Are GI Benefits Considered Income on Your Tax Return?
If you're a service member or a veteran with an honorable discharge, the GI Bill may provide funding to help with college costs. The benefits can add up to thousands of dollars that you do not have to report as income on your individual income tax return.
Key Takeaways
- The GI Bill provides funding to help with college costs for service members and veterans with an honorable discharge.
- The Post-9/11 GI Bill provides benefits to service members who have been on active duty for 90 days or more since 9/11/01, including Reservists and National Guard members.
- The U.S. Department of Veterans Affairs will pay tuition equal to the most expensive public college tuition in the state, and under some circumstances, the government may pay even more.
- The federal government offers several tax credits for college expenses, including the Lifetime Learning Credit and the American Opportunity Credit.
GI Benefits
If you're a service member or a veteran with an honorable discharge, the GI Bill may provide funding to help with college costs. The benefits can add up to thousands of nontaxable dollars that you do not have to report as income on your individual income tax return (Form 1040).
History of the GI Bill
The original GI Bill, officially known as the Servicemen's Readjustment Act, was passed in 1944, despite it being highly controversial. At the time, few people outside the rich or academically gifted went to college, and members of Congress wondered if veterans would fit in. The House and Senate passed different versions, and the bill reconciling the two versions passed by a single tie-breaking vote. Congress revamped the bill in 1984, then again with the "Post 9/11" GI Bill in 2009.
Qualifying for GI Bill benefits
The Post-9/11 GI Bill provides benefits to service members who have been on active duty for 90 days or more since 9/11/01, including Reservists and National Guard members. The service period required is just 30 days if you have a service-related disability.
- The benefits increase by tiers, based on the length of your service.
- All veterans are eligible, provided they received an honorable discharge.
- You can use the benefits for undergraduate and post-graduate study, as well as vocational training, provided it's at a federally approved institution of higher learning.
Benefits for GI Bill recipients
Under the Post-9/11 GI Bill, the U.S. Department of Veterans Affairs (VA) will pay tuition equal to the most expensive public college tuition in the state, and under some circumstances, the government may pay even more.
The bill also provides:
- Up to $1,000 for schoolbooks and supplies,
- a housing allowance the VA pays directly to you, unless you're taking classes entirely online, and
- a one-time relocation allowance for some qualifying individuals.
None of this is taxable income, so you don't need to mention it on your Form 1040.
TurboTax Tip:
Enlisted active duty and reserve military can file free federal and state taxes with TurboTax Online using the TurboTax Military Discount.
Claiming additional education credits
The federal government offers several tax credits for college expenses, including the Lifetime Learning Credit and the American Opportunity Credit. These education tax credits allow you to deduct a share of your family's college expenses from your taxes, rather than from your taxable income.
The IRS states that your education tax credit will be reduced for any money the GI Bill contributes toward your tuition and college fees.
- If you pay $5,000 in tuition one year, and the government pays for $4,000, your credit would be based on the $1,000 you paid yourself.
- Your room and board allowance, however, is separate from these credits.
Enlisted active duty and reserve military can enjoy TurboTax Online for free
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