The IRS has special provisions for active members of the U.S. Armed Forces. And those in a combat zone have additional tax benefits during the time served in the combat zone. Below are 9 of the many helpful tax benefits for those serving active duty in the Army, Navy, Marines, Air Force, Coast Guard, and associated reservists.
- Free tax prep – Service members and their families at bases in the U.S. and around the world qualify for free tax preparation through the Volunteer Income Tax Assistance program.
- Extended tax filing deadline – Members of the armed forces stationed abroad have until June 15 to file federal income tax returns without filing an extension. For those in a combat zone, the deadline is 180 days after leaving the combat zone.
- Delayed payment – Up to a 180 extension for payment of income tax due is available for qualified service members.
- Combat pay – The pay received while in areas such as a designated combat zone or a hazardous duty area is fully or partly tax free. State bonus payments are considered combat pay and are not taxable. However, differential wages, those paid by an employer to the employee who is serving combat duty, count as regular wages and are taxable.
- Travel expenses — Reserve-related duties more than 100 miles from home qualify as a tax deduction (for unreimbursed expenses), even if the reservist doesn’t itemize other deductions.
- Moving expenses – Unreimbursed moving expenses are deductible for those on active duty who move due to a permanent change of station. This includes a move from home to a first post of active duty, moves between posts, and a move from active duty to home within one year of ending active duty.
- Sale of home – Service members may not have to pay tax on all or part of the gain from a sale of a home. And, the 5-year test period (owning and living in the home for 2 of the last 5 years) may be suspended if the homeowner was on active duty during the five year time period.
- Retirement account direct deposit – A service member’s tax refund may be deposited into myRA®, a retirement account offered by the Department of the Treasury.
- Forgiveness of tax liability – If a member of the Armed Forces dies while in active service, or from wounds, injuries, or diseases obtained during terrorist or military action, then the tax for the year of death and possibly other years may be forgiven.
The Taxpayer Advocate Service is an independent organization within the IRS that helps all taxpayers, military or not, resolve tax problems. It’s a free service that assigns one advocate to provide help until the issues are satisfied.
For complete information about tax benefits specifically for active members of the Armed Services, please see IRS Publication 3, or talk with a Salmon Sims Thomas tax advisor.