Military members, veterans, and their families are provided with assistance by the Internal Revenue Service for their federal income tax filing requirements. Those in the military have access to a number of tax benefits, including extensions and deferments.
Military tax benefits may be available to members of the armed forces listed below. Recently retired or separated members may also qualify.
Members of the United States Army (including the Army Reserve and the Army National Guard), United States Navy (including the Navy Reserve), United States Air Force (including the Air Force Reserve and the Air National Guard), United States Marine Corps (including the Marine Corps Reserve), and United States Coast Guard (including the Coast Guard Reserve) are all eligible for special accommodations from the IRS.
During tax season, members of the United States Armed Forces are frequently deployed outside their home state or country. It can be difficult to file a military tax return or make payments on time when this occurs. Because of this, the IRS grants extensions to many military and support personnel.
There is a variety of resources available to help make tax time easier as a US service member. Learn everything you need to know about filing your taxes as a member of the military in this ultimate guide.
What military pay and allowances are taxable?
Generally, the federal government only taxes base pay in the military. On the state level, it is common for most states to waive income taxes.
Military members receive a variety of allowances and pay. Some military pay, like housing allowances or combat pay, isn't taxed at all. In the United States, some types of military compensation are taxed as gross income, while others are not.
Examples of compensation that are taxed as gross income are:
- Active-duty pay
- Hardship-duty pay
Excluded from gross income are the following:
- Moving allowances
- Combat-zone pay
- Disability pay
In some states, wages and compensation are excluded from gross income according to federal tax rules, while in others they are not.
Excluding Compensation from Taxable Income
Armed forces members serving in combat zones or supporting military operations in a combat zone can include income during that period from their federal taxable income, but not Social Security and Medicare taxes.
This includes the following:
- Pay while on active duty in a combat zone
- Imminent danger/hostile fire pay
- Reenlistment bonuses if you reenlist while serving in a combat zone
- Pay for selling back leave while serving in a combat zone
The exclusion from federal income tax is unlimited for enlisted members. Exclusions for officers are limited to the maximum amount of enlisted pay. Military housing allowances can also be excluded from federal taxable income.
Members of the armed forces can also elect to include nontaxable combat pay in order to maximize their Earned Income Credit. The nontaxable combat pay you receive must be reported as earned income if you choose this option.
Combat pay will likely increase your Earned Income Credit only if your earned income before combat pay is less than the following amounts:
- $7,000 if you have no children
- $10,500 if you have one child
- $14,800 if you have two or more children
Each state has its own tax rules on military pay. Active duty pay, retired military pay, and survivor benefits are not subject to income tax in some states. In some states, the exclusion is capped at a certain dollar amount, while in others it follows the federal tax rules. By preparing your return with a tax professional, you can make use of all of the state income tax exemptions you qualify for.
Where to File Your Taxes While Stationed
Active-duty service members are required to file state income taxes in the state where they reside legally. When military personnel move solely on military orders, they are not required to change their legal residence; they may maintain it in a state where they already have one.
This means that you should send your federal tax return to the Internal Revenue Service Center in the place where you currently live. If, for instance, your permanent home address is in California, but you are stationed in Pennsylvania, you should send your federal return to the service center for Pennsylvania. The addresses for the service centers for each state are listed in the instructions for Forms 1040, 1040A, and 1040EZ.
If you have an FPO or APO address while overseas, you should file your tax return with Internal Revenue Service Center Philadelphia, PA 19255-0215.
Military Taxes and Residency
You will probably be taxed in the state where you live rather than the state where you are stationed if you are in the military. You can also file taxes while deployed based on your state of residence.
Legal residency in a state usually requires that you prove you live there - and intend to continue living there. Each state has its own rules for proving your intent to legally reside in that state. Taking the following steps will assist you in proving your residency for filing military taxes:
- Obtaining a driver's license (or maintaining it)
- Registration of your vehicle
- Payment of state taxes, such as income or property taxes
- Registering to vote
Military Tax Return Deadlines and Extensions
For all taxpayers, the deadline to file is April 15. However, there are a number of accommodations available for members of the military to get more time to file.
Automatic Deadline Extensions and Deferrals
Armed forces members serving in active combat zones or contingency operations are entitled to an automatic extension, which extends the due date for filing tax returns, paying taxes owed, or claiming a refund. Similarly, if you are hospitalized outside of the U.S. due to injuries sustained in a combat zone or hazardous duty area, you will be eligible for an automatic extension and deferral.
Military combat zones are areas where the Armed Forces have engaged in or are engaged in combat. These areas have been designated combat zones by executive order. Contingency operations are either designated by the secretary of defense or triggered by the president or Congress declaring war or a national emergency.
The extension is calculated by counting 180 days after:
- Departure from the eligible area
- The area is no longer designated as a combat zone
- The operation is no longer classified as a contingency operation
- You're no longer hospitalized
You should add the number of days you had left to file when you began the qualifying service. For example, if you began serving in a combat zone on April 1, you had 15 days until the filing deadline of April 15. Therefore, you have 195 days from your last day of service to file your return and pay any taxes due, or 180 days plus the 15 remaining from April 1 to April 15.
The IRS will not charge you interest or penalties if you pay your tax in full by the end of this deferral period.
In addition to you, your spouse and dependents also qualify for an extension. If you file separate returns, your spouse will qualify even if you do not file a joint return.
Deadline Extensions Available to File For
If you are within the United States, by filing IRS Form 4868 before the filing deadline, you can extend your deadline for filing a federal income tax return by six months. If you owe taxes, the IRS will charge interest from the due date unless you make the payment by the original filing deadline.
Active duty members stationed outside the U.S. or Puerto Rico are entitled to an automatic two-month extension without filing Form 4868. This delays the filing deadline to June 15. An explanation of your situation and how you qualify must be attached to your tax return to qualify for this extension. In the event that you owe tax, the IRS will still charge interest and late payment penalties from the regular due date forward.
An additional four-month extension is also available if you can't file by June 15. You can also use Form 4868 to request this extension.
Helpful Resource: How to File an Income Tax Extension
Additionally, you may be able to request a two-month discretionary extension, which pushes your deadline back to December 15. By October 15, you must send a letter to the IRS requesting the two-month extension. In the letter, explain why you need the extra time.
You will only receive a response if the IRS denies your request for additional time.
Special Military Tax Rules
In addition to extensions and deferrals, there are also a variety of other tax-related accommodations for US military members in place by the IRS.
Joint Tax Return by Spouse
Armed forces stationed in combat zones usually have more time to file their tax returns. However, if you have a spouse or a family, they may want to file as early as possible so they can receive your refund. When only one spouse is present to file a joint tax return, the spouse can receive special authorization to act on behalf of the other spouse.
Responding to IRS Notices
The IRS gives military members more time to deal with IRS notices, including collections and audits, when they are deployed in a combat zone or contingency operation. Return the IRS notice to the IRS with the words "COMBAT ZONE" in red on the notice and on the envelope.
Helpful Resource: What to Do When You Recieve an IRS Letter or Notice
You can also prevent such notices from being sent by sending the IRS an email with your name, stateside address, date of birth, and deployment date. You should also attach a military statement confirming your deployment area.
Contributing to an IRA
Contributions to Traditional and Roth IRAs for the previous year are generally due by April 15 of the current tax year. You have until April 15, 2022, for example, to make a 2021 IRA contribution.
The IRS can extend your deadline for making an IRA contribution by 180 days if you are serving in a combat zone or on a contingency operation, or if you are hospitalized.
Military Tax Breaks, Credits, and Deductions
The tax benefits the government offers to military service members continue with a wide array of tax breaks available to help lower your tax bill. Here are some other tax breaks, deductions, and tax credits that you may find useful.
As a result of the Tax Cuts and Jobs Act of 2017, many taxpayers lost the right to deduct moving expenses, but active-duty military members did not.
Military members who move due to a permanent change of circumstance can deduct unreimbursed moving expenses, including:
- Transporting household goods and personal items
- Storage and insurance of household goods and personal items within the 30-day period between moving out of your old home and moving into your new one
- Travel expenses from your old home to your new home, such as lodging, car rental, or airfare
Those who travel more than 100 miles from home for reserve duties may deduct their unreimbursed travel expenses from their departure date until their return date.
Housing and Living Allowances
The Basic Allowance for Housing (BAH) and Overseas Housing Allowance (OHA) are excluded from taxable income. You may, however, be able to deduct other expenses paid with your BAH, such as mortgage interest and real estate taxes. In addition, the Basic Allowance for Subsistence is also excluded from gross income.
If you need work-related education to maintain or improve the skills needed for your job, it can be deducted. There is also the possibility of receiving up to 100% of tuition from Military Tuition Assistance. Dependents may also be able to deduct certain educational expenses.
You may be able to deduct the cost of purchasing and maintaining your uniforms. These uniforms must be those that you cannot wear if you are off duty. If you receive an allowance for your uniform, your deduction must be reduced by that amount.
Tax-Free Expenses for Members of the Armed Forces
Tax-free and not subject to tax, these types of expenses are excluded from your gross income, but you may have to report them on your return. Examples of tax-free expenses include:
- Temporary lodging
- Annual round trip for student dependents
- Dependent-care assistance program payments
- Disability payments
- Medical and dental care
- Defense counseling
- Group-term life insurance premiums
- Survivor Protection Plan premiums
- ROTC allowances
- Family Separation Allowance
Military Tax Returns for Spouses During Deployment
If the service member you're married to is deployed, you might be wondering how you can file taxes. Military spouses are now taxed much the same as military members. The Military Spouses Residency Relief Act of 2009 (MSRRA) made this possible. Military spouses can either maintain their original states of residence or choose the state of residence of the service member spouse under this act.
This is true even if your spouse is stationed in another state, so long as you comply with the following military residency requirements:
- You must move with your military member spouse to a state outside your home state. Your spouse must be moving on military orders.
- You’re in the stationed state only to be with the military member.
Filing taxes while deployed becomes easier this way. You will not be taxed by the state in which you are stationed if you meet these military residency requirements. Despite the fact that the income could be subject to tax in your home state, this rule still applies. Your property is also not taxed in the stationed state.
Therefore, both your non-military income and your spouse's military income are exempt from state tax in the state where you are stationed. As a result, filing your military taxes becomes much easier. Each of you must still pay income and property taxes in your home state.
What You’ll Need to File Taxes
No matter whether you choose an off-base tax professional, tax software, or to visit your installation tax center or a VITA office off-base, here is what you must have:
- Valid identification
- A Social Security card for you, your spouse, and your dependents, or a Social Security number verification letter issued by the Social Security Administration.
- Taxpayer Identification Number (ITIN) assignment letter for you, your spouse, and your dependents
- Evidence of foreign status, if applying for an ITIN
- The dates of birth of you, your spouse, and your dependents
- Statements of earnings and wages from all employers (IRS Forms W-2, W-2G, 1099-R).
- Bank interest and dividend statements (Form 1099)
- Last year's federal and state tax returns, if available
- For direct deposits, a blank check for proof of routing and account numbers
To file a joint tax return electronically, both spouses must sign the appropriate forms or you must have a power of attorney that allows the filing spouse to complete the process. If one spouse is serving in a combat zone, there is a special exception. It is simply a matter of providing a written statement stating that the filing spouse is serving in a combat zone and therefore unable to sign.
Where to Go for Tax Help
Many tax professionals specialize in helping service members and their families deal with unique tax situations. With expert guidance and free services provided by tax professionals, military taxpayers can save money on tax preparation and filing. These professionals have been trained by the Internal Revenue Service and the military to deal with the often complex tax situations military members face.
IRS Free File
The IRS Free File program allows many military taxpayers to file their taxes for free. In partnership with leading tax software providers, the IRS offers free brand-name software to those earning $69,000 or less. Several of these providers offer free federal and state tax return preparation and electronic filing. If you earn over $69,000, you can use Free File Fillable Forms, an electronic version of IRS paper forms. This option is best for those who have experience preparing tax returns.
Military spouses and active duty military service members can take advantage of a special offer from Free File. The income limitation is waived for individuals and their families, and individuals and their families may choose from any of nine tax preparation software companies.
Military OneSource / MilTax
The Department of Defense offers Military OneSource, a service that provides a wide range of free resources for military members, veterans, and their families.
The Military OneSource tax service, MilTax, offers free electronic filing of federal and up to three state tax returns, regardless of income.
Volunteer Income Tax Assistance / VITA
Every year, millions of people have their taxes prepared for free by IRS-certified volunteers. Volunteer Income Tax Assistance has helped millions of taxpayers over its 50-year history. Nearly 11,000 free tax preparation sites across the country, some located on military installations, prepared more than 100,000 free tax returns for military members and veterans last year.
Volunteer Income Tax Assistance programs are also available for free in many off-base communities. Your combined income must be less than $57,000 to qualify for free services at these civilian locations.
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