Individual Income Tax

Ohio Veterans Bonus

Ohio resident veterans who served during the time of the first Persian Gulf War or during the conflicts in Afghanistan and Iraq are eligible to receive a bonus approved by Ohio voters in November 2009 and administered by the Ohio Department of Veterans Services. The bonus is not taxable at either the federal or state level, as explained below:

Taxability of Ohio Veterans Bonus

The Ohio Veterans Bonus is not taxable as part of either federal or Ohio adjusted gross income. Bonus recipients also do not need to report it as income on either their federal or Ohio income tax return.

Normally, income tax would apply to any military pay that is earned for service outside a combat zone. But the Internal Revenue Service determined that the bonuses are not considered to be military pay; they are instead regarded as gifts and are thus excluded from federal adjusted gross income. The ruling is explained in a Sept. 1, 2010 letter to the Ohio Attorney General .

The state had already taken action to exempt the bonus from Ohio income tax. The exemption was a provision of House Bill 48, enacted by the General Assembly in March 2010 and signed into law by the Governor on April 2, 2010. However, the ruling by the IRS means that the bonus is exempt from both federal and state income tax. The bonus is also not taxable income for purposes of school district income tax.

The Ohio Veterans Bonus applies to any Ohio resident veteran of an armed military service who served on active duty for purposes other than training between Aug. 2, 1990 and March 3, 1991 or at any time since Oct. 7, 2001. Eligible veterans will receive $100 for each month spent on active duty service in the Persian Gulf, Afghanistan or Iraq during these times, up to a maximum of $1,000. Veterans who served in other areas are eligible for $50 for each month of active duty service, up to a maximum of $500. Family members of service members who lost their lives in these conflicts are eligible for a benefit of $5,000 plus the benefit the deceased veteran would have received up to a maximum of $1,500. Families of missing or prisoner of war service members may be eligible for a bonus of $5,000. Complete details, and how to apply, are at http://www.veteransbonus.ohio.gov.

Have questions?

Additional details concerning military tax issues are discussed in our Frequently Asked Questions - Military.

You can reach us by e-mail at Military-Info@tax.state.oh.us. Our toll-free number for individual taxpayer inquiries is (800) 282-1780, and the toll-free number for forms is (800) 282-1782.