Tax Tips for Military Personnel
Members of the military and their families may be
eligible for special tax benefits. This brochure presents a
brief summary of some of the special tax provisions that
For federal tax purposes, the U.S. Armed Forces
includes officers and enlisted personnel in all regular and
reserve units controlled by the Secretaries of Defense,
the Army, Navy and Air Force. The Coast Guard is
also included, but not the U.S. Merchant Marine or the
American Red Cross.
General Military Provisions
Uniform Cost and Upkeep. In general, the expenses
for uniform cost and upkeep are nondeductible. If
military regulations prohibit you from wearing certain
uniforms when off duty, you can deduct the cost and
upkeep of those uniforms, but you must reduce your
expenses by any allowance or reimbursement you receive.
Travel to Reserve Duty. If you are a member of the
US Armed Forces Reserves, unreimbursed travel expenses
for traveling more than 100 miles away from home to
perform your reserve duties are eligible for deduction.
You do not have to itemize deductions since eligible
expenses are deducted as an adjustment to income.
Expenses related to travel less than 100 miles
or overnight travel may be deducted as an itemized
deduction. A meeting of a reserve unit is considered a
second place of business only if the meeting is held on a
day on which you work at your regular job. Also, if you
travel away from home overnight to attend a guard or
reserve meeting, you can deduct travel expenses.
Plan Distributions. Distributions from IRA, 401(k),
or 403(b) plans which were made after the date of the
order or call to active duty and before the close of the
active duty period are subject to special rules and
may not be subject to the 10% penalty tax on
early distributions. Such distributions are also eligible to be
repaid to the plan if paid back within 2 years after active
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.
Joint Returns. Generally, joint returns must be signed
by both spouses. If one spouse is overseas on military
duty, there are some options for signing:
• One spouse can prepare the return, sign it, and send it
to the other spouse to sign early enough so that it can be
filed by the due date, or
• The spouse who expects to be overseas on the due
date of the return can file Form 2848, Power of Attorney
and Declaration of Representative, specifically designating
that the spouse who remains in the United States may
sign the return for the absent spouse.
•If the taxpayer is stationed in a combat zone, the
spouse can sign without a Power of Attorney.
Extending Your Return. If you live in the US, you
can receive an automatic 6-month extension to file your
return by filing Form 4868. If you live outside the US,
you may qualify for an automatic 2-month extension
of time without filing Form 4868, and an additional
4-month extension may be requested by filing
Form 4868 by June 15.
You do not have to send in any payment of tax due
when you extend your return, however, interest will be
due on late payments.
Deferral of Tax Payment. Armed Forces members
may qualify to defer payment of income tax that becomes
due before or during military service. If you qualify,
you will be allowed up to 180 days after termination
or release from military service to pay the tax.
Moving Expenses. Special rules apply to active
duty members of the Armed Forces and their surviving
spouses who move because of a permanent change of
station. Deductible expenses include unreimbursed costs
of moving household goods and personal effects, travel,
and certain costs of storing and insuring household
goods and personal effects. For foreign moves, the
deductible moving expenses are expanded to include
the reasonable expenses of moving your household
goods and personal effects to and from storage, and
storing these items for part or all of the time the new
job location remains your main job location.
Sale of Home. Qualifying taxpayers can exclude up
to $250,000 of gain ($500,000 if married filing a joint
return) on the sale of a main home. There are special
rules if you sell due to a move to a new permanent duty
station. Another special rule is available for suspending
the test period for ownership and use for up to 10
years during the period you or your spouse serve on
qualified official extended duty.
Transitioning Back to Civilian Life. You may be able
to deduct some costs you incur while looking for a new
job. Expenses may include travel, resume preparation
fees, and outplacement agency fees. Moving expenses
may be deductible if your move is closely related to the
start of work at a new job location.
Homebuyer Credits. Certain military personnel are
still eligible for the first-time and long-time resident
homebuyer credits through April 30, 2011. If you, or
your spouse, are on qualified official extended duty
outside the United States for at least 90 days after 2008
through April 30, 2010, the due dates to qualify for the
homebuyers credits are extended to purchases by April
30, 2011 or binding contracts in effect by April 30,
2011 which are closed by June 30, 2011.
The homebuyer credit recapture may be waived if the
home was sold or ceased to be the taxpayer’s main
home in connection with Government orders for
qualified official extended duty service.
Combat Zone Provisions
Extension of Deadlines. The deadline for filing
tax returns, paying taxes, filing claims for refund,
and taking certain other actions with the IRS, including
making IRA contributions, is automatically extended if
serving in a combat zone, or you have qualifying service
outside of a combat zone, such as participating in a
contingency operation. No penalties or interest will be
imposed for failure to file a return or pay taxes during
the extension period.
Combat Pay Income Exclusion. Pay received while
a member of the US Armed forces serving in a combat
zone can be excluded from income. If you serve in a
combat zone for any part of one or more days during
a particular month, you are entitled to an exclusion for
that entire month.
The wages shown in box 1 of your W-2 should not
include military pay excluded from income under the
combat zone exclusion provisions. If it does, get a
corrected Form W-2 from your finance office. Pay
properly shown in Box 1 of Form W-2 may not be
excluded under the combat pay rules.
Earned Income Credit. A special election can be made
to include all your nontaxable combat pay in income to
qualify for the earned income credit. If you are filing a joint
return and both you and your spouse received nontaxable
combat pay, you can each make your own election.
IRA Contributions. Combat pay is considered earned
income for purposes of contributing to an IRA even
though it is not included in taxable income.
IRS Audit and Collections Relief. Taxpayers
who are serving in a combat zone are eligible for a
suspension of IRS compliance actions, such as audits
or enforced collections, until 180 days after the
taxpayer has left the zone.
Decedent Provisions. Tax liability for the year of
death and possibly for earlier years can be forgiven, or
taxes refunded, 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.
This brochure contains general tax information for taxpayers.
As each tax situation may be different, do not rely upon this
information as your sole source of authority. Please seek
professional advice for all tax situations.
#869 – © Copyright August 2010
National Association of Tax Professionals
PO Box 8002
Appleton, WI 54912-8002