Volunteer Firefighter Tax Credits & LOSAP: A 2026 Overview

Why volunteer compensation matters in 2026

Roughly two thirds of firefighters in the United States are volunteers. The number has been falling for years. Recruitment and retention is the single biggest operational problem most small departments face, and a chief running a 28-member volunteer roster cannot solve it with overtime and pay raises - those tools do not exist.

What does exist: a patchwork of federal, state, and local tax provisions, plus formal Length of Service Award Programs (LOSAP) that work like a pension for volunteers. Properly run, these benefits add real money to a member's pocket. Properly explained at recruitment, they are one of the few levers a small department can actually pull.

The problem is that the rules are scattered across the IRS code, fifty separate state tax codes, county and municipal ordinances, and individual LOSAP plan documents. Most departments do not have a payroll professional on staff. Most chiefs learn this stuff the hard way, usually after a member's tax preparer asks a question nobody on the department can answer.

This guide is the operational map. It is not tax advice. Members should talk to their own preparer, and departments setting up new programs should run plan documents past a qualified attorney. But you should at least know what to ask.

Federal tax treatment of volunteer firefighter benefits

Start with the federal picture. The IRS treats volunteer firefighters as employees for some purposes and not for others, and the answer depends on what kind of payment is involved.

Nominal payments and per-call stipends

Many "volunteer" departments pay small per-call or per-hour stipends. The IRS generally treats these as taxable compensation reportable on a W-2 or 1099 depending on the relationship. A $15 per call stipend is income. So is a year-end appreciation check. So is a flat monthly drill payment. The department is responsible for issuing the right form. See IRS Publication 15 (Circular E) for the employer rules and the IRS guidance on first responder treatment for the specific carve-outs that follow.

The federal LOSAP exclusion

This is the single most important federal provision for volunteer departments. Section 457(e)(11) of the Internal Revenue Code carves LOSAP out of the normal nonqualified deferred compensation rules. Length-of-service awards paid to bona fide volunteers (or their beneficiaries) are not treated as deferred compensation under Section 457 if the aggregate amount of awards accrued for any year of service does not exceed a statutory limit.

That limit was raised by federal legislation in recent years and is currently set at $7,000 per year of service (verify the current number, the figure is indexed and has changed). If your LOSAP stays under the per-year-of-service cap and the participant is a "bona fide volunteer" (no compensation other than reimbursement, reasonable benefits, and nominal fees), the plan does not have to comply with the 457(b) deferral rules that would otherwise apply.

That carve-out is the entire reason LOSAP exists in its current form. Without it, every plan would be a 457(b) and small departments could not administer them.

The Volunteer Responder Incentive Protection Act (VRIPA)

VRIPA, made permanent by federal legislation, excludes from federal income tax up to a set dollar amount of "qualified payments" made to bona fide volunteer firefighters and EMS personnel. Qualified payments include reimbursements, reductions or rebates of property taxes, and length-of-service awards. The current annual exclusion is $600 per year of service, indexed. Verify the figure on the IRS first-responder guidance page when you set up the plan.

What this means in practice: if your county gives volunteers a $500 property tax rebate and your state gives a $250 income tax credit, those payments are within the VRIPA exclusion and do not get reported as federal taxable income. Above the threshold, the excess is taxable.

Section 139B

IRC Section 139B is the operative federal statute that codifies the VRIPA exclusion. If your tax preparer asks where the rebate exclusion lives in the code, that is the citation. It also clarifies that volunteers can still claim the standard charitable mileage deduction for the unreimbursed portion of their service-related driving even when they receive qualified payments.

State income tax credits and deductions

Most of the actual money flows through state and local programs, not federal ones. Roughly two dozen states offer some form of income tax benefit to volunteer firefighters or EMS personnel, and the rules are wildly inconsistent. Here is what to look for in your state.

The basic shapes these programs take

• Flat refundable credit. A fixed dollar amount the volunteer subtracts from their state income tax liability. New York's volunteer firefighter and ambulance worker credit, for example, has been a flat amount per qualifying member for years. Refundable means you get the money even if you owe no state tax.
• Flat non-refundable credit. Same idea but capped at your tax liability. If you owe $80 in state tax and the credit is $200, you get $80 back, not $200.
• Income tax deduction (subtraction modification). Reduces taxable income rather than tax owed. Worth less per dollar than a credit. Maryland uses a subtraction modification for qualifying volunteers.
• Earned income exclusion. A few states exclude the value of the LOSAP benefit, the per-call stipend, or both, from state taxable income.

Examples by state

These descriptions are illustrative as of early 2026. Verify with your state revenue department before claiming anything.

New York. Long-running flat income tax credit for volunteer firefighters and ambulance workers who serve the entire tax year. The credit is claimed on Form IT-245. There is also the New York Service Award Program enabling statute (General Municipal Law Article 11-A) that authorizes municipalities to establish LOSAPs.

New Jersey. State income tax exemption for active volunteer firefighters and first aid/rescue squad members who meet active-service criteria certified by the local department. Claimed on the NJ-1040. New Jersey also has a long history of LOSAP authorization under the Length of Service Awards Program statute (N.J.S.A. 40A:14-183 and following sections).

Pennsylvania. The Volunteer Firefighter Tax Credit allows municipalities to grant a credit against earned income tax or real estate tax to qualifying active members. Pennsylvania does not run this at the state level - it is enabled by Act 172 of 2016 and adopted municipality by municipality. The local fire chief certifies eligibility.

Connecticut. Property tax abatement is the primary mechanism in Connecticut, authorized by Connecticut General Statutes Section 12-81w. Each municipality decides whether to adopt it and at what amount, currently capped by statute at a level that is periodically adjusted.

Maryland. Subtraction modification on the Maryland income tax return for qualifying members of volunteer fire, rescue, and EMS organizations. The amount is set in statute and has been adjusted upward over the years. Members must meet point-system or active-service requirements certified by the chief or commissioner.

Other states with meaningful programs. Iowa, Kentucky, Louisiana, Massachusetts, Minnesota, Missouri, New Mexico, Ohio, South Carolina, and Wisconsin all have some form of volunteer-specific tax provision. Some are credits, some are deductions, and many require the chief to sign an annual eligibility certification.

Property tax exemptions and abatements

Property tax relief is often the largest single benefit a volunteer receives, because property tax bills are larger than state income tax for most homeowners. Like state income tax credits, this is enabled at the state level and adopted (or not) at the municipal or county level.

Common patterns:

• Flat dollar reduction in assessed value or tax owed for active volunteers who meet years-of-service thresholds.
• Percentage reduction on the volunteer's primary residence, sometimes capped at a maximum dollar amount.
• Tiered benefits by years of service - more years served, larger abatement, sometimes vesting permanently after a service threshold (often 20 to 25 years).
• Surviving spouse continuation - if the volunteer dies, the spouse may continue to receive a reduced version of the benefit for a period.

The chief's role is to certify active service annually to the assessor's office. Do not assume the assessor knows your roster. They do not. Members fall off the abatement list every year because the certification got stuck on someone's desk.

What LOSAP actually is

Length of Service Award Program. Sometimes called a "service award program" or in some states a "volunteer firefighter retirement system." It is a deferred benefit, paid out at a defined retirement age (commonly 55, 60, or 65), funded annually by the sponsoring municipality based on each member's earned credit for the year.

It is not a 401(k). It is not Social Security. It is not a pension in the traditional public-employee sense. The federal carve-out under IRC 457(e)(11) treats LOSAP differently than any of those, and the plan document defines almost everything about how it works.

A LOSAP is sponsored by the municipality (sometimes the fire district, sometimes a separate authority) and the participants are the volunteers. The plan can be:

• Defined benefit. The plan promises a specific monthly or annual payment at retirement based on years of credited service. The municipality bears investment risk. Common pattern: $20 per month per year of service, paid for life starting at age 62.
• Defined contribution. The plan credits a specific dollar amount per year of service into an individual account that grows with investment returns. The volunteer bears the investment risk. The account is paid out at retirement age in a lump sum, an annuity, or installments per the plan terms.

Defined benefit plans are simpler from the volunteer's perspective and more common in the older programs (especially in the Northeast). Defined contribution plans are easier on municipal budgets because the contribution is fixed each year regardless of investment performance. Most newly created LOSAPs in the last 20 years have been defined contribution.

How LOSAP plans work mechanically

The plan document is the source of truth. Every plan answers the same set of questions. If you are evaluating a plan or trying to explain one to a recruit, these are the items you need to know.

Who is eligible to participate

Typically, an active member of the sponsoring department who is at least 18 years old (some plans 16 or 17 for junior members with reduced credit). Probationary members may or may not be eligible during probation. The plan document defines this.

How a year of service is earned

This is where most of the administrative work happens. Most LOSAPs use a point system. Members earn points across categories:

• Emergency call response (often 1 point per call, sometimes capped per year)
• Drill and training attendance (varies; common to require minimum hours)
• Standby duty hours
• Department meetings
• Elected or appointed office (chief, captain, lieutenant, treasurer, etc.)
• Special details, fundraisers, public education events
• Completion of certifications (FF1, FF2, EMT, hazmat, etc.)

The plan defines a point threshold for a credited year of service. A typical threshold is 50 points. Members who hit the threshold earn one year of service credit for that calendar year. Members who fall short earn nothing, or in some plans a partial credit, depending on the plan.

Vesting

Most plans require a vesting period (commonly 5 years) before the member is entitled to any benefit. Leave the department before vesting and you forfeit everything earned to date. After vesting, the earned credits are yours and will pay out at the plan's retirement age.

Retirement age and payout

Most plans set entitlement age between 55 and 65. Some plans allow earlier retirement with reduced benefits. Payout is monthly for life, monthly for a fixed term, or lump sum, depending on the plan.

Disability and death benefits

Plans typically provide accelerated benefits if a member is disabled in the line of duty, and a death benefit (often payable to the spouse or designated beneficiary) if a member dies before or after retirement age.

State LOSAP programs at a glance

LOSAP exists by state enabling legislation. Without a state law authorizing it, a municipality cannot create one. The state law typically defines the broad parameters (eligibility, vesting, contribution caps, governance) and leaves the specifics to the local plan document.

New York. One of the oldest and most established frameworks. New York General Municipal Law Article 11-A authorizes municipalities and fire districts to establish service award programs by voter approval. Plans require an annual actuarial valuation if defined benefit. The state has hundreds of active LOSAPs, mostly defined benefit at $20 per month per year of service, with substantial variation.

New Jersey. N.J.S.A. 40A:14-183 to 40A:14-194 enables LOSAP for municipalities and fire districts. Voter approval is required. The state caps annual employer contributions per participant; the cap has been raised periodically by legislation. New Jersey LOSAPs are predominantly defined contribution.

Pennsylvania. Act 84 of 1990 (the Volunteer Firefighters' Relief Association Account Act provisions on awards) and subsequent legislation authorize LOSAP-style benefits funded in part through the state's foreign fire insurance tax allocations to volunteer relief associations. The Pennsylvania structure is different from the Northeast neighbors - much of the volunteer benefit money flows through Volunteer Firefighters' Relief Associations (VFRAs) rather than a separate LOSAP entity.

Connecticut. Connecticut General Statutes Section 7-301 and following authorize municipalities to establish service award programs. Adoption is municipality by municipality. The state does not run a uniform plan.

Maryland. The Length of Service Award Program for volunteer fire, rescue, and EMS personnel is authorized in state statute and implemented at the county level. Several Maryland counties operate active LOSAPs, with substantial county-by-county variation in benefit levels and point systems.

Other states with formal programs. Delaware, Indiana, Iowa, Massachusetts, Michigan, New Hampshire, North Carolina, Ohio, Rhode Island, Vermont, Virginia, and Wisconsin all have either statewide or municipality-authorized LOSAP frameworks. Coverage varies. In some states, only a handful of municipalities have ever adopted a plan.

If you are in a state where LOSAP is authorized but your department does not have one, the path to creating one usually runs through the municipal or fire district board, often with a voter referendum. This is a legal and actuarial project, not a one-meeting decision. Budget 12 to 18 months from the first conversation to first contributions, and engage a qualified plan attorney and (for defined benefit) an actuary.

Administering credits and LOSAP at the department level

Here is what year-round administration actually looks like for a small or mid-size volunteer department. None of this is glamorous. All of it is necessary.

Maintain a per-member activity record

Every member needs a record showing, for each calendar year, every credited activity. Calls (with run number, date, duration), drills (with date, topic, hours), meetings (with date), training (with course name, hours, certificate), elected positions, and special events. The record needs to be auditable - meaning each entry should be tied to a source document (run report, sign-in sheet, certificate).

This is hard to do in a spreadsheet that lives on the chief's laptop. It is much easier in a system that is already capturing the source data. Run reports already exist (NFIRS or the equivalent state system). Drill attendance is already taken. The activity record should be a roll-up of source data, not a separate parallel ledger.

Run the year-end totals in early January

Before any tax filings, before any LOSAP contributions, run the totals. Identify members who hit the LOSAP threshold and those who fell short. Identify members eligible for the state tax credit and prepare the chief certification letters. Do this in the first two weeks of January for the prior year.

Issue tax certifications and W-2s/1099s

Members need their state tax credit certification by January 31 (some states have earlier deadlines for the department-side filing). Members who received taxable stipends need W-2s or 1099-NECs by the same federal deadline. Members in a LOSAP need an annual statement showing their accumulated service credit and any vesting status changes.

File the LOSAP annual filings

Defined benefit plans require an annual actuarial report. Defined contribution plans require an annual financial statement. Many states require the plan to file an annual report with the state comptroller or department of community affairs. Miss the filing and the plan can lose its tax-favored status. This is not a place to economize on the bookkeeper.

Keep records for at least 7 years, ideally longer

LOSAP service credits earned today may be paid out 30 years from now. The records that prove the credit need to be available for the full length of that liability. "We had the spreadsheet but the laptop died" is not a defense.

Common mistakes that cost members benefits

1. Chief certification not submitted on time. Members who would otherwise qualify for state tax credits or property tax abatements lose them because the certification was late. Build a January 10 internal deadline.
2. Point sheets not reconciled to run reports. A member shows 47 points but ran 43 calls. Either the call response credit is being miscounted or runs are missing. Reconcile in real time, not at year end.
3. Mistaking a stipend program for "volunteer" status. If the department pays meaningful per-call wages, the IRS may not treat members as bona fide volunteers, which kills the federal tax exclusions. Get a tax opinion before launching a stipend program.
4. Not recording probationary period activity. Probationary members often qualify for activity credit even if they are not yet vested or full members. Track from day one.
5. Losing track of vesting status. A member with 4 years 11 months of credit who resigns thinking they have 5 years loses their entire LOSAP. Members need a clear annual statement.
6. Treating LOSAP contributions as discretionary. Once the plan is adopted, the annual contribution is a legal obligation of the sponsoring municipality. Skipping a year because the budget is tight will create a funding deficiency that has to be made up later, often with interest.
7. Forgetting beneficiary designations. Members get married, divorced, have kids, lose parents. The LOSAP beneficiary form needs to be updated, not signed once and forgotten.
8. Confusing federal VRIPA exclusion with state taxability. A payment can be excluded from federal income but still taxable at the state level, or vice versa. Check both.
9. Not communicating the value of the program at recruitment. A defined contribution LOSAP that puts $1,200 a year into an account for 25 years is worth real money at retirement. Tell recruits.
10. Letting records live with one person. When the long-time secretary or treasurer leaves, departments lose institutional memory of who has what credit. The records should be in a system, not in someone's head.

Further reading

• IRS guidance on Volunteer Firefighters and Emergency Medical Responders - the federal source on bona fide volunteer status, VRIPA exclusion under Section 139B, and the Section 457(e)(11) LOSAP carve-out.
• National Volunteer Fire Council - tracks state-by-state volunteer benefit legislation and maintains a recruitment and retention resource library.
• U.S. Fire Administration - publishes data and reports on the volunteer fire service nationally.
• Your state's department of revenue and your state firefighters' association - the most current state-specific tax credit forms and LOSAP enabling statutes are published there.

Final note

None of these benefits replace what a volunteer actually gives the community. They do, when administered well, make it easier for members to stay on the roster for 10 or 20 or 30 years. Departments that take administration seriously hold members longer. Departments that lose track of point sheets and miss certification deadlines watch members walk away from benefits they earned and never collected.

The work is not glamorous. Run the totals in January. Sign the certifications. File the annual report. Keep the records where two people can find them. That is most of the job.