Members of the Armed Forces Get Special Tax Benefits

IRS Summertime Tax Tip 2017-06, July 14, 2017 

Members of the military may qualify for tax breaks and benefits. Special rules could lower the tax they owe or give them more time to file and pay taxes. In addition, some types of military pay are tax-free.

Here are some tips to find out who qualifies:

1. Combat Pay Exclusion.  If someone serves in a combat zone, or provides direct support, part or even all of their combat pay is tax-free. However, there are limits for commissioned officers. See Earned Income Tax Credit below for important information.
2. Deadline Extensions.  Some members of the military, such as those who serve in a combat zone, can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
3. Special Deductions: 
   • Reservists’ Travel.  Reservists whose duties take them more than 100 miles away from home can deduct their unreimbursed travel expenses on Form 2106, even if they do not itemize their deductions.
   • Moving Expenses.  Taxpayers who serve may be able to deduct some of their unreimbursed moving  costs on Form 3903. This normally applies if the move is due to a permanent change of station.
   • Uniform.  Members of the military can deduct the cost and upkeep of their uniform, but only if rules say they cannot wear it off duty. Also, they must reduce their deduction by any uniform allowance they get for those costs.
4. Earned Income Tax Credit or EITC.  If those serving get nontaxable combat pay, they may choose to include it in their taxable income to increase the amount of EITC. That means they could owe less tax and get a larger refund. For tax year 2016, the maximum credit for taxpayers is $6,269. It is best to figure the credit both ways to find out which works best.
5. Signing Joint Returns.  Both spouses normally must sign a joint income tax return. If military service prevents that, one spouse may be able to sign for the other or get a power of attorney.
6. ROTC Allowances.  Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
7. Separation and Transition to Civilian Life.  If service members leave the military and look for work, they may be able to deduct some job search expenses, including travel, resume and job placement fees. Moving expenses may also qualify for a tax deduction.
8. Tax Help.  Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after the April deadline. Check with the installation’s tax office (if available) or legal office for more information.

For more, refer to IRS.gov/Military or Publication 3, Armed Forces’ Tax Guide, on IRS.gov.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

More IRS resources

• Questions & Answers on Combat Zone Tax Provisions
• Publication 521, Moving Expenses
• Publication 529, Miscellaneous Deductions

IRS YouTube Videos:

• Military Tax Tips – English | Spanish
• Moving Expenses – English | Spanish | ASL
• Job Search Expenses – English | Spanish | ASL