Taxes for U.S. Service Members
For members of the U.S. military, the tax code allows for some extra benefits – or at least some extra flexibility.
For starters, service members – including those serving in a combat zone – can postpone some tax deadlines. That includes automatic extensions of time to file tax returns and pay taxes due. See the IRS’s Tax information for Members of the Military, or Publication 3, the Armed Forces Tax Guide, for help on this or the topics that follow.
And if you serve in a combat zone, you can exclude certain combat pay from your income. You won’t need to do anything to exclude the pay, because qualifying combat pay isn’t included on your W-2. Some service outside of a combat zone also qualifies for this exclusion.
Credits and Deductions
Some special considerations for service members:
- You can choose to count nontaxable combat pay as earned income to qualify for the Earned Income Tax Credit (EITC). It makes sense to do this if it qualifies you for the credit, or increases the amount you qualify for. But even if combat pay is counted as earned income for the credit, it’s still not taxed. Your nontaxable combat pay is listed on Form W-2, box 12, with code Q. Also see Combat Pay and the Earned Income Credit.
- Moving, of course, is a big part of serving in the military. And if you move due to a permanent change of station, then you may be able to deduct some of your unreimbursed moving costs. What’s a “permanent” change? A move from your home to your first active duty post; a move from one permanent post to another; or a move from your last active duty post to your home (or to a nearer point in the U.S.). This last move has to happen within one year of ending your active duty, or within the time period allowed in the Joint Federal Travel Regulations. Refer to IRS Publication 3 for rules on qualifying expenses, and use Form 3903 – Moving Expenses to deduct them on your return. When you do your taxes with 1040.com, our interview will help you fill out the right form.
- If regulations prohibit you from wearing certain uniforms when off duty, you can deduct the costs and upkeep of those uniforms. But remember to reduce your expenses by any reimbursement you get.
- If you’re a member of the U.S. Armed Forces Reserves, you can deduct certain travel expenses on your tax return. You can deduct unreimbursed travel expenses if you have to go more than 100 miles from home for your Reserve duty.
- The educational and subsistence allowances paid to ROTC students during advanced training are not taxable. However, active duty pay – such as pay received during summer advanced camp – is taxable.
On the Home Front
Normally, both spouses have to sign the income tax return if filing jointly. But when one spouse is unavailable because of certain military duty or conditions, in some cases the other spouse may sign for both – or will need a power of attorney to file a joint return. Publication 3 has all the specifics.
After leaving the military, you may be able to deduct certain job search expenses. Those may include travel, résumé preparation fees and job placement agency costs.
Also, many bases have free tax help available, so take advantage of the experts if your tax situation seems a little daunting.