108 Solutions Military Life: Active-Duty Military Pay and Benefits Part Two

As mentioned in our previous post on Active-Duty Military Pay and Benefits, this is section two of benefits that most personnel may not aware of.

Section II: Special Tax Benefits for Military Personnel

1. Moving Expenses
Military allowances for PCS moving expenses will be paid for members of the Armed Forces, on active-duty status. Service members who move because of a permanent change of duty station receive this military pay compensation. Moving expenses can also be deducted if you are out of the military and your move is closely related to the start of a new job location, and you meet certain tests. You are entitled to a deduction for reasonable, unreimbursed moving expenses related to travel and the cost of moving household goods and personal belongings.

2. Combat Pay
Most enlisted military personnel or warrant officers know that if they serve in a combat zone for any part of a month, all of their pay received for military service during that month is not taxable. Military officers are eligible to receive tax free pay as well but it could be capped at the highest enlisted pay, plus hostile fire or imminent danger pay received. One little known fact is that you can elect to include your nontaxable combat pay in your ‘earned income’ for purposes of claiming the Earned Income Tax Credit.

3. Extension of Deadlines
Qualifying members of the military can get an automatic extension for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS.

4. Military Uniform Cost and Upkeep
You can deduct the cost and upkeep of uniforms that military regulations prohibit you from wearing when off duty. If you receive any allowance or reimbursement for the services you receive you will need to reduce your expenses by those amounts.

5. Joint Returns
A power of attorney may be used on joint income tax returns if one spouse is unavailable due to military duty.

6. 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.

7. 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.

8. Job Hunting Expenses
You may be able to deduct some costs you incur while looking for a new job after separating from the military. Expenses may include travel and outplacement agency fees.

9. Forgiveness of Decedent’s Tax Liability
Tax liability can be forgiven, or refunded if already paid, if a member of the U.S. Armed forces dies while in active service in a combat zone; from wounds, disease, or other injury received in a combat zone; or from wounds or injury incurred in a terrorist or military action. If filing a joint return only the decedent’s part of the joint income tax liability is eligible for the refund or tax forgiveness.

10. Tax Help
Most military installations offer free tax filing and preparation assistance during and/or after the tax filing season.

11. Earned Income Tax Credit
Tax credit designed to lessen the tax burden for individuals and families with lower income. Qualified individuals and families can receive anywhere from $450- $5,000. The taxpayer must be between 25 and 65 years old, have an earned income and make less than $3,150 in investment income. For military personnel, they would be interested in the EITC because combat pay is not included in a service member's income, making it easier to meet the income requirements for qualification.

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