Active duty service members are allowed a number of special tax considerations. For example, living allowances that are intended to cover family educational expenses and emergencies, as well as reenlistment bonuses earned while serving in combat zones, may be nontaxable. Likewise, the EITC helps offset low-income families’ Social Security and Medicare contributions. Service members may also qualify for a deduction of moving expenses and spousal IRA contributions.
Military personnel also don’t have to pay personal property taxes on cars, mobile homes, and other equipment. This is a benefit of the Servicemembers Civil Relief Act. This law also protects service members from having their property attached by private creditors to collect overdue debts incurred before joining the military. Military legal assistance offices located on many bases can provide information about state laws that apply to individual families. Aaron Kassraie writes about issues important to military veterans and their families for AARP.
What Are Military Tax Benefits?
Like everyone else, military members have deductions taken out of their pay, which appears on their Leave and Earnings Statement (LES). These include federal tax withholding for Social Security and Medicare. They also have state income tax withholding based on their state of legal residence.
There are many tax benefits that are specific to service members and their families, including allowances for living expenses, uniforms, death expenditures, moving costs, group-term life insurance, and professional education. Members on active duty are also not required to pay taxes on combat pay if it isn’t included in their earned-income tax credit calculation.
Most military bases have volunteer tax assistance programs. These IRS-certified volunteers understand military tax rules and guidelines. They can help you fill out your taxes; some offer free or reduced-cost filing services. If you don’t qualify for tax help at your installation, there are other places to get help, including online resources and the Armed Forces Tax Guide.
Legal Employment Statement
Military members and their families pay a lot in taxes, but there are also plenty of deductions that can help offset this burden. Many of these are listed on the LES (Legal Employment Statement).
For example, service members who have to travel away from home in connection with their military duties can deduct unreimbursed work-related expenses like lodging and meals. However, this only applies if the trip is not for personal reasons or is not a commuting expense. Servicemembers can also deduct uniforms that are required to be worn while at work, job placement agency fees, and the cost of moving to a new duty station.
Additionally, DFAS will send a tax certificate indicating that a member has repaid debt over a certain period of time to be used as an adjustment on future returns. Also, the military offers financial and legal counselors to assist with debt repayment programs. Finally, the earned income tax credit is great for lower-income servicemembers to offset Social Security and Medicare deductions.
Unreimbursed Work-related Travel Expenses
If you are a member of the military, you can deduct unreimbursed work-related travel expenses. Travel to and from your place of work and overnight trips away from home are eligible expenses. You may also be able to deduct dues paid to a professional society related to your military position. Travel expenses that are not related to your military duties can’t be deducted.
If your service involves fighting in a combat zone, you can include combat pay as part of your taxable income. This can raise your earned income tax credit, which could lower the amount of taxes you owe or boost your refund.
If you are a disabled veteran, you might qualify for property tax exemptions at the state level. Each state has its own requirements, so check with your taxpayer assistance center or state tax office for details. Some states allow veterans to file a return without both spouses signing.