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Do I Owe Taxes on the GI Bill?

If you plan to go to college using GI Bill benefits, you might wonder if the GI Bill is taxable. Examining the tax implications of your student financial aid is essential, especially if you hope to claim federal tax credits for your education expenses. The article below is not tax advice; consider this a primer for your own tax research or when discussing your VA benefits with a tax professional.

Free Military Tax Filing Help Is Available

Military members, family members, and veterans may have free help during tax season. If you aren’t sure how to prepare and file your own taxes you may consider using a free resource such as MilTax, offered to qualifying service members and family members. MilTax provides one-on-one assistance from MilTax experts who have training for military-specific tax issues.

RELATED: Free Tax Support for Military Members

Federal Income Tax Rules for GI Bill Benefits

The Department of Veterans Affairs official site reminds us that payments you get from any GI Bill program is exempt from federal taxes. That does not mean you won’t file additional paperwork if you get GI Bill benefits (see below) but you are not taxed on them.

RELATED: Student Loans for Military Spouses

A Short List of VA Tax-Free Education Benefits

• Tuition
• Housing stipend
• Fees
• Test fees for licenses and certifications
• Tutoring
• Work-study
• Books

Tax-Free VA Education Benefit Programs

• GI Bill
• Fry Scholarship
• VET TEC Training
• Yellow Ribbon Program
• National Call To Service Program
• Survivors’ and Dependents’ Educational Assistance (DEA) program

Read more: Military and Veteran College Scholarships and Grants

Federal Income Tax Credits And Your VA Education Benefits

Federal income tax credits may be offered based on your education expenses. To claim these credits, subtract VA education benefit payments from your total education expenses (money paid directly to you, not to the school.) The amount the VA pays to the school is what you may claim as deductions.

Learn More About IRS federal income tax rules governing VA benefits and how receiving them may affect your federal tax credits.

Are Student Loans Taxable?

While reasearching this subject some start to wonder if they can be taxed for student loans, but like other types of lending a student loan is not considered income. It may become income if the loan is forgiven without having to be repaid under qualifying circumstances but the act of borrowing itself is not viewed as a form of earning.

Student loan interest may be deductible on your federal taxes. According to IRS.gov, student loan interest may be ded8uctible up to a certain amount.

In 2024, for example, the IRS official site says, “You may deduct the lesser of $2,500 or the amount of interest you actually paid during the year. The deduction is gradually reduced and eventually eliminated by phaseout when your modified adjusted gross income (MAGI) amount reaches the annual limit for your filing status.”

In 2024, IRS rules stated that it’s possible to claim a student loan interest deduction if all of the following apply:

• You paid interest on a qualified student loan;
• Your filing status isn’t married filing separately;
• Your monthly adjusted gross income is less than a specified amount which is set annually;
• Neither you nor your spouse, if filing jointly, were claimed as dependents on someone else’s return.

Depending on the tax year and any changes to the rules implemented for that year, your experience may vary.

The IRS says you don’t need to itemize deductions in order to claim student loan interest, you simply adjust your income according to guidance current at press time. Tax laws are subject to change at any time, consult a tax professional to learn what’s applicable in the tax year you want to file in.

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• Student Loan Tax Deduction: Everything You Need to Know
• GI Bill for Guard and Reserve
• When Does the GI Bill Expire?