Do I Need to Claim My GI Bill When Filing Taxes?

by Fraser Sherman, Demand Media Google
    The GI Bill is one of the benefits available to servicemembers.

    The GI Bill is one of the benefits available to servicemembers.

    If your military service entitles you to benefits under the GI Bill, you're in luck. The bill pays 36 months of full tuition and fees at private schools in your state, and partial tuition and fees at out-of-state or private schools. The government also throws in a monthly housing allowance and a stipend for books. None of the benefits raises your taxes.

    Veterans' Benefits

    Not only are your GI Bill benefits tax-free; you don't even have to report them on your taxes. What's more, qualifying education includes more than just colleges. It includes vocational and technical schools, on-the-job training, flight training, correspondence courses, licensing classes and entrepreneurship training. If you receive educational assistance under some other military benefit, the same rule applies: you don't pay tax on it or report it to the IRS.

    Other Aid

    There's no law against getting veterans' benefits and claiming various school-based tax deductions or tax credits such as the Lifetime Learning or American Opportunity Credit. However, getting the GI Bill benefits will cut how much you can write off. If your military benefits cover all or some of your tuition, you can't take a tax credit or a deduction based on those amounts. If, say, the VA pays $3,000 of tuition and you pay another $2,000 yourself, you calculate any credit or deduction based on the $2,000 you paid.

    MHA

    The GI Bill's housing allowance works similarly to the housing allowance for active-duty service members. The size of the allowance you get is based on the zip code for your school. Unlike the tuition benefits, which go straight to your school, the MHA goes right into your bank account, and there's no requirement that you use that specific money to pay your rent. Your housing allowance has no effect on any of the tuition tax credits or deductions.

    Family Benefits

    The various federal education benefits aren't just for you. If you pay for your spouse or your dependents to attend school, you can claim tax credits or tuition deductions for them, too, if they meet the requirements. You can also transfer your GI Bill benefits to your family members so that they can use them to attend school. The benefits still aren't taxable, though they still reduce the amount you can claim as a deduction or credit.

    About the Author

    A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.

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