Tax Tips for Military Personnel

Because military personnel have obligations that can impact their tax situation, they are entitled to special tax breaks.  Here are a number of benefits that apply.

o Moving Expenses - If you are a member of the Armed Forces on active duty and move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving yourself and members of your household. You are not subject to the 50-mile distance test or 39 weeks employment test that civilians are subject to for taking a moving deduction.  Reasonable expenses include shipping, moving van, truck rental, travel expenses (not meals), packing, insurance and storage en route, moving pets, utility connect and disconnect charges.

o Combat Pay - If you serve in a combat zone as an enlisted person or as a warrant officer for any part of a month, all of the military pay that is received for military service that month is not taxable.  For officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.

o Home Mortgage Interest & Taxes - A military taxpayer can deduct mortgage interest and real estate taxes on their tax return as an itemized deduction, even if they are paid with nontaxable military housing allowance pay.

o Home Sale Gain Exclusion - In order to claim the home gain exclusion, a taxpayer must generally own and use the home for 2 of the prior 5 years.  A military taxpayer may choose to suspend the 5-year look back period for up to 10 years when on qualified official extended duty.

o Extension of Deadlines - The time for taking care of certain tax matters can be postponed. The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is automatically extended for qualifying members of the military.

o Uniform Cost and Upkeep - If military regulations prohibit you from wearing certain uniforms when off duty, the cost and upkeep of those uniforms can be deducted, but you must reduce your expenses by any allowance or reimbursement that is received.

o Joint Returns - Generally, joint returns must be signed by both spouses.  However, when one spouse may not be available due to military duty, a power of attorney may be used to file a joint return.

o Travel to Reserve Duty - If you are a member of the US Armed Forces Reserves, you can deduct unreimbursed travel expenses for traveling more than 100 miles away from home to perform your reserve duties.

o ROTC Students - Subsistence allowances paid to ROTC students participating in advanced training are not taxable.  However, active duty pay – such as pay received during summer advanced camp – is taxable.

o Transitioning Back to Civilian Life - You may be able to deduct some costs that are incurred while looking for a new job.  Expenses may include travel, resume preparation fees, and outplacement agency fees.  Moving expenses may be deductible if your move is closely related to the start of work at a new job location, and you meet certain tests.

If you or your spouse have questions about any of the above, or have questions related to your designated state of residence for state tax filing purposes, please give this office a call.

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