Can I qualify for veteran tax breaks?

Ask NJMoneyHelp

Photo: pixabay.com

Q. Do unearned income and capital gains income qualify for the New Jersey veterans exemption of $3,000?
— Veteran

A. The veteran’s benefit is still new, so questions abound.

Beginning in 2017, the state of New Jersey began allowing for a $3,000 exemption on your income tax return.

You may qualify if you were a military veteran who was honorably discharged or released under honorable circumstances from active duty in the Armed Forces of the United States on or any time before the last day of the tax year, said Matthew Masterson, a certified financial planner with RegentAtlantic in Morristown.

“To take a step back for a second, you can reduce your tax liability in three ways on your tax return – utilizing credits, deductions or exemptions,” he said. “Credits reduce your tax liability dollar for dollar while deductions and exemptions reduce your income subject to tax.”

If you qualify for the exemption, it gets added to your Total Exemption Amount on Line 29 of your New Jersey tax return, Masterson said.

“As a result, it, along with any other exemptions and deductions are subtracted from your gross income to come up with your taxable income,” he said. “Since unearned income and capital gains are included in your gross income, they would be eligible to be reduced by the veteran’s exemption.”

To get the exemption you must fill in the appropriate bubble on your New Jersey return and provide documentation attesting to your military service the first time you claim the exemption, he said.

Email your questions to moc.p1542340067leHye1542340067noMJN1542340067@ksA1542340067.