Special Tax Breaks for Members of the Military

Most Americans may not think about federal income taxes in the middle of July, but being prepared for tax season while you can still do something about it is good way to be proactive. For example, members of the military stationed overseas during tax filing season are automatically https://turbo-tax.org/ granted a two-month extension to pay their taxes, without incurring penalties or interest. Mitchell highlights a change affecting military spouses and service members who operate a business selling goods or services, which is resulting in questions from the field.

  • When serving abroad as a U.S. military member, you still need to pay your taxes on time.
  • One factor to be aware of — claiming the EITC could delay your tax refund.
  • To learn more about the First Command Financial Behaviors Index, contact us at or visit /about-us/advisor-difference.
  • If the IRS concurs, the service member will be allowed up to 180 days after termination or release from military service to pay the tax.
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Taxpayers who have already filed their 2022 tax returns and included the payments in their gross income should file amended returns using Form 1040-X, Amended U.S. Individual Income Tax Return. For example, in 2022, Virginia enacted a law that gradually phases out taxes on military retirement for retirees age 55 and older, up to a cap of $40,000. It starts with tax year 2022, when the first $10,000 of their retirement pay is tax free. ♦ Taxpayers can deduct the cost of operating an automobile for business, charitable, medical or moving expense purposes. Taxpayers may use the optional standard mileage rates, but there are two rates for 2022. For the last six months of 2022, the standard rate for business travel was 62.5 cents per mile, up 4 cents from the rate effective for the first six months of the year.

Money Topics

This is a monthly stipend for U.S. military members that’s free from federal taxation. While base pay is taxable by the federal government, additional forms https://turbo-tax.org/military-tax-tips/ of United States military pay aren’t when earned abroad. Understanding this is crucial so you don’t accidentally report forms of nontaxable income.

If you have any questions about special tax situations for National Guard or reservists, contact a MilTax consultant for a free consultation. If you are eligible to claim a loss on your tax filing, use IRS Form 4684, Casualties and Thefts. Refer to IRS Publication 547 (Casualties, Disasters, and Thefts) and Publication 584 (Casualty, Disaster, and Theft Loss Workbook) for more detailed information. Many military families buy a home knowing they may have to sell it when their next PCS comes around.

One highlight: The free MilTax software that includes tax prep help from tax consultants

Learning to take advantage of these tax breaks can help you make the most of your money and your benefits as a member of the military. If, as part of your duty as a reservist, you must travel more than 100 miles from home, you should report this on your 2022 Tax Return. If you are moved permanently to a new station, you may deduct your moving expenses or be reimbursed for related costs such as mileage and lodging. If you are reimbursed, do not include this income as taxable income on your return.

  • Last year, over 100,000 free tax returns were prepared for military members and veterans at nearly 11,000 free tax preparation sites across the country, some located on military installations.
  • After the extended date, you will be assessed any applicable late tax penalties.
  • Therefore, interest and/or penalties might be charged on any taxes owed from April 15, 2023 to the date the taxes are paid.
  • For more information about these or other credits, deductions or exclusions, contact a MilTax consultant about your specific situation.
  • If you e-file, your tax software will take care of your return’s delivery.
  • The deadline for filing, or to file an extension, and pay your taxes, is Tuesday, April 18.

When you’re in the military, taxes are likely far down on your list of concerns. Col. Curt Sheldon, USAF (Ret), CFP®, EA, is a Life Member of MOAA and the president of C.L. Under the new law, the final assembly of the electric vehicle must occur in North America to qualify for the credit. If you purchased or had a binding contract for the purchase of an electric vehicle prior to that date, the vehicle doesn’t have to be assembled in North America to qualify for the credit.

Can I claim a deduction for a military move?

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Commissioned officers also are allowed to exclude part of their combat pay, but that amount is capped. It also doesn’t affect tax  calculations if you are receiving Combat Related Special Compensation (CRSC). DFAS expects military to retrieve these forms online or request that they get mailed. ♦ Using the MilTax software can help avoid math errors, Mitchell said, because the software does those complex calculations and catches any math errors. She suggests printing out a copy of the return to review before submitting it to the IRS.

VA Payments

A deduction of up to $250,000 of gain (or $500,000 if married, filing jointly) is generally available upon the sale of a main home in 2009. A main home is one defined as having been lived in as a primary residence for more than two years. You may also be able to exclude gain from the sale of a home that was used as a rental or business property as long as it meets certain ownership test criteria outlined by the IRS.

  • Not all the money you receive for your services is considered gross income.
  • Use this calculator to determine whether it makes sense to itemize or take the standard deduction.
  • If you have specific questions regarding your state tax exemptions for your military income, contact us once you have created your free eFile account.
  • You cannot deduct expenses related to travel overseas when you are stationed there, or when you are traveling for personal reasons.
  • The service is available for 365 days after separation or retirement from the military.

In addition to access to the same tax opportunities given to civilians, you also benefit from military-specific tax deductions and considerations. This extension also applies to military personnel who are hospitalized because of their combat zone service. In these medical cases, they have up to 180 days after the last day of continuous hospitalization to file or pay taxes. Deploying to a combat zone reduces your family’s taxable income, which may help you qualify for low-income tax credits that might not be available otherwise.

Individuals and their families who meet the income limitation may choose from any of nine companies without regard to additional eligibility requirements. To access the right option, make sure to begin at IRS.gov/freefile or use the internet search term «IRS Free File Program.» You also should check out the information and help available at Military OneSource, a program offered by the Department of Defense. It provides a range of free resources, tax and otherwise, for military members, veterans and their families. Tax law allows for home qualified active duty sellers facing an ordered Permanent Change of Station (PCS) to suspend the ownership and residency period when you’re on qualified official extended duty. If you were thinking about reducing the taxable portion of your pension based on this rumor, consider rethinking your decision.

Military Tax Tips

Remember that any taxes due must be paid by that April 18 deadline (or the June 15 deadline, if overseas) or you could be subject to both interest charges and a failure-to-pay penalty, Mitchell said. Christina Taylor is senior manager of tax operations for Credit Karma. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years.