People working in the U.S. Armed Forces often have to face several financial challenges which are attached to their responsibility and role towards the country. The long list of economic issues and hurdles include traveling for a training program, serving in different countries for long periods, moving frequently, and continuous uniform maintenance charges. No doubt, the list of financial hurdles is long. Fortunately, the International Revenue Service (IRS) has designed some special provisions for the members working in services to alleviate their burden and financial challenges. Here are the five most important tax tips that military members should know:
You Do Not Have to Pay Tax On All of Your Income
All your income is not taxable, especially if you receive combat pay. Filing for a tax return does not include your combat pay as your taxable income. Allowances that you receive from the military for uniforms, family expenses, living, death expenditures, travel and moving cost, professional education, and life insurance are not taxable.
However, you have to pay tax on compensations like active duty service, training expenses, incentives and bonus money, or repayment for student loans.
You Can Deduct Expenses for Lodging and Travelling
You are allowed by the IRS to deduct your amount when you travel for work or lodge, and you can even deduct 50% of your meal cost. Spanning more than 100 miles and staying overnight as a military member can quickly get you a tax deduction.
However, do not forget to exceed the federal rate per diem designated for meals and lodging charges, as the rates vary from state to state.
You Do Not Have to Change Your State Residency
Changing your state residency frequently for your service can be a significant pain, not just in moving but for filing your tax returns in different states as well. The tax charges are added in each state. For this reason, do not change your residence to your home state, whenever you move out of your state residency.
Being a military person, you will not be forced by the new state to pay your tax according to their state law. If your income tax gets withheld from your paycheck, you can even file for a nonresident tax return to receive a refund.
You Can Have More Time to File Your Tax Return
If you get stationed abroad or enter a combat zone during the time for tax filing, you can be granted more time by the IRS to file your tax. You can get 180 additional days from the day of your return from the combat zone or the last day of hospitalization if you get injured during the combat zone.
This 180-day extension is in addition to the days you left to file your income tax. You will not be charged any penalties or interest for this period, and if you require more time, you can still receive an extension till October 17.
You Can Deduct Expenses for Your Military Uniform
If you purchase a uniform, you cannot wear it off duty and deduct that amount with your other itemized deductions. With this expense, your uniform maintenance and cleaning expense are also deductible.
However, when added with your other itemized miscellaneous deductions, this amount should not exceed 2% of your adjusted gross income.
As there are already many financial hurdles for a military person, working on these five tips can quickly decrease your hurdles. If you want to have more information on this, or are looking for professional advice, you can directly contact our Armed Forces Benefits Network professionals to decrease some of your load.