- Days left

Tax tips for military personnel

Tax tips for military personnelWith all the news about troops in Iraq and Afghanistan, it's easy to forget that U.S. military personnel are stationed all over the globe. According to the Department of Defense, as of last year, there were 1,421,668 service men and women on active duty, largely located in the U.S. An additional 848,000 service men and women make up the reserves.

Men and women who serve in the military face a different set of challenges than most. In any given year, military personnel may experience relocation to different stations, temporary assignments and shifts for serving in a combat zone. As the sister of two Navy boys, including a career submariner, I can attest that what does remain constant is the capacity for change -- my brothers, for example, have collectively lived or worked in at least seven states while in the service.

With the constantly changing lives of military personnel in mind, the IRS recently released a list of hot topics targeted to those in the service. Here are a few highlights:
  • Moving Expenses. Generally, to deduct moving expenses, you have to meet certain time and distance tests. However, if you are on active duty in the military and you move because of a permanent change of station, you don't have to meet these tests in order to take the deduction. A permanent change of station includes a move from your home to your first post of active duty, a move from one permanent post of duty to another, and a move from your last post of duty to your home (slightly different rules may apply for spouses and dependents). If you are reimbursed for the move or receive an allowance to cover the costs of the move, you may not claim the deduction; however, if your expenses exceed your reimbursements or allowances, you can claim those expenses on a form 3903. If your reimbursements and allowances exceed your expenses, you have to claim the excess as wages. Examples of deductible expenses include the costs of travel (including lodging but not meals), as well as expenses related to hauling a trailer, packing, crating, in-transit storage and insurance.
  • Combat Pay Exclusion. If you serve in a combat zone, you can exclude your "combat pay" from your gross income come tax time. There's no need to do anything extra to qualify for the exclusion -- the amount of your combat pay will not be included on your form W-2. To qualify as combat pay, your pay must have been earned in a month in which you either served in a combat zone or were hospitalized as a result of injuries or sickness incurred while serving in the combat zone. Retirement pay and pensions do not qualify for the combat zone exclusion. Other exceptions apply, so be sure to ask if you have questions.
  • Extension of Filing Deadlines. The deadline for filing tax returns, paying taxes, filing claims for refund, and other tax-related IRS activity is automatically extended if you serve in a combat zone, you have qualifying service outside of a combat zone or if you are deployed outside of the country away from your permanent duty station while participating in a contingency operation. A contingency operation is a military operation designated by the Secretary of Defense or a call to active duty during a war or a national emergency. Deadlines are also extended for support personnel for the military -- this includes Red Cross personnel, accredited correspondents, and civilian personnel acting under the direction of the Armed Forces. Generally, your deadline is extended for 180 days after the later of the last day you are in a combat zone, have qualifying service outside of the combat zone, serve in a contingency operation, or the last day of any continuous qualified hospitalization for injury while performing qualifying service. Additional time may also be granted in certain circumstances; check with your tax professional or the IRS for more information.
  • Uniform Cost and Upkeep. You are usually not allowed to deduct expenses for the costs of buying and maintaining uniforms. However, if military regulations prohibit you from wearing your uniform when not on duty, you can deduct those costs. That would include military battle dress uniforms and utility uniforms, as well as qualifying reservists' uniforms. You can also deduct the costs of accessories such as insignia of rank, corps devices, epaulets, aiguillettes and swords. As usual, if you receive any reimbursement or allowance, you can only take the deduction to the extent that it exceeds the amount received.
  • Travel to Reserve Duty. If you are a member of the branches of the reserves (Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service) and you travel more than 100 miles away from home to perform your duties, you can deduct your travel expenses as an adjustment to income. This means you can claim the expense on line 24 of your form 1040 as "above the line" rather than as a miscellaneous itemized deduction on Schedule A. All expenses from the time you leave home until the time you return home are included to extent that they don't exceed the amount the federal government pays its employees for travel expenses.
If you have specific tax questions related to military life, check out the IRS' website, Tax Information for Members of the U.S. Armed Forces, or check out Publication 3, Armed Forces' Tax Guide from the IRS. If you'd like to order a hard copy of Publication 3, you can call 1-800-TAX-FORM (1-800-829-3676).

Tax support and assistance are available on many military bases. If yours doesn't offer help or you prefer to use a tax professional off base, keep in mind that you might be eligible for special military rates -- just ask!

Increase your money and finance knowledge from home

How Financial Planners go Grocery Shopping

Learn to shop smart and save.

View Course »

What is Inflation?

Why do prices go up?

View Course »

TurboTax Articles

Will Medicare/Medicaid be Impacted by ACA?

The Affordable Care Act put in place significant tax-related programs that impact Medicare and Medicaid, such as increased Medicare taxes on earned and unearned income for high-wage earners, and Medicaid changes that increase the number of insured individuals. Establishing whether you are affected by the ACA-imposed taxes, or are eligible for certain health programs that fall under the Centers for Medicare and Medicaid Services, is determined by filing your income tax.

8 Things You Think Are Tax Deductible That Aren't

There?s a fine line between looking to save money on your taxes and taking deductions that will raise eyebrows at the Internal Revenue Service. Some taxpayers are tripped up by expenses that they assume are tax deductions, but don?t qualify under IRS guidelines. Here are a dozen items that can lead to unpleasant surprises in case of an audit.

Essential Tax Forms for the Affordable Care Act

The Affordable Care Act (ACA), also referred to as Obamacare, affects how millions of Americans will prepare their taxes in the new year. The law now includes penalties for all who haven?t obtained health insurance -- and those penalties are expected to be paid at tax time. The ACA also provides tax credits to help people pay for insurance, and you can claim those credits when you file your taxes. The Internal Revenue Service (IRS) has introduced a number of tax forms to accommodate the ACA.

How to Determine if You Have Minimum Essential Coverage (MEC)

The Affordable Care Act, also known as Obamacare, requires most Americans to have health insurance that meets a government standard known as "minimum essential coverage," or MEC. Whether your insurance qualifies as MEC depends not on the plan itself, but on how you obtained your coverage.

What are 1095 Tax Forms for Health Care?

In 2014 the Affordable Health Care Act, also known as Obamacare, introduced three new tax forms relevant to individuals, employers and health insurance providers. They are forms 1095-A, 1095-B and 1095-C. These forms help determine if you need to comply with the new shared responsibility payment, the fee you might have to pay if you don't have health insurance. For individuals who bought insurance through the health care marketplace, this information will help to determine whether you are able to receive an additional premium tax credit or have to pay some back.

Add a Comment

*0 / 3000 Character Maximum