Military service members and their families may be eligible for free tax preparation, assistance, and advice. Some allowances are excluded from income, including those for family travel, cost of living, military housing, and commissary purchases. Combat pay is also exempt from tax. Federal law states that only one state can tax your earned income—the state of your duty station. This makes filing taxes a little simpler.
Military members face many unique financial challenges, whether deployed in a combat zone or working long hours. The IRS offers special deductions and credits for service members to offset some of these burdens. However, it can be a bit overwhelming to keep track of all the rules and regulations. This is why it’s important to understand how military service impacts your taxes and responsibilities to the IRS.
Federal tax filings for military personnel are generally the same as those of civilians. They must file by April 15. Depending on their status, they may also be eligible for extended deadlines or automatic extensions. While these extension options are not available for all individuals, they can make a huge difference when it comes to filing.
Some military-related expenses are deductible, including uniform costs, professional dues, and travel expenses for work-related purposes. For example, if you have to leave your home to attend a meeting with colleagues, you can deduct expenses related to meals, lodging, taxi fare, and other related costs. However, you cannot deduct the cost of commuting to your regular workplace.
In addition, service members can claim personal property taxes in their state of legal residence. In some cases, the taxes are based on the value of the property. This applies to real estate and other assets, such as automobiles. In addition, service members can file for a property tax exemption in the state where they live as long as it is not a combat zone or contingency operation. In addition, service members can apply for an Earned Income Tax Credit (EITC) to help offset the cost of living in a foreign country.
Military Tax Preparation
ax season can be stressful for service members, but free filing help is available both online and on base. The Defense Department’s Military OneSource website offers MilTax, which includes free preparation, electronic filing software, and personalized support from a tax consultant. The program kicks off January 22 and is available to active duty personnel and their families, National Guard and Reservists, survivors, and veterans who left the military in the last 365 days.
The program addresses situations specific to the military, including deployments, combat and training pay, and multistate filings. Eligible taxpayers can also use the IRS’s Free File program, a public-private partnership that allows participants to prepare and electronically file federal and up to three state returns for free. Each private-sector software company sets its own eligibility rules, and not everyone can use the program based on income levels and other factors.
There are other options for preparing taxes online, such as H&R Block and Liberty Tax. Both offer a military discount and have locations across the country, including some on bases. Some states, such as New York, have special tax exemptions for military service members and their families. For example, New York law defines military personnel as nonresidents for tax purposes, so their military pay is not subject to the state’s income tax.
Another important benefit of the military is USERRA, which ensures that when a member leaves the service or retires, they return to the same position with the same seniority, status, and pay that they would have had in their civilian job if they had not been away on military duty. This is a critical benefit that ensures consistency and fairness for those constantly moving around the country, especially regarding tax-filing requirements.
State Income Taxes for Military Members
Enlisted soldiers and warrant officers can exclude basic pay, re-enlistment bonuses, and other incentive payments if they served in a combat zone or other qualified hazardous duty area designated by Congress. This includes areas in Jordon, Kyrgyzstan, Iraq, Afghanistan, Somalia, the Federal Republic of Yugoslavia, and the states of Kuwait, Saudi Arabia, Oman, Qatar, and Bahrain. The same rule applies for commissioned officers, though the excluded amount is limited.
Service members also don’t have to pay state income taxes except for their state of legal residence. However, they do have to pay local property taxes on their homes. The military legal assistance offices found on most bases can answer questions about individual states. They can also help with the complication of filing in more than one state on personal property. Creditors can only attach up to 25 percent of a service member’s pay, but this does not include retirement or separation pay, hazard pay, housing, or subsistence allowances. Service members are protected from this type of debt collection under the Servicemembers Civil Relief Act.