Soldiers are subject to income tax on their military pay, just like other taxpayers. However, they may be eligible for certain tax benefits and deductions that can reduce their tax burden. For example, soldiers deployed to combat zones may be eligible for the combat zone tax exclusion, which allows them to exclude a portion of their income from taxation. Additionally, soldiers may be able to deduct certain expenses related to their military service, such as moving expenses or the cost of uniforms.
Military Tax Exemptions and Deductions
Members of the military receive certain tax exemptions and deductions that help to offset the unique financial challenges they face. These benefits include:
- Combat pay exclusion: Up to $2,000 per month of combat pay is excluded from taxable income.
- Moving expenses: Military members can deduct the cost of moving to a new duty station.
- Housing allowance: The housing allowance that military members receive is not taxable income.
- Death gratuity: The death gratuity that military members receive is not taxable income.
- Educational assistance: Military members can deduct the cost of educational expenses up to $2,500 per year.
- IRA contributions: Military members can contribute up to $6,500 to an IRA each year, and this amount is deductible from taxable income.
In addition to these exemptions and deductions, military members may also be eligible for the following tax credits:
- Earned income tax credit (EITC): The EITC is a refundable tax credit for low- and moderate-income workers. Military members may be eligible for the EITC even if they do not have qualifying children.
- Child tax credit (CTC): The CTC is a tax credit for parents with qualifying children. Military members may be eligible for the CTC even if they are not the primary caregiver for their children.
| Tax Benefit | Description |
|---|---|
| Combat pay exclusion | Up to $2,000 per month of combat pay is excluded from taxable income. |
| Moving expenses | Military members can deduct the cost of moving to a new duty station. |
| Housing allowance | The housing allowance that military members receive is not taxable income. |
| Death gratuity | The death gratuity that military members receive is not taxable income. |
| Educational assistance | Military members can deduct the cost of educational expenses up to $2,500 per year. |
| IRA contributions | Military members can contribute up to $6,500 to an IRA each year, and this amount is deductible from taxable income. |
| Earned income tax credit (EITC) | The EITC is a refundable tax credit for low- and moderate-income workers. Military members may be eligible for the EITC even if they do not have qualifying children. |
| Child tax credit (CTC) | The CTC is a tax credit for parents with qualifying children. Military members may be eligible for the CTC even if they are not the primary caregiver for their children. |
Tax Treatment of Military Pay and Allowances
Military members are subject to federal and state income taxes on their pay and allowances. However, there are some special rules that apply to combat pay and certain allowances, which can result in tax savings.
Tax Consequences of Combat Pay
Combat pay is a tax-free allowance paid to military members who serve in combat zones. The amount of combat pay that is tax-free is limited to the amount of the member’s base pay, plus any special pay for duty in a combat zone.
Combat pay is not considered taxable income for federal income tax purposes, which means that it is not subject to federal income taxes, Social Security taxes, or Medicare taxes. Combat pay is also not considered taxable income for state income tax purposes, unless the state has a specific law that taxes combat pay.
Tax Treatment of Allowances
Allowances are payments made to military members to cover the costs of food, housing, and other expenses. Allowances are generally considered taxable income for federal income tax purposes, but some allowances are tax-free.
- Tax-free allowances: The following allowances are tax-free for federal income tax purposes:
- Basic allowance for housing (BAH)
- Basic allowance for subsistence (BAS)
- Family separation allowance (FSA)
- Temporary lodging allowance (TLA)
- Taxable allowances: The following allowances are taxable for federal income tax purposes:
- Clothing allowance
- Overseas housing allowance (OHA)
- Post allowance
- Hazard pay
- Proficiency pay
Table Summary
| Type of Pay/Allowance | Federal Income Tax Treatment | State Income Tax Treatment |
|---|---|---|
| Combat pay | Tax-free | Varies by state |
| Allowances | ||
| Basic allowance for housing (BAH) | Tax-free | Tax-free |
| Basic allowance for subsistence (BAS) | Tax-free | Tax-free |
| Clothing allowance | Taxable | Varies by state |
| Family separation allowance (FSA) | Tax-free | Tax-free |
| Hazard pay | Taxable | Varies by state |
| Overseas housing allowance (OHA) | Taxable | Varies by state |
| Post allowance | Taxable | Varies by state |
| Proficiency pay | Taxable | Varies by state |
| Temporary lodging allowance (TLA) | Tax-free | Tax-free |
Filing Taxes While Deployed
Soldiers are required to file taxes just like any other U.S. citizen, even while deployed overseas. Here are some of the key things to know about filing taxes while deployed:
- Use a military tax filing service. There are a number of military tax filing services that can help you file your taxes for free. These services are specifically designed for military members and can help you take advantage of all of the tax benefits that you are eligible for.
- File an extension if needed. If you are unable to file your taxes by the April 15th deadline, you can file an extension. This will give you until October 15th to file your taxes.
- Take advantage of the combat zone tax exclusion. The combat zone tax exclusion allows you to exclude up to $200,000 of your military income from your taxable income. This can save you a significant amount of money on your taxes.
- Get help from a tax professional. If you have any questions about filing your taxes while deployed, you can get help from a tax professional. Tax professionals can help you make sure that you are filing your taxes correctly and taking advantage of all of the tax benefits that you are eligible for.
Tax Assistance for Service Members
United States service members have unique tax situations. The military provides a variety of resources to help service members with their tax preparation and filing needs. Some of these resources include:
- The Military OneSource Tax Center provides free tax assistance to active-duty, National Guard, and Reserve members, as well as their families.
- The Department of Defense provides a variety of tax resources on its website, including information on tax laws, tax filing, and tax assistance.
- The Internal Revenue Service (IRS) provides a variety of tax resources for service members, including information on tax laws, tax filing, and tax assistance.
In addition to these resources, service members may also be eligible for a variety of tax benefits, including:
- The combat pay exclusion allows service members to exclude from their taxable income any pay received for service in a combat zone.
- The overseas housing exclusion allows service members to exclude from their taxable income any housing allowance received for service overseas.
- The earned income tax credit (EITC) is a tax credit for low- and moderate-income working individuals and families. Service members may be eligible for the EITC even if they do not have any earned income.
Service members should be aware of these tax resources and benefits to ensure that they are taking advantage of all the tax benefits available to them.
| Deadline | Description |
|---|---|
| April 15th | Tax filing deadline for most taxpayers |
| June 15th | Tax filing deadline for service members serving in a combat zone |
| October 15th | Tax filing deadline for service members serving outside the United States |
Hey there, folks! Thanks for taking the time to read about the tax adventures of our brave soldiers. I hope you found it informative and maybe even a bit enlightening. Remember, if you have any burning tax questions or just want to chat about the military’s financial foibles, don’t hesitate to drop by again. Until next time, stay informed and keep those tax dollars flowing!