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The federal tax code has specific benefits for members of the armed services that are designed to help offset the extraordinary burden of service and provide additional financial compensation. If you're serving in the armed forces, it's important to understand your military tax advantages so you can make the most of them when filing your tax return.
Tax exempt allowances
Military pay has several components. Typically, compensation for members of the armed forces includes basic pay such as salary, plus special allowances for housing and food.
The housing and food allowances are exempt from state and federal income tax and Social Security tax, although periodic cost-of-living adjustments are taxable. Since these exempt payments average more than 30% of a service member's total regular compensation, this tax benefit allows members of the armed forces to keep substantially more of their pay than similarly situated civilians.
Combat zone exclusion
When a member of the armed forces is deployed into a combat zone, base pay or re-enlistment bonuses paid during that time period is excluded from taxable income.
- In practical terms, if a service member spends any part of a month deployed in a combat zone, all of that month's earnings are free from state and federal income tax.
- There is a dollar limit for officers but not enlisted members.
Miscellaneous itemized tax deductions (for tax years prior to 2018)
Similar to normal civilian taxpayers, members of the military can elect to itemize their tax deductions on their tax return. Certain aspects of military life provide opportunities to itemize expenses, such as,
- required travel
- education
- other unreimbursed employee expenses, such as maintenance of uniforms that may not be worn when off duty
Travel and transportation expenses
Members of the military can deduct unreimbursed travel and transportation expenses when traveling on official business away from their permanent duty station. Eligible expenses include:
- Transportation to official meetings or business functions away from the regular workplace (but not to and from the regular workplace).
- Business-related meals, lodging, and other ordinary and necessary expenses.
Travel expenses are not deductible for service members who are stationed overseas or traveling for personal reasons.
Unreimbursed educational expenses
Members of the armed forces may also deduct unreimbursed educational expenses relating to their official capacity in the service. Unreimbursed educational expenses will be tax deductible as an itemized deduction on your personal tax return if the education:
- is required to keep your job and serves a legitimate defense purpose
- maintains or improves necessary skills
Forgiveness of tax liability
In the unfortunate event that a member of the armed services is killed while on deployment in a combat zone or dies later from injuries sustained in a combat zone, their existing tax liabilities may be forgiven, and paid taxes can even be refunded to their surviving family.
- If a service member dies in a terrorist or other military action, they would likewise be eligible for forgiveness of his federal tax debt.
- Obtaining this relief requires a personal representative to make a timely claim for tax forgiveness.
Enlisted active duty and reserve military can enjoy TurboTax Online for free
In honor of our nation's military personnel, all enlisted active duty and reserve military can file free federal and state taxes with TurboTax Online using the TurboTax Military Discount. The #1 best-selling tax software, TurboTax easily handles military tax situations including:
- military and civilian income—including combat pay, BAS and BAH
- military-related expenses—TurboTax will find every deduction you deserve
- completed a PCS—TurboTax will determine your state of residence
Simply start your TurboTax Online return and use your military W-2 to verify rank, and your savings will be applied when you file.
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