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.
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Tax Breaks for the Military
If you are in the U. S. Armed Forces, you may be eligible for special tax breaks. For instance, some types of pay are not taxable. As a member of the armed forces, there are certain rules that you may be able to apply to deductions or credits that can lower your tax. You may even get more time to file your tax return and get more time to pay your income tax. Here are some tax breaks that you might be able to take advantage of:
If you serve in a combat zone, you may be able to postpone some tax deadlines. If you are eligible for this, you may get an automatic extension of time to file your tax return and pay any taxes that you owe.
While serving in a combat zone, certain combat pay is not taxable. This type of pay will not be included on your tax return and therefore is not considered taxable income.
Earned Income Tax Credit or EITC
Your nontaxable combat pay will be used in the calculation of your Earned Income Tax Credit which may give you a larger EITC credit. Even in this case, your combat pay remains nontaxable.
Moving Expense Deduction
If you have moved as a result of a permanent change of station, you might be able to deduct some of your unreimbursed moving expenses.
You may be able to deduct the costs of the purchase and upkeep of your uniforms. These uniforms must be those that you cannot wear if you are off duty. If you get an allowance for your uniform, your deduction must be reduced by that allowance amount.
Signing Joint Returns
If you are filing a married filing joint return, it must be signed by both spouses. If your spouse cannot sign the return because of absence due to military duty, you may be able to sign the return for your spouse.
Reservists’ Travel Deduction
If you travel as a member of the U.S. Armed Forces Reserves, you can generally deduct the costs of travel on your return. This includes unreimbursed travel costs while your are performing reserve duties more than 100 miles from your home.
The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls.
Member of a reserve component. In order to qualify as a member of a reserve unit of the Armed Forces of the United States, you must be in the Army, Naval, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service.
Where to report. If, as part of your duty as a reservist, you must travel more than 100 miles from home, you should complete Form 2106 or Form 2106-EZ. You must file Form 1040 efile it .
You may not deduct expenses for travel that does not exceed 100 miles from home, as an adjustment to gross income. In this case, you must complete Form 2106 efile it or 2106-EZ efile it and deduct the expenses as an itemized deduction on Schedule A (Form 1040).
ROTC Allowances - If you are in ROTC advanced training and get an allowance for education and room and board, these amounts are not considered taxable. Don’t get this confused with active duty ROTC pay which is considered taxable income.
Leaving the Military - Even if you leave the military, you may be able to deduct some job search expenses, costs of travel, resume preparation and job placement fees, and moving expenses.
Find more information about the deduction in IRS Publication 463-Armed Forces Reservists.
Tax-Free Expenses for Members of the Armed Forces
Some examples of tax-free expenses are:
- Uniform allowances
- Basic Allowance for Housing
- Basic Allowance for Subsistence
- Moving expenses
- Temporary lodging
- Travel expenses when on leave between consecutive overseas tours of duty
- Annual round trip for student dependents
- Dependent-care assistance program payments
- Disability payments
- Medical and dental care
- Defense counseling
- Group-term life insurance premiums
- Survivor Protection Plan premiums
- ROTC allowances
- Family Separation Allowance
- Combat zone pay (see below)
Learn more in IRS Publication 3 - Armed Forces' Tax Guide.
Military Filing Automatic Deadline Extension
Most individuals must file their tax return by the regular due date (April 15). For 2015 returns the due date is April 18, 2016. If you are serving in a combat zone or outside the U.S. you may be eligible for an extension. Please note that any 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 (April 18 for 2015 returns) to the date the taxes are paid.
If you need more time to prepare your return, you can get an extension and you will have until October 17, 2016 to efile your return. You can prepare and efile your extension on efile.com.
Combat Zone Filing Deadline Extension
All military personnel serving in a designated combat zone or contingency operation on April 18, 2016 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 18, 2016 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.