Tax Credits

When someone dies, the Internal Revenue Service requires a final accounting. It is up to the surviving spouse or the executor of the will to file the paperwork, submit a tax return and send in a survivor’s claim if applicable.

As the survivor, check if you can access certain tax benefits. A MilTax consultant can help you with that. For instance, the Internal Revenue Service may forgive or refund the amount the service member pays in taxes each year if the service member dies under certain circumstances:

• while on active duty in a combat zone,
• from wounds, disease or other injury received in a combat zone,
• from wounds or injury sustained in a terrorist or military action.

Tax forgiveness is not automatic. If you meet the criteria, submit a claim for credit or refund. You must submit the claim within a certain timeframe. You also will need to attach proof of death, a statement that the individual was a U.S. employee on the date of the injury and on the date of death, and confirmation the service member died because of military or terrorist activity.

If you typically file a joint return, the Internal Revenue Service only considers the decedent’s part of the income tax for forgiveness. Talk to your tax advisor about your specific tax claim.

When you inherit money or assets, take steps to navigate complicated tax rules and protect yourself and your inheritance.

• Get a probate lawyer within two weeks of the death to make sure you make all important deadlines. You also may want to talk to a financial advisor to maximize any benefits or decide what to keep or to sell.
• Secure your new assets. Place cash in a low-risk money market fund or CD. Lock up paper stock certificates and valuable jewelry in a safe deposit box. Tell your insurer about the new assets that may need to be covered. Keep several copies of the will and trust documents, asset inventory and value, and the death certificate.
• Reach out to your installation’s personal finance management program or use Military OneSource’s free financial counseling. Also, check out the Military Financial Readiness Program offered by the nonprofit FINRA Investor Education Foundation.

Sending yourself or someone else to college doesn’t have to break the bank if you take advantage of available tax credits and deductions.

For starters, the IRS offers some education tax breaks that you should check out for tax savings on college expenses, such as:

• Tax deductions. Deductions are valuable because they can reduce the amount of your income subject to tax. Use Form 8917 to apply for a tuition and fee deduction, which sometimes can result in solid savings. Other deductions to consider include student loan interest deduction, qualified student loans, qualified education expenses, business deductions for work-related education, qualifying work-related education, education required by employer or by law, and education to maintain or improve skills.
• Savings plans benefits. Certain savings plans allow the accumulated earnings to grow tax-free until money is taken out, or they allow the distribution to be tax-free, or they do both. 529 plans and a Coverdell Education Savings Account are two examples.