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Is the GI Bill Considered Income?

Is the GI Bill taxable?

Is the GI Bill considered income? There are multiple reasons to ask this question, including whether or not you should expect to be taxed on the GI Bill and whether or not it can be considered income to apply for a VA home loan or other lines of credit.

What the IRS Says About the GI Bill®

The Internal Revenue Service’s official site lists its policies on GI Bill funds clearly. Those who served or who are still serving in the military and receiving VA education benefits are not taxed on those benefits.

From IRS.gov:

“If you serve or served in the military and receive Department of Veterans Affairs (VA) education benefits, the IRS excludes this income from taxation.”

IRS.gov directs users with questions to Publication 970, Tax Benefits for Education, which it describes as “the authoritative source for all education tax matters,” including this GI BIll tax exclusion.

IRS Says Do Not List GI Bill Benefits as Income

If you receive VA education benefits, the IRS says, “There is no required action” for you to receive the federal tax exclusion.

Furthermore, IRS.gov advises, “Payments you receive for education, training, or subsistence under any law administered by the VA are tax-free. Don’t include these payments as income on your federal tax return.”

Related: What is Veterans Readiness &Employment?

VA.Gov on GI Bill Benefits as Income

VA.gov states, “Payments from all GI Bill programs are tax-free. This is true for you, your dependents, and your survivors.” VA.gov also says not to include VA education benefit payments as earned income.

Related: How to Activate the GI Bill

Using GI Bill Benefits as Income When Buying a Home

Some may be tempted to claim Post-9/11 GI Bill BAH housing stipend payments as income when applying for VA home loans, FHA mortgages or even some conventional loans.

Be advised that for most government-backed mortgage loan programs such as the VA loan, GI Bill funds cannot be used to qualify for the home loan.

Related: BAH Calculator and Post-9/11 GI Bill BAH Calculator

This is because VA loans and FHA mortgages require the borrower’s qualifying income to be stable, reliable, and likely to continue. But GI Bill housing benefits are only paid during the days the student actually attends class, and the stipend will expire when the student’s GI Bill benefits run out.

In other words, the income is not likely to continue and therefore does not count as “verifiable income” the lender may use to approve the loan.

Your experience may vary regarding conventional mortgages, but you may find that some lenders are unwilling to consider GI Bill benefit payments as income for the same reasons government-backed mortgages don’t.


RELATED: GI Bill Status: How to Check





About the author

Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.