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Members of the U.S. Armed Forces should be aware of tax breaks available to them. To benefit you need to be in the Army, Marine Corps, Navy, Air Force, Space Force, Coast Guard, National Guard, or the military reserve.
Among the tax breaks you may receive, if you qualify, are postponement of tax deadlines, partial or fully tax-free pay, tax deductions, and other benefits around filing tax returns. Learning to take advantage of these tax breaks can help you make the most of your money and your benefits as a member of the military.
Key Takeaways
- Combat pay is partially or fully tax-free if you serve in a combat zone, and you receive automatic extensions on deadlines for filing your taxes.
- Most military bases offer tax preparation and filing assistance services during tax season.
- Some costs—such as moving expenses, reservists’ travel, and some uniforms—may entitle you to deductions when filing your taxes.
Helpful Tax Tips
When it comes to general information about your taxes, keep in mind the following two tips:
- Combat pay exclusion: Your combat pay is partially or fully tax-free if you serve in a combat zone. You may also qualify for 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, MilTax, during tax season.
When Filing Your Taxes
When it comes to actually filing your taxes, note that you may qualify for extensions on deadlines and that you may have options when it comes to signing your return or choosing what to include as taxable income.
- Extensions: Military members who serve in a combat zone receive automatic extensions on deadlines for filing their taxes. You can receive extensions of time to file your tax return and pay your taxes.
- Earned Income Tax Credit (EITC): If you receive nontaxable combat pay, you can still choose to include it as part of your taxable income. If you do, it may boost your EITC, leading to a potentially larger refund.
- Joint returns: 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; the legal office at your installation maybe able to help you.
Tip
The Internal Revenue Service has an Armed Forces’ Tax Guide that covers everything about taxes for members of the armed forces in great detail.
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 the amount you owe or are refunded, so be sure to take advantage of every option that you can.
- Moving expense deduction: Moving costs can be deducted using Form 3903. This usually only applies when the move is due to a permanent change in station.
- Reservists’ travel deduction: Members of the reserves can deduct unreimbursed travel expenses if their duties take them more than 100 miles from home. They can do this on Form 2106 (even if they do not itemize their deductions).
- Uniform deduction: Some uniforms that must be purchased cannot be worn while off duty. The cost and upkeep for these can be deducted. You must reduce your deduction by any allowance you get for these costs.
- Post-military life: You may be able to deduct some job search expenses if you leave the military and seek other work, such as costs of travel, preparing a resume, job placement agency fees, and even moving fees.
- ROTC allowances: Some amounts paid to ROTC students in advanced training—such as allowances for education and subsistence—are not taxable. However, active duty ROTC pay and pay for summer advanced camp is taxable.
Other Tax Considerations
There are other tax considerations worth being aware of as well, including some that affect veterans or your dependents.
- Disabled veterans: Disabled veterans may be eligible to claim a federal tax refund if there was an increase in their percentage of disability from the Department of Veterans Affairs (this may include a retroactive determination) or if they are a combat-disabled veteran who is granted Combat-Related Special Compensation.
- Combat-Injured Veterans Tax Fairness Act of 2016: This law states that veterans who suffer injuries related to combat are not to be taxed if they receive a lump-sum disability severance payment from the Department of Defense. The Department of Defense must instruct you to amend your return if you were taxed on this payment.
- Death benefits: The death gratuity benefit paid to survivors of deceased Armed Forces members is not taxable.
- Dependent care flexible spending accounts: Service members can divert pre-tax money into a dependent care flexible spending account. This allows them to lower their taxable income while putting aside money to care for family.
- Education benefits: If you are serving or have served—and are receiving education benefits—these are excluded from taxation.
What Are the Most Common Tax Breaks for Military Members?
Military members can benefit from several tax breaks, including tax-free housing and subsistence allowances, exclusions for combat pay, and deductions for certain moving expenses.
How Does Combat Pay Affect My Taxable Income?
Combat pay is partially or fully excluded from taxable income for enlisted members and warrant officers. For commissioned officers, the exclusion is capped at the highest enlisted pay rate, plus imminent danger pay.
Can Military Members Deduct Moving Expenses?
Active-duty military members can deduct unreimbursed moving expenses if the move is due to a permanent change of station. This deduction includes costs for transportation, storage, and travel for the service member and their family.
Do Reservists Get Any Special Tax Deductions?
Yes, reservists who travel more than 100 miles from home for drills or meetings can deduct unreimbursed travel expenses, even if they don’t itemize deductions. This includes mileage, lodging, and half the cost of meals. It’s considered an above-the-line deduction, which means it reduces gross income and can lead to a lower adjusted gross income
The Bottom Line
Knowing as much as possible about the tax breaks that you can take advantage of as a member of the military will help you make the most of your money. Whether you are currently serving or are a veteran, there will always be tax considerations that you should review when filing your taxes to ensure that you are taking full advantage of all your benefits.
