Understanding the intricacies of tax write-offs and benefits is crucial for service members and veterans alike. Unique tax considerations can significantly impact your financial well-being as an individual who has served or is currently serving in the armed forces. Taxes are often stressful for many armed forces members, especially without proper direction and assistance. With the help of an Armed Forces Benefits advisor, you can ensure you will maximize your tax return and get the most from your benefits.
Tax Basics for Service Members
As an armed forces service member, your income comprises various elements such as base pay, allowances, and bonuses. It’s essential to comprehend the differences and tax implications of each. Additionally, certain types of income, like combat pay and housing allowances, may be tax-free.
Your filing status (single, married, head of household) plays a role in determining your tax liability. Understanding each status ensures you take advantage of available deductions and credits.
Common Tax Deductions
Mortgage Interest Deduction: Service members may deduct mortgage interest on their primary residence.
Property Tax Deductions: Property tax payments can also be deducted.
GI Bill Benefits: The GI Bill offers funding assistance for college, training programs, and graduate school. Explore the tax implications of educational benefits provided by the GI Bill.
Education-related Deductions and Credits: Deductible education expenses and available credits, such as textbooks and materials or student loan interest, can be deducted from your taxes.
Deductible Moving Expenses: Understanding which moving expenses are deductible, like parking or lodging while relocating.
Documentation Requirements: In order to deduct expenses related to a move of residence on your tax return, you must meet two requirements: first, you must be a member of the armed forces on active duty, and second, you relocate due to a permanent change of station (PCS).
Uniforms and Gear
Deductions for Military Uniforms: Generally, members of the Reserve receive additional benefits for maintaining and purchasing military uniforms and gear.
Documentation Requirements: Ensure proper documentation, such as receipts, to support your claims.
Official Military Travel Deductions: Check your eligibility and requirements to avoid incorrect documents resulting in an audit.
PCS Travel Expenses: Be sure to track mileage, lodging expenses, and any tolls or fees, and complete proper forms to deduct expenses from your taxes.
Tax Credits Exclusive to Servicemembers and Veterans
Earned Income Tax Credit (EITC)
EITC helps low-to-moderate-income workers and families get a tax break. Military members should be educated about the implications of this dedication and how it can affect other benefits. To ensure you fully understand your benefits, exclusions, and deductions, contact AFBN for more information.
Child Tax Credit and Additional Child Tax Credit
If you have dependents, take into account the CTC and ACTC tax credits offering you up to $2,000 for the first child and $1,600 per additional child. Learn more about the specifics of this tax credit here.
Disabled Veterans Tax Benefits
Disabled veterans may be eligible to claim a federal tax refund based on the veteran’s percentage of disability. Documentation from the Department of Veterans Affairs and information from the Defense Finance and Accounting Services are required to take advantage of this benefit. Because of the complex nature of filing taxes and the added difficulty of verifying documentation, assistance is available through the Armed Forces Benefits Network.
In conclusion, service members and veterans have access to a range of tax benefits, deductions, and credits. By understanding these opportunities and seeking professional advice from AFBN when needed, you can make the most of your financial resources. Whether it’s claiming deductions for travel expenses, taking advantage of the GI bill, or exploring unique benefits for disabled veterans, proactive tax planning can lead to significant savings. Maximize your financial security and well-being by staying informed and making positive decisions when it comes to your taxes.
The Armed Forces Benefits Network offers free financial services to military members and veterans. Learn how an advisor can help make the most of your benefits and set you up for financial success by visiting our website or finding your closest AFBN location today.