Did you know that members of the military may qualify for tax breaks and benefits? Special rules can lower the tax they owe or give them more time to file and pay taxes. In some circumstances, certain types of military pay are tax-free.
Below are 8 tips to find out who qualifies.
- Combat Pay Exclusion – Part or even all of someones combat pay is tax-free if they serve in a combat zone, or provide direct support. There are, however, limits for commissioned officers.
- Deadline Extensions – Certain 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.
- Special Deductions include:
- Reservists’ Travel. Reservists can use Form 2106 to deduct their unreimbursed travel expense when their duties take them more than 100 miles away from home, 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.
- 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.
- Signing Joint Returns – Normally, both spouses 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.
- 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.
- 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.
- Tax Help – Keep in mind that 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.
The professionals in our office can help you determine if you qualify for one or more of these special rules, call us today.