Tax tips for military personnel
Men and women who serve in the military face a different set of challenges than most. In any given year, military personnel may experience relocation to different stations, temporary assignments and shifts for serving in a combat zone. As the sister of two Navy boys, including a career submariner, I can attest that what does remain constant is the capacity for change -- my brothers, for example, have collectively lived or worked in at least seven states while in the service.
With the constantly changing lives of military personnel in mind, the IRS recently released a list of hot topics targeted to those in the service. Here are a few highlights:
- Moving Expenses. Generally, to deduct moving expenses, you have to meet certain time and distance tests. However, if you are on active duty in the military and you move because of a permanent change of station, you don't have to meet these tests in order to take the deduction. A permanent change of station includes a move from your home to your first post of active duty, a move from one permanent post of duty to another, and a move from your last post of duty to your home (slightly different rules may apply for spouses and dependents). If you are reimbursed for the move or receive an allowance to cover the costs of the move, you may not claim the deduction; however, if your expenses exceed your reimbursements or allowances, you can claim those expenses on a form 3903. If your reimbursements and allowances exceed your expenses, you have to claim the excess as wages. Examples of deductible expenses include the costs of travel (including lodging but not meals), as well as expenses related to hauling a trailer, packing, crating, in-transit storage and insurance.
- Combat Pay Exclusion. If you serve in a combat zone, you can exclude your "combat pay" from your gross income come tax time. There's no need to do anything extra to qualify for the exclusion -- the amount of your combat pay will not be included on your form W-2. To qualify as combat pay, your pay must have been earned in a month in which you either served in a combat zone or were hospitalized as a result of injuries or sickness incurred while serving in the combat zone. Retirement pay and pensions do not qualify for the combat zone exclusion. Other exceptions apply, so be sure to ask if you have questions.
- Extension of Filing Deadlines. The deadline for filing tax returns, paying taxes, filing claims for refund, and other tax-related IRS activity is automatically extended if you serve in a combat zone, you have qualifying service outside of a combat zone or if you are deployed outside of the country away from your permanent duty station while participating in a contingency operation. A contingency operation is a military operation designated by the Secretary of Defense or a call to active duty during a war or a national emergency. Deadlines are also extended for support personnel for the military -- this includes Red Cross personnel, accredited correspondents, and civilian personnel acting under the direction of the Armed Forces. Generally, your deadline is extended for 180 days after the later of the last day you are in a combat zone, have qualifying service outside of the combat zone, serve in a contingency operation, or the last day of any continuous qualified hospitalization for injury while performing qualifying service. Additional time may also be granted in certain circumstances; check with your tax professional or the IRS for more information.
- Uniform Cost and Upkeep. You are usually not allowed to deduct expenses for the costs of buying and maintaining uniforms. However, if military regulations prohibit you from wearing your uniform when not on duty, you can deduct those costs. That would include military battle dress uniforms and utility uniforms, as well as qualifying reservists' uniforms. You can also deduct the costs of accessories such as insignia of rank, corps devices, epaulets, aiguillettes and swords. As usual, if you receive any reimbursement or allowance, you can only take the deduction to the extent that it exceeds the amount received.
- Travel to Reserve Duty. If you are a member of the branches of the reserves (Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service) and you travel more than 100 miles away from home to perform your duties, you can deduct your travel expenses as an adjustment to income. This means you can claim the expense on line 24 of your form 1040 as "above the line" rather than as a miscellaneous itemized deduction on Schedule A. All expenses from the time you leave home until the time you return home are included to extent that they don't exceed the amount the federal government pays its employees for travel expenses.
Tax support and assistance are available on many military bases. If yours doesn't offer help or you prefer to use a tax professional off base, keep in mind that you might be eligible for special military rates -- just ask!