07 Dec Understanding the N.J. veterans exemption

Q. Is the veterans exemption a deduction of $3,000 plus other state taxes paid? Would it be lost if total taxable income exceeds the $100,000?
— Veteran

A. The veterans exemption you are referring to is for New Jersey tax filers, and both resident and non-resident filers can try to qualify.

For tax years beginning after Dec. 31, 2016, New Jersey now allows “an additional $3,000 exemption deduction for 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 Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.

He said spouses can also claim the deduction if they were a military veteran meeting the same requirements.

New Jersey uses the term “exemption” to mean a deduction from taxable income, similar to how the IRS allows a personal exemption of $4,050 per dependent to be deducted against taxable income.

Hook said the veterans exemption is in addition to any other exemptions you may claim, and it does not phase out for higher taxable income taxpayers.

“In order to claim the deduction, you must submit documentation that you qualify for the exemption – specifically form DD-214 and the NJ Veteran Exemption Submission Form,” Hook said.

You can request form DD-214 by contacting the United States National Archives and Records Administration here, h and the Veterans Exemption Submission form can be found here.

Take note that this is not a credit, which would be a dollar for dollar reduction of tax, Hook said. Credits are more valuable than deductions.

“Using this veterans exemption as an example, the $3,000 deduction probably saves most taxpayers about $120 to $150 in state tax,” Hook said. “If the $3,000 was a credit, it would save $3,000 in state tax.”

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This post was first published in December 2017.