You are the ones on the front lines, fighting for our freedom. In September, we celebrate both Patriot Day and National POW/MIA Recognition Day. If anyone deserves a break, it's those of you in the U. S. Armed Forces. Allow me to help.
Troops, there are special tax breaks that may apply to you, including deductions and credits. Certain types of pay are not taxable and, in some cases, you may get more time to file your tax return. As a member of the military, you may also get more time to pay your income tax. Check with a tax advisor on what applies to your situation, but here are some general tips:
1. Deadline Extensions. Some members of the military, such as those who serve in a combat zone, can postpone some tax deadlines. These are zones designated by an Executive Order from the President as areas in which U.S. military troops are engaging or have engaged in combat. If this applies to you, you can get automatic extensions of time to file your tax return and to pay your taxes.
2. Combat Pay Exclusion. According to the IRS, if you serve in a combat zone (or serve in support of this type of zone) your combat pay is partially or fully tax-free. Check with an advisor on this one, especially if you are in a support role.
3. Moving Expense Deduction. You may be able to deduct some of your unreimbursed moving costs on Form 3903. This normally applies if the move is due to a permanent change of station.
4. Earned Income Tax Credit or EITC. If you get nontaxable combat pay, you may choose to include it when calculating your taxable income. Why would you do that, you ask? Including it may boost your EITC, meaning you may owe less tax and could get a larger refund.
In 2015, the maximum credit for taxpayers was $6,242. The average amount of EITC claimed was more than $2,400. Calculate it both ways and go with the best numbers. Which benefits you the most?
5. Signing Joint Returns. Normally, both spouses need to sign a joint income tax return. This can be a problem if you, or your spouse, are deployed. You may be able to sign for your spouse if he or she is absent due to certain military duty or conditions. For this, you'll need a Power of Attorney. Your installation's legal office should be able to help you.
6. Reservists' Travel Deduction. Reservists whose reserve-related duties take them more than 100 miles away from home can deduct their unreimbursed travel expenses on Form 2106, even if they don't itemize their deductions. This is the form for Employee Business Expenses.
7. What You Wear Matters. You can deduct the costs of certain uniforms that you can't wear while off duty. This includes the costs of buying them and upkeep. Remember to reduce your deduction by any allowances you get for these costs.
8. ROTC Allowances. Some amounts paid to ROTC students in advanced training aren't taxable, such as allowances for education. Active duty ROTC pay is taxable. For example, pay you earn for summer advanced camp is taxable. For more tax benefits and credits, check out this one-sheet from the IRS.
When you leave the military and look for work, some of the benefits continue. You may be able to deduct some job search expenses including the costs of travel, preparing a résumé and job placement agency fees. Moving expenses may also qualify for a tax deduction.
It's always smart to have a tax pro double-check your numbers, and laws regarding the military can vary from state to state. You've worked hard for Uncle Sam and you have the right to keep as much of your own money as possible.
And, again, thank you for your service.