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Posted by Jim McClaflin, EA, NTPI Fellow, CTRC

Understanding Various Military Tax Benefits

Understanding Various Military Tax Benefits


For a start, you must be aware that you are only entitled to military tax benefits, if you are actively involved in service, or have served on active duty. Most importantly, it would be best if you equally were a taxpayer as you would be accessible and eligible for lots of benefits that make taxes less stressful.

This article has gathered some information about the benefits you or your loved ones can enjoy while paying taxes as military personnel.


Benefits Peculiar to Military Personnel

Exclusion payment

If you are currently in service in a combat zone, it’s possible to remove your reenlistment bonus, pay, and others from the taxable income you ought to pay. One needs to know that these exemptions are for members that have been enlisted, assigned officers, and warrant officers. 


Deadline Extension

Some members in active service are entitled to a postponement of their tax filing deadline. Those serving abroad are entitled to a 2-month extension to file for a return. If you'd like to activate the extension, you need to include a statement that explains your circumstances. Generally, the extension to file doesn’t necessarily prolong the payment time of your tax. 

Active service members in combat zones have an automatic extension for filing their tax returns and tax payment for 180 days from the last day in a combat zone.


Deductions

You might be moving or relocating to a different environment as military personnel, and you need to make adjustments in your permanent change of station. In that case, you can subtract'' important unreimbursed bills "incurred in the relocation process. Examples of such bills include flight ticket bills, packing expenses, truck and trailer rent bills, lodging bills, etc.


Freedom of choice

Do you know that you can choose the state you'd like to be taxed for as military personnel?

Members that are active in service but relocated on the job, with their spouses in their previous residential building, can decide to use it for tax-related issues. This is practical if the last residence is located in a state with little or no income tax. This can be a big way to save money as a family. Also, if you are married to Active Duty U.S military personnel as a civilian, you can decide to use the exact tax residence as your spouse.


Free Withdrawals

Generally, your taxes are paid when you make contributions to Roth IRA. You can make withdrawals entirely accessible as long as the required conditions are met, including using the account for at least five years and an age of 59 at the inception of your contributions. But, if you belong to the category of those getting tax-free combat–zone payment, you can make your contributions and withdrawals from your Roth account free.


Additional Exclusions

You should know that you are entitled to the exclusion of capital gains on your home if you have a personal house in two years and have lived there for not less than two years in your five-year service period.

Another advantage is that if you and your partner are qualified officials on extended duty in U.S armed services or foreign service; the 5-year rule may be extended to 10 years. Therefore, the least requirement you must have is to save up on capital gains tax including living in residence for two years out of the last 15 years.


If you are willing to file your taxes, you should look out for free tax preparation and filing procedures on military bases. 

As active military service personnel, you and your family must enjoy the benefits of the profession.


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Jim McClaflin, EA, NTPI Fellow, CTRC
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