military and tax law
military and tax law

Top 10 Tips on Tax Breaks for the Military

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If you have clients who are in the U. S. Armed Forces, there are special tax breaks that apply to them. Here’s a list of some basic tips:

  1. Deadline Extensions. Some members of the military, such as those who serve in a combat zone, can postpone some tax deadlines. You can help them get automatic extensions of time to help them file their tax return and pay their taxes.
  2. Combat Pay Exclusion. If they serve in a combat zone, the combat pay is partially or fully tax-free. If they serve in support of a combat zone, they may also qualify for this exclusion.
  3. Moving Expense Deduction. They may be able to deduct some of their unreimbursed moving costs on Form 3903, Moving Expenses. This normally applies if the move is due to a permanent change of station.
  4. Earned Income Tax Credit (EITC). If your clients get nontaxable combat pay, they may choose to include it in their taxable income. Including it may boost their EITC, so, in effect, they may owe less tax and could get a larger refund.
  5. Signing Joint Returns. Both spouses normally must sign a joint income tax return. If one spouse is absent due to certain military duty or conditions, the other spouse may be able to sign and the present spouse may need a power of attorney to file a joint return.
  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, Employee Business Expenses, even if they do not itemize their deductions.
  7. Uniform Deduction. Clients can deduct the costs of certain uniforms they can’t wear while off duty, including the costs of purchase and upkeep. Note they must reduce their deduction by any allowance they get for these costs.
  8. ROTC Allowances. Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
  9. Civilian Life. If a client leaves the military and looks for work, he or she may be able to deduct some job search expenses. This may include the costs of travel, preparing a resume and job placement agency fees. Moving expenses may also qualify for a tax deduction.
  10. Tax Help. Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after the April deadline.

Editor’s note: For more information, refer to Publication 3, Armed Forces’ Tax Guide. The Intuit® ProConnect™ Tax Pro Center also has a variety of articles related to Tax Law & News, including, “IRS May Delay Returns Claiming EITC or ACTC.”

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