Military Armed Forces Tax Deductions
There are many tax benefits available to military personnel, including tax deductions, combat pay exclusions, extended deadlines, and other benefits. Read on to find out details about the various tax concerns that are specific to members of the armed forces.
Tax Tips for All Members of the Armed Forces and Military Personnel
As a member of the Armed Forces, there are many expenses which may be excluded from your income when assessing what taxes you owe. Such expenses are nontaxable even if their value is reimbursed or they are furnished to you as part of an allowance.
Tax-Free Expenses for Members of the Armed Forces
Some examples of tax-free expenses are:
Basic Allowance for Housing
Basic Allowance for Subsistence
Travel expenses when on leave between consecutive overseas tours of duty
Annual round trip for student dependents
Dependent-care assistance program payments
Medical and dental care
Group-term life insurance premiums
Survivor Protection Plan premiums
Family Separation Allowance
Combat zone pay (see below)
Learn more in IRS Publication 3 - Armed Forces' Tax Guide.
Military Filing Automatic Deadline Extension
All members of the Armed Forces serving outside of the U.S. (and Puerto Rico) on April 15, 2013 are granted an automatic two-month extension of time to file their tax returns. You do not need to file a form to get this extension. The new deadline will be June 15, 2013. Please note that this automatic extension is not an extension of time to pay any tax owed by the regular due date of the return. Therefore, interest is charged on any taxes owed from April 15 to the date the taxes are paid.
If you need more time to prepare your return, you can get an additional 4-month extension to October 15, 2013 by efiling or filing Form 4868. This will not extend your payment deadline beyond June 15.
Combat Zone Filing Deadline Extension
All military personnel serving in a designated combat zone or contingency operation on April 15, 2013 are granted an automatic 180-day extension of time to file and time to pay. The 180-day extension period does not begin until after you leave the combat zone. You may add to the 180 days the number of days that you had left to file when you first entered the combat zone. You also get the automatic combat zone extension if you are in the hospital on April 15, 2013 as a result of injuries received while on duty in a combat zone. In this case, the 180-day extension period begins after you are released from the hospital, and you may add to it the amount of time you had left to file when you first entered the hospital.
For more information on military and combat zone deadline extensions, please see Publication 3 - Armed Forces' Tax Guide.
The Combat Zone Tax Exclusion
Do You Receive Combat Pay (Imminent Danger Pay)?
If you are stationed in a combat zone for at least one day out of a month, not only should you receive a nontaxable combat pay allowance for that month, but the entire month's regular salary may be excluded from your taxable income. Any Hardship Duty Pay and Family Separation Allowances you receive may also be excluded.
The current official combat zones are:
The Arabian Peninsula Area: The Persian Gulf, Red Sea, Gulf of Oman, Arabian Sea (north of 10 degrees north latitude and west of 68 degrees east longitude), Gulf of Aden, Bahrain, Kuwait, Oman, Iraq, Qatar, Saudi Arabia, and the United Arab Emirates
The Kosovo Area: The Federal Republic of Yugoslavia (Serbia and Montenegro), Albania, Adriatic Sea, and Ionian Sea (north of the 39th Parallel)
In addition, service in an area outside of an official combat zone may be considered (for tax purposes) to be performed in a combat zone if the Department of Defense has declared the service to be in direct support of operations occurring in a combat zone.
Learn more about combat zone pay tax exclusions in Publication 3 - Armed Forces' Tax Guide
More details about excluding combat pay from your gross income and relevant combat pay related questions and answers here: Combat Zone Tax Exclusion FAQ.
You may actually want to report some of your normally nontaxable combat pay as taxable income if you are claiming the Earned Income Tax Credit. Learn about special Earned Income Credit rules for the military.
More Military Tax Relief
Do You Receive the Earned Income Tax Credit? Do You Want to?
The Earned Income Tax Credit may be claimed by certain workers who earn a low income. The credit can reduce the amount of taxes you pay and may increase your tax refund. Many military personnel miss taking the credit because they do not report enough taxable income to qualify for it. The Working Families Tax Relief Act of 2004 and the Gulf Opportunity Zone Act of 2005 gave military personnel the option of reporting some of their untaxed combat pay as taxable income. Doing this may allow you to qualify for the Earned Income Tax Credit.
Learn more about the EITC
Forgiveness of a Decedent's Tax Liability
If a member of the Armed Forces dies in service to our country (while on active duty in a combat zone or from wounds received while in a combat zone), then that person's tax liability may be forgiven. If income taxes for the year in which the death occurred have already been paid, they may be refunded.
Learn more in Publication 3 - Armed Forces' Tax Guide
Homebuyer Credit for Military Personnel
Attention: The First-Time Homebuyer Credit has expired, but you may still claim it on an amended 2010 or 2011 Tax Return if you qualified for it.
The Worker, Homeownership, and Business Assistance Act of 2009 extended the deadline of the First-Time Homebuyer Tax Credit for members of the military who serve outside the US. If you served at least 90 days out of the country during the period from December 31, 2008 to May 1, 2010, then you have an extra year in which to qualify for the Homebuyer Credit. You may qualify for either the first-time homebuyer credit or the long-time homebuyer credit. To qualify, you must enter into a contract to buy a home on or before April 30, 2011, and you must close on the purchase by June 30, 2011. You can claim the credit on your 2011 Tax Return.
See what other tax deductions you may qualify for.
Use our Free Tax Tools to calculate taxes or determine eligibility for certain tax credits.