I am eligible for the Ohio Veterans Bonus. How is this bonus income treated for income tax purposes?
The Ohio Veterans Bonus is not taxable as part of either federal or Ohio adjusted gross income. Bonus recipients do not need to report it as income on either their federal or Ohio income tax return. Normally, income tax applies to military pay if it is earned for service outside a combat zone. But the Internal Revenue Service determined that the bonuses are regarded as gifts and are thus excluded from federal adjusted gross income. This ruling is detailed in a Sept. 1, 2010 letter to Ohio Attorney General Richard Cordray. Ohio had already decided that state income taxes did not apply to the veterans bonus. The exemption was a provision of House Bill 48, enacted by the General Assembly in March 2010 and signed into law by Governor Ted Strickland on April 2, 2010. The ruling by the IRS means that the bonus is exempt from federal as well as 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 residen
