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Tax Breaks for U.S. Military

Members of the U.S. Armed Forces deserve the thanks of the nation for their service, and one small way we can show our thanks is by giving those who serve a small measure of tax relief.

In some cases, a soldier’s pay isn’t taxable. Or perhaps they qualify for deductions or credits that can lower their taxable income. And they may have more time to file or pay their taxes.

A quick overview of military tax breaks may be helpful:

Deadline Extensions: Some members of the military, such as those who serve in a combat zone, can postpone some tax deadlines. If the taxpayer qualifies, they get an automatic extension of time to file a return and pay any tax due.

Combat Pay Exclusion: If a taxpayer does service in a combat zone, their pay is partially or fully tax-free. The exclusion could also apply if the taxpayer serves in support of a combat zone.

Moving Expense Deduction: Military taxpayers may be able to deduct a portion of unreimbursed moving costs, using Form 3903, Moving Expenses. The deduction applies if the taxpayer’s move is due to a permanent change of station.

Earned Income Tax Credit (EITC): Military clients who get nontaxable combat pay may choose to include it in taxable income instead. Why? Including it as taxable could boost the EITC, dropping the tax bill and resulting in a larger refund.  In 2015, the maximum credit for taxpayers was $6,242. The average amount of EITC claimed was more than $2,400. Of course, figure it both ways and pick the option with the best bottom line.

Signing Joint Returns: Normally, both spouses have to sign their join income tax return. However, if one spouse is away because of military service, the other spouse can sign for both. A power of attorney  may be needed to file a joint return, so a visit to the soldier’s base legal office may be necessary.

Travel Deductions for Reservists: When duty-related assignments take a reservist more than 100 miles away from home, unreimbursed travel expenses can be deducted on Form 2106, Employee Business Expenses – even if the taxpayer doesn’t itemize.

Uniform Deduction: If the military taxpayer has expenses related to uniforms that cannot be worn off-duty, those costs can be deducted. This includes the costs of purchase and upkeep. If the taxpayer gets an allowance for upkeep, for example, the deduction has to be reduced by the amount of the allowance.

ROTC Allowances: Some amounts paid to ROTC students in training are not taxable, whether for education or subsistence. Active duty ROTC pay, however, is taxable. Pay for summer advanced camp is an example.

Transition to Civilian Life: When soldiers leave the armed forces and look for work, they may be able to deduct some job search expenses. Travel costs, resume preparation expense, placement fees and moving expenses may all qualify for a tax deduction.

For the full story on tax breaks available to our military service member clients, check out IRS Publication 3, the Armed Forces Tax Guide.

 

Bob Williams

Forget genes; I’ve got words in my DNA. Communication has been part of who I am nearly all my life. From a long career in radio news to another one in newspapers – and a University of Georgia journalism degree sandwiched between the two – language has been my life. I’ve also been fortunate to have learned the tax business from the ground up here at Drake, starting with 1040.com online forms some years ago before moving on to work on the Web. In all things tax-ish, we aim to give you tools you can use.