TurboTax / Tax Calculators & Tips / All Tax Guides / General Tax Tips / A Salute to Savings: Tax Benefits for the Armed Forces

A Salute to Savings: Tax Benefits for the Armed Forces

Updated for Tax Year 2016


OVERVIEW

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.


The federal tax code has specific benefits for members of the armed services. These are designed to help offset the extraordinary burden of service and provide additional financial compensation for members of our military. It is important for those serving to understand their military tax advantages so they can make the most of them when filing their tax returns.

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 help officers and enlisted members to pay for the basics for their families and helps to take the sting out at tax time," says Sergeant Adam Kowalski, an Army recruiter.

Both of the 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 percent of a service member's total regular compensation, members of the armed forces realize a tax benefit that lets them 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.

"When deployed in a combat zone, there is extreme stress on a daily basis. Knowing that your family will be able to keep more of your pay during this difficult time allows you to focus even more on the task at hand and worry less about trivial financial matters back home," Kowalski says.

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

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 give rise to specific opportunities to itemize expenses, including required travel, education, and 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.

Kowalski says, "I make a habit out of tracking any time I come out of pocket while traveling on official business, because it may come in handy when it’s time to file my taxes." However, these and other travel expenses are not deductible for a service member who is 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. If the education is required to keep your job and serves a legitimate defense purpose, or maintains or improves necessary skills, any unreimbursed expenses will be tax deductible as an itemized deduction on your personal tax return.

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, his existing tax liabilities may be forgiven, and paid taxes can even be refunded to his surviving family.

Also, if a service member dies in a terrorist or other military action, he would likewise be eligible for forgiveness of his federal tax debt.

According to Kowalski, "There is no greater sacrifice than to die serving your country. Among the various ways this is recognized by the U.S. government is by its tax debt forgiveness for soldiers killed in action." Obtaining this relief requires a personal representative to make a timely claim for tax forgiveness.

TurboTax Military Edition

Did you know that TurboTax has a product designed specifically for the unique needs of service members and their families? To learn more, see our TurboTax Military Edition page.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99$34.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/1040A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Bonus Offer with TurboTax Self-Employed: File your 2016 federal return with TurboTax Self-Employed by 4/18/17 and receive a complimentary subscription to QuickBooks Self-Employed until 4/30/18 at no additional cost. After you file your taxes, you must activate your QuickBooks Self-Employed subscription by 7/15/2017 by logging into QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/login. Once activated, you will have access to QuickBooks Self-Employed until 4/30/2018.
    Offer valid only for new QuickBooks Self-Employed customers.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not file with TurboTax Self-Employed by 4/30/2018, your QuickBooks Self-Employed subscription will automatically renew on 5/1/2018 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself: In order to pay for the price of TurboTax Self-Employed, you will need at least $600 in deductible business expenses. This calculation is based on the self-employment tax income rate for tax year 2016.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or SmartLook); not included with Federal Free Edition. Feature availability varies by device. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • TurboTax Self-Employed Expense Finder: Available only in TurboTax Self-Employed. Not available for people with certain types of expenses and tax situations including paying contractors or employees, home office or vehicle actuals, inventory, self employed health insurance or retirement, asset depreciation, sale of property or vehicles, and farm income. Some financial institutions limit the timeframe for which historical transactions may be imported by ExpenseFinder. ExpenseFinder expected late January (late February for mobile app).
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected in March. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.