Tax Tips for Military Personnel

If you’re in the military, the IRS has special rules for you. Here’s what you need to know!

Tax Tips for Mili-tary

Personnel

Combat Zone ExclusionMembers of the Armed Forces who serve in a designated combat zone can exclude combat pay from their taxable income. This means that the pay you earn while serving in an officially recognized combat zone OR were hospitalized due to injuries or illness sustained while serving in a combat zone, is not taxable. You need only serve for one day in a month to qualify for exclusion for the entire month. 

Gross IncomeMilitary service members receive many different types of pay. For tax pur-poses, it is important to identify the types of pay and allowances that can be ex-cluded from your gross income. These exclusions generally include: living al-lowances, moving allowances, travel allowances, combat zone pay and death al-lowances. Excluded items are not subject to tax, but may have to be shown in your tax return. 

Retirement ContributionsGenerally, you can deduct some portion of the contributions you make to your traditional individual retirement account (IRA) for the year. However, if you or your spouse were covered by an employer-maintained plan at any time during the year then not all of these deductions may be eligible. Military personnel qualify for additional time to make contributions to an IRA.

Sale of a HomeYou may not have to pay tax on all of the profit realized from the sale of your main home. A deduction of up to $250,000 of gain (or $500,000 if married, filing jointly) is generally available upon the sale of a main home. A main home is one defined as having been lived in as a primary residence for more than two years. 

Travel ExpensesWork-related travel expenses for which you are not reimbursed are tax deductible.Eligible expenses include business-related meals, lodging, laundry and business phone calls. You cannot deduct travel expenses for personal travel, even if you are serving overseas.

Moving ExpensesIf you are a member of the Armed Forces on active duty and you move be-cause of a permanent change of station, then you are entitled to a deduction for reasonable un-reimbursed moving expenses related to travel and the cost of moving household goods and personal effects.

Uniform ExpensesGenerally, these are not deductible, except when regulations prohibit you fromwearing uniforms off duty. In this case, you can then deduct the un-reim-bursed cost and expense of upkeep of the uniforms.

Education ExpensesEducation expenses are deductible if one of two conditions are met. First, if it is required by your employer or the law to maintain your salary, status or job. This must also serve a bona fide business purpose of your employer. Or if the class or course maintains or improves skills needed in your present work.

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Ewing, Ethan. “Top Tax Tips for Military Personnel.” Military.com. Military Advantage. Web. 19 May 2016. <http://www.military.com/money/per-sonal-finance/taxes/top-tax-tips-for-military-personnel.html>