Special Tax Breaks for Members of the Military

Members of the United States armed forces should be aware of the tax breaks available to them. To qualify, you must be in the Army, Marine Corps, Navy, Air Force, Space Force, Coast Guard, National Guard, or Military Reserve.

Some of the tax breaks you can benefit from, if you qualify, include deferred tax deadlines, partially or fully tax-free salary, tax deductions and other benefits related to filing tax returns. Learning how to take advantage of these tax breaks can help you get the most for your money and benefits as a member of the military.

Key takeaways

  • Combat pay is partially or fully tax-exempt if you serve in a combat zone, and you receive automatic extensions to your tax filing deadlines.
  • Most military bases offer tax preparation and filing assistance services during tax season.
  • Certain expenses, such as moving expenses, reservist travel and certain uniforms, may entitle you to deductions on your tax return.

Useful tax tips

When it comes to general information about your taxes, keep the following two tips in mind:

  • Exclusion from combat pay: Your combat pay is partially or fully tax exempt if you serve in a combat zone. You can also benefit from this extension if you serve in support of a combat zone.
  • Tax services: If preparing your taxes is the hardest part of tax season for you, seek help from the tax preparation and filing assistance services that most military bases offer during tax season. Some are even offering help after the (usual) April deadline.

When filing your taxes

When it comes to filing your taxes, note that you may qualify for deadline extensions and you may have options when it comes to signing your return or choosing what you want to include as taxable income.

  • Extensions: Military personnel serving in a combat zone receive automatic extensions to their tax filing deadlines. You may benefit from deadline extensions to file your tax return and pay your taxes.
  • Earned Income Tax Credit (EITC): If you receive tax-free combat pay, you can still choose to include it in your taxable income. If you do so, it may increase your EITC, leading to a potentially larger refund.
  • Joint statements: Spouses may be able to sign the tax form for a spouse who is absent due to certain military duties or conditions. You may need a power of attorney (POA) to file a joint return; your facility's legal office may be able to help you.

Deductions and allowances

It's important to be aware of the deductions and allowances you can include when filing your taxes. This can make a substantial difference in how much you owe or are repaid, so be sure to take advantage of all possible options.

  • Deduction for moving expenses: Moving expenses can be deducted using Form 3903. This generally only applies when the move is due to a permanent change of station.
  • Travel deduction for reservists: Reserve members can deduct unreimbursed travel expenses if their duties take them more than 100 miles from home. They can do this on the 2016 form (even if they don't itemize their deductions).
  • Uniform deduction: Some uniforms that must be purchased cannot be worn off duty. Their cost and maintenance can be deducted. You must reduce your deduction by any allowance you receive for these expenses.
  • Post-military life: You may be able to deduct certain job search expenses if you leave the military and look for another job, such as travel expenses, resume preparation, employment agency fees, and even fees moving.
  • ROTC Allowances: Certain amounts paid to ROTC students in advanced training, such as education and living allowances, are not taxable. However, active duty ROTC pay and summer advanced camp pay are taxable.

Other tax considerations

There are also other tax considerations worth knowing about, including some that affect veterans or your dependents.

  • Disabled veterans: Disabled veterans may be eligible for a federal tax refund if there has been an increase in their disability percentage with the Department of Veterans Affairs (this may include a retroactive determination) or if they are veterans disabled in combat who receive combat-related assistance. Special remuneration.
  • Tax Fairness for Combat Wounded Veterans Act of 2016: This law states that veterans who sustain combat-related injuries will not be taxed if they receive a lump sum disability severance payment from the Department of Defense. The Department of Defense must ask you to amend your return if you have been taxed on this payment.
  • Death benefits: Death compensation paid to survivors of deceased service members is not taxable.
  • Dependent Assistance Programs: These benefit plans, which help pay for the care of eligible dependents, are not included in the service member's income.
  • Educational benefits: If you are serving or have served and receive education benefits, these are excluded from tax.

The essential

The Internal Revenue Service has an Armed Forces Tax Guide that covers everything related to taxes for members of the armed forces in great detail.

Knowing as much as you can about the tax breaks you can receive as a military member will help you get the most for your money. Whether you are currently serving or a veteran, there will always be tax considerations you need to review when filing your taxes to ensure you are taking full advantage of all your benefits.

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