very easy to itemize deductions to maximize my return.

And in case you get audited and get your ass handed to you for claiming money to which you're not actually entitled, here's my disclaimer: this is just what I've learned and used; check with an experienced tax preparer before filing.

Students - The Hope Credit
If you meet the following criteria, you may be eligible for a $1600 tax credit ($3600 for Midwestern disaster areas):

1) You must be enrolled in one of the first two years of post secondary education;
2) You must be enrolled in a program that leads to a degree, certificate, or other recognized educational credential;
3) You must be taking at least half of the normal full time work load for your course of study for at least one academic period beginning during the calendar year;
4) You must not have a felony conviction for possessing or distributing a controlled substance.

SEE: this article for complete details.

Disabled Veterans - Recoup Tax on Severance
If you were medically separated from the Armed Services this year and were paid a lump-sum severance, you may be eligible to recoup the taxes paid on that amount. The amount exempt from taxation will be specified in the "We Have Withheld Benefits" section of your claim determination letter from the Dept. of Veterans Affairs.

If you meet either of the following criteria;

1) You received a "combat-related injury" designation from the Physical Evaluation Board (see AFI 36-3212, 3.27. Determinations for Tax Benefits)
2) You received a retroactive disability determination from the VA for the same condition for which you were discharged (see IRS Pub 17, 2008, page 53)

...visit the US Vet Info website and read this information paper from the Presidio of Monterey Staff Judge Advocate for more information on how to claim your refund. If you received the severance and your VA Compensation claim determination in the same year, you should be able to request a corrected W-2 from the finance office/comptroller on your local military installation.

NOTE: Monthly VA Disability Compensation benefits are NOT taxable.

If you know anyone to whom these conditions may apply, please forward the information. Uncle Sam shouldn't get to keep their money.

Bonne chance!
Melissa

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