Military Status

Military members must be serving or have served in one of the following organizations to be eligible for military tax benefits. Recently retired or separated members may also be eligible for benefits.

  • United States Army (including Army Reserve and Army National Guard)
  • United States Navy (including Navy Reserve)
  • United States Air Force (including Air Force Reserve and Air National Guard)
  • United States Marine Corps (including Marine Corps Reserve)
  • United States Coast Guard (including Coast Guard Reserve)
  • Uniformed Services of the United States

Combat Zones

Military members who serve in a combat zone may be eligible for multiple tax benefits. These include the Combat Zone Tax Exclusion, which allows service people to exclude certain types of combat pay from their federal taxable income.

Combat zone extensions are now expanded to contingency operations
The various extensions granted to combat zone participants to file returns or pay taxes will also apply to those military members serving in Contingency Operations outside the United States.  The Department of Defense defines contingency operations as small, medium, or large-scale military operations, including support for peacekeeping operations, major humanitarian assistance efforts, noncombatant evacuation operations and international disaster relief efforts.

Armed Forces Tax Guide

Internal Revenue Service Publication 3 Armed Forces’ Tax Guide, or IRS Publication 3, is a document published by the IRS that outlines special tax considerations for active members of the United States military. It is part of a series of publications explaining how the IRS conducts business.

IRS Publication 3 also provides an overview of most of the tax credits that are available.  There are also special rules for people serving abroad.  IRS Publication 3 covers the special tax situations of active members of the U.S. Armed Forces.

Credit for Excess Withheld Social Security Tax

This is only available if you have more than one employer, and the total withholdings exceeded $7,960.80 for tax year 2018.

DETAILS ON TAX-FILING DEADLINES

While tax filing extensions are available for everyone, IRS Publication 3 explains that certain rules exist specifically for service members.  Whether you’re filing from one of the 48 contiguous States or the District of Columbia (“CONUS”), filing from Alaska, Hawaii or overseas (“OCONUS”), or filing from a combat zone, there are extensions available.

CONUS: Everyone can receive an automatic 6-month extension by filing Form 4868.

OCONUS: There are 3 separate extensions that may apply to you.

Combat zone: Not only does the guide tell you the rules, but it gives examples for you to follow. The guide has more information regarding Tax Deadline Extensions for Deployed Military Members.

Of course, for those taxpayers that owe money on their tax return, in most situations (not including the combat zone-related extensions) the IRS will continue to charge interest from the regular due date until the date you pay the tax.

Disabled Veterans

There are resources available to disabled veterans to help them understand employment and retirement benefits. These resources include:

•Volunteer Income Tax Assistance
•Accessible Tax Products
•IRS Veterans Employment Program Office

Tax breaks available to military members and their dependents

-Death benefits

The death gratuity paid to survivors of deceased Armed Forces members is $100,000 and it is not taxable, effective for deaths occurring after 9/10/2001.

-Sale of principal residence

A taxpayer on qualified official extended duty in the U.S. Armed Services or the Foreign Service may suspend for up to 10 years of such duty time the running of the 5-year ownership-and-use period before the sale of a residence. This applies when the duty station is at least 50 miles from the residence – or while the person is residing under orders in government housing – for a period of more than 90 days or for an indefinite period. This optional election applies to only one property at a time.

-Dept. of Defense Homeowners Assistance Program

Payments made after Nov. 11, 2003, under this program to offset the adverse effects on housing values of military base realignments or closures will be excludable from income as a fringe benefit.  Additionally, payments to military members are also not subject to social security or Medicare taxes.

-Dependent care assistance programs

Dependent care assistance programs for military personnel are excludable benefits and not included in the military member’s income.

-Military academy attendees

The ten percent tax on payments from a Qualified Tuition Program or Coverdell Education Savings Account that are not used for educational expenses does not apply to attendees of the U.S. Military, Naval, Air Force, Coast Guard or Merchant Marine Academies, to the extent the payments do not exceed the costs of advanced education.

 

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.