Military Personnel Tax Tips

Uniform upkeep

All branches of the military issue uniforms to their members that they are required to wear and provide them with a monthly clothing allowance for regular upkeep. For tax years prior to 2018, uniform expenses that exceed that allowance may be deducted as an unreimbursed employee expense subject to 2% of your adjusted gross income, if you itemize your deductions.

Because service members are not required to wear their dress uniforms, except for special occasions,

• They are not considered a standard uniform.
• They would not qualify under the deduction or reimbursement.
• If a special circumstance requires the service member to wear a dress uniform, the additional costs may be an itemized deduction.

Beginning with tax year 2018, these unreimbursed employee expenses are no longer deductible.

Reservists and ROTC students

Active reservists traveling 100 or more miles from home to reserve duty may deduct unreimbursed travel expenses, such as costs associated with lodging and meals, using Form 2106. They may also take the standard mileage rate for driving.

ROTC students who receive subsistence allowances for participating in advanced training aren't taxed for that allowance, but active duty payment for events such as summer advanced training camp is taxable.

Life transitions

The military offers service members a civilian life transition program to help them prepare for life after the military. Some costs—such as expenses for job-hunting—incurred during these programs for transitioning between military service and civilian life may be deducted. Deductible expenses include those incurred for travel, resume preparation and job placement fees.

Deadline extensions

Service members who serve in a combat zone are allowed extra time without penalty to take care of their tax filing matters. The IRS offers an automatic 60 to 180 day extension for qualifying members of the military, especially those serving in a combat zone, for:

• filing tax returns,
• paying taxes, and
• filing refund claims.

Even though the extension is automatic, military personnel are still required to submit some documents and forms to the IRS in order to file for the extension.

Combat zone exclusions

Members of the U.S. Armed Forces who serve in combat zones may exclude certain pay, referred to as “combat pay,” from their income. The IRS allows enlisted members, warrant officers and commissioned warrant officers to exclude various forms of pay, including:

• Active duty pay earned in any month served in a combat zone
• Imminent danger/hostile fire pay
• Re-enlistment bonuses if voluntary re-enlistment occurred during a month while serving in a combat zone
• Pay for accrued leave earned while serving in a combat zone
• Pay while hospitalized as a result of your service in a combat zone

Commissioned officers also may exclude part of their combat pay, but their exclusion is capped at the highest rate of enlisted pay—plus extra pay for imminent danger or hostile fire.