Posted by The TaxAdvocate Group, LLC

Tax Deductions for the Armed Forces

Tax Deductions for the Armed Forces

There are many tax benefits available to the military, including tax deductions, exclusions from battle payments, extended deadlines, and other benefits. If you are in the U.S. military, you may be eligible for special tax exemptions. For example, some types of payments are not taxable (e.g., ROTC). Several tax-free expenses do not need to be reported on your tax return. As military personnel, there are certain rules that you can apply to tax deductions or credits that can reduce your tax debt. You may also have added time to file taxes or pay income taxes. Here are some tax cuts you can take advantage of:

  • Deadline extensions: If, as military personnel, you serve in a combat zone, you can postpone a few tax deadlines. If you are eligible, you can get an automatic extension of the deadline for submitting your tax return and paying the due taxes. Some combat payments are not taxable when serving in a battle zone. This type of payment will not be included in the tax return and is therefore not considered taxable income.

  • Earned Income Tax Credit or EITC: Your non-taxable battle payout will be used to calculate your EITC, which can give you a higher EITC credit. Again, the payment for combat is still tax-free.

  • Moving expenses deduction: If, as an active member of the service, you have to move or change positions due to a military order, you can still deduct moving costs from your federal tax return. 

  • Signing Joint Returns: If a marriage declaration is jointly filed, both spouses must sign it. If your spouse cannot sign the declaration due to military duty, you can sign the declaration on behalf of your spouse. 

  • Uniform Deduction: Military personnel can deduct the cost of buying and maintaining uniforms. These uniforms should be the ones you can't wear if you're out of work. If you receive an allowance for your uniform, the deduction should be reduced by the allowance amount.


Travel deduction for reservists

If you travel as a member of the United States Armed Forces reserves, you can deduct return travel expenses. This includes non-refundable travel costs when carrying out reserve duties more than 100 miles from home. The expenses that can be deducted as a gross income adjustment are limited to the normal federal daily rate for accommodation, meals, extras, standard mileage rate (for car expenses), parking and ferry fees, and taxes. 

To qualify as a member of a U.S. Army reserve component, you must be a member of the Army, Navy, Marine Corps, Air Force, Coast Guard Reserve, United States Army National Guard, National Air Force Guard of the United States, or the Public Health Service Reserve Corps. If you need to travel more than 100 miles from home as part of your reservist duty, you must report this in your tax return. 

Travel expenses not exceeding 100 miles from home cannot be deducted as an adjustment to gross income. If so, you must complete Form 2106 and deduct expenses as an itemized deduction on Schedule A. 

If you are undergoing advanced training from the Reserve Officers Training Corps (ROTC) and receive a scholarship with accommodation and boarding, these amounts are not considered taxable. Not to be confused with the payment of ROTC in active service, which is considered tax revenue.


Non-taxable expenses for members of the armed forces

Here are some examples of non-taxable expenses:

  • Annual return ticket for student dependents 

  • Basic housing allowance

  • Basic livelihood allowance

  • Combat zone payment 

  • Defense counseling 

  • The dependent care assistance program

  • Disability payments

  • Family separation allowance

  • Group-term life insurance premiums

  • Medical and dental care

  • Moving expenses

  • ROTC allowances

  • Survivor protection plan premiums

  • Temporary accommodation

  • Travel expenses on leave between consecutive periods of service abroad

  • Uniform Allowance


Automatic Filing extension For Military Personnel 

Most people have to file their tax returns before the normal deadline (April 15). If you are serving in a combat zone or outside of the United States, you are qualified for an extension. Note that any extension is not an extension of the deadline for payment of taxes due before the normal return due date. Therefore, interest and fines may be charged for taxes due from April 15, 2021, until the date of payment. If you miss the filing deadline, you will have until October 15, 2021, to electronically file your return.  


Combat Zone Tax Exclusion 

If you are assigned to a combat zone at least one day per month, not only should you receive a tax-free payment allowance for that month, but your regular full month salary may be excluded from your taxable income. You can also exclude payment of harsh living conditions taxes and family separation checks that you receive. Also, service in an area outside an official combat zone may be considered (for tax purposes) if the Department of Defense declares that the service directly supports ongoing operations in a combat zone. You may want to report part of your combat pay that is normally non-taxable as taxable income if you claim the earned income tax credit.


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