New Benefit For Military Veterans In Virginia

[Christian]

A new benefit for retired military members allows them to deduct up to $10,000 from their military pension benefits on their Virginia returns for 2022. The amount increases in later years. I have interpreted the law to be inclusive of veterans of the active military as well as National Guard members as both receive pensions from the Defense Finance & Accounting Service. Someone questioned this. The benefit as written reads to me to make no distinction between Guard members and those from the active military. Sooooooooo I called the Virginia Department of Taxation this morning and was asked to wait until the responder could read the wording of the benefit. She replied that she was unable to advise whether it covered both Guard and veterans of the active military. How do those of you who are fellow Virginia preparers interpret the new benefit ?

[Gail in Virginia]

I think this benefit is specific to members of the US Armed Forces.  Aren't the National Guard state forces?  I have had a few retired service members, but not anyone from the Guard yet so I am not really sure.

[TAXMAN]

Some have said that if their retirement was on a DFAS then it qualified. I have not run into a guard situation yet.

[Christian]

And there you have it in a nutshell. What is to be said if an employee of the Virginia Department of Taxation herself cannot address this. I'll  call an office of one of the state senators sponsoring the d--- legislation. Oops did I say that ?

[Lion EA]

You meant to say, "I'll call an office of one of the d--- state senators sponsoring the legislation." If our lawmakers can't write a bill so we can understand it...

[Christian]

Well you are, of course, correct. Well I called and his mail box is full. Go figure. So I called my state senator whose legislative assistant is calling Richmond to see if she can get clarification. If I hear back i will post.

[Lee B]

Actually our elected representatives don't write these laws, they are written by the staff of the committees our representatives are on.

At the Federal level most tax law is written by the staff of the Joint Committee On Taxation.

[Lion EA]

OK, If our lawmakers can't vote on a bill that we can understand...

[Lee B]

18 minutes ago, Lion EA said:

OK, If our lawmakers can't vote on a bill that we can understand...

Most of the time our elected representatives are voting on a law they haven't even read.

[Christian]

Well take your pick. A legislative aid to one of the bill's sponsor called to advise that members of the National Guard are not covered by the benefit. My own state senator called to advise his reading of the law means it covers the Guard veterans as well. If the Department of Taxation wants to split hairs over this they will likely need to contact every individual availing themselves of this benefit and obtain from them proof of their former military status. Very unlikely.

 

[Gail in Virginia]

Personally, I think the aid is correct because I don't think the members of the Guard are considered members of the United States Armed forces.  They are part of the Virginia National Guard.  And I think if they receive a pension it would be from a state agency and not DFAS.  So I suspect that the state will not have any problem identifying those who are federally retired from those who are state retirees.  But the devil is in the details, so who knows?  If the department of taxation cannot answer the question, I don't see how they can program their computers to identify anyone who takes the deduction in error. 

[Christian]

Well as a last full measure of my devotion to our work I again called Senator Bryce's office in Spotsylvania who after a lengthy discussion with his aide decided that any service veteran paid with a pension from the Defense Finance & Accounting Service qualifies for the benefit which oddly enough is passed on to their spouse after the veteran's death. Actually Gail retired Virginia National Guard members do in fact draw a pension from the Defense Finance & Accounting Service. It reads as follows Defense Finance and Accounting Service and in the second line just below U. S. Military Retired Pay.

[Lee B]

Another day in the life of tax preparation

[Gail in Virginia]

Are all military pensions paid by DFAS?  I have a client who receives a pension from OPM as a surviving spouse.  Her husband was retired from the Navy after 20 years, and then worked at the VA.  I would guess that this pension covers both periods of service, but how can I tell?  And does it qualify for the Virginia exclusion?

[Christian]

I received this from a member of the Department of Taxation through a request submitted to them to assist in clarifying this matter. They apparently have posted a FAQ on this issue on the official website because of the large numbers of requests. For my money if they get the Defense Finance and Accounting Pension it's good enough for me. Directly below is her response.  

This is not directly dealt with in the FAQs, but it is sort of indirectly dealt with.  The FAQs say that only these types of military benefits are eligible if the other requirements of the subtraction are met: 

Military retirement income received for service in the Armed Forces of the United States;  

Benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States under the Survivor Benefit Plan program established by the U.S. Department of Defense; and  

Military benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States. 

With regard to the above, because the Armed Forces of the United States would include the Virginia National Guard, this would include military pension benefit received by a National Guard member from the federal government. However, it would not appear that active military would generally be receiving this type of income, which is for retirees and their surviving spouses. 

Personally an OPM pension alone would not cut it for me as it is widely received by other federal employees.