Military Personnel Tax Tips

Updated for Tax Year 2019


OVERVIEW

Those who serve in the U.S. armed forces are honored with a number of benefits, ranging from education assistance to retirement. Among the perks are a number of steps to make filing federal income tax returns easier, as well.


member of the armed services hugging his daughters

The "Armed Forces' Tax Guide"

While most service members file the shortest, simplest tax forms, others must complete additional forms and schedules so they can take advantage of subtle differences in tax law pertaining only to service members.  Internal Revenue Service Publication 3, "Armed Forces' Tax Guide," details special tax situations for those serving in the Army, Navy, Air Force, Marines or Coast Guard.

Moving expenses

Each branch of the military pays for the relocation of those members who aren’t married or don’t have families.  If the service member is married,  the government provides the vast majority of standard relocation costs. The rest can be reimbursed or deducted, depending on the situation.

Active duty service personnel who move themselves and their families because of a permanent change of station may deduct what the IRS calls “reasonable unreimbursed expenses” using Form 3903.

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.

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. Get started today for free.

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