The IRS’ Publication 3 is an Armed Forces Tax Guide filled with tips and information to help service members and their families take advantage of all tax benefits available to them. Some key benefits detailed in this guide are partial or tax-free combat pay, 180 day extensions and the Earned Income Tax Credit. As the July 15 deadline approaches, here are some important resources to share with military clients.
Combat Pay
Service members in a combat zone or in a qualified hazardous duty area may qualify for partial or fully tax-free combat pay. U.S. citizens and resident aliens (generally spouses) that have worked as contractors or employees of contractors supporting the military in designated combat zones may also qualify for the foreign earned income exclusion.
180 Day Extension
Members who currently serve or have served in a combat zone or in contingency operations outside of the U.S. may qualify for an extension of at least 180 days to file and pay their taxes.
Earned Income Tax Credit
Service members and their spouses can each choose to have their nontaxable combat pay included in their earned income for purposes of the Earned Income Tax Credit. Low and moderate-income service members who receive partial or fully tax-free combat pay can use this special computation method that may boost their Earned Income Tax Credit (they may owe less tax or get a larger refund!). In fact, the Earned Income Tax Credit is worth up to $6,660!
Combat Zone Tax Benefits
Under the Tax Cuts and Jobs Act (TCJA) members of the U.S. military who performed services in the Sinai Peninsular can now claim combat zone tax benefits.
Home and Personal Expenses
Dependent care assistance programs for military personnel are excludable benefits not included in the military member’s income. Active duty service members also have the opportunity for tax benefits. Active service members who move following a permanent change of station order may claim the moving expenses deduction. This is also available for service members who move due to a permanent change of station order and receive reimbursements.
For military families who may have one spouse absent due to certain military duties or conditions, the other spouse may be able to sign in lieu. A power of attorney is required in other instances, and a military installation’s legal office may be able to help in those situations.
Tax School Resources for Military
Tax preparation is a great career for service members transitioning back to civilian life, and also a great career for military spouses. It’s flexible, people oriented, process driven, and the skills needed to get started don’t require years and years of schooling. In as little as 10 weeks, you can tackle the basics of tax preparation and get started preparing taxes for the general public. It’s also affordable compared to a university education or other technical school. The Income Tax School offers a military discount, as well as tuition assistance.