Tax Deductions for Armed Services Personnel

Armed Services Personnel

Members of the armed services receive a Form W-2, Wage and Tax Statement, just like other employees. This document lists taxable income and withholdings. In some situations, combat zone service is excluded from taxation. Also, officer's excludable amounts are not included in Box 1 of the Form W-2. This income isn't subject to income tax, but Medicare and Social Security taxes still apply, and will be recorded in Box 3, Social Security wages, and Box 5, Medicare.

As a military personnel, you need to double check your W-2 to ensure that it is correct, and all pay that is not subject to taxation is excluded. If you encounter any errors, you should have your financial office issue you a new, amended Form W-2, as you'll need it to accurately complete your tax return.

Some expenses you acquire, which are not reimbursed, may qualify for a tax deduction, which can decrease the amount you owe in taxes. Some examples of these deductions include:

  • Training for work
  • The upkeep and expense of military dress outfits and reservists' regalia that are unsuitable for wear off-duty
  • Dues surveyed to publications and other memberships for professional servicemen, however officers' club and noncommissioned officers' club charges are non-deductible
  • Moving costs in the event that you are active duty and you have a direct order to change stations on a permanent basis
  • Travel costs, including limited meals, mileage, and laundering costs, when outside of your permanent station for approved travel to authorized drills and training

Since different sources of income are not taxable, you can apply the income to different credits. Consider the following facts:

  • You can use non-taxed combat pay to count toward the Additional Child Tax Credit, as well as the Child and Dependent Care Expenses credit
  • Non-taxed combat pay can count toward qualification for an IRA.
  • Military base realignment bonuses aren't typically taxed.
  • You may be exempt from a five year capital gains period on the sale of your primary home after May 6, 1997, if you served on active duty. If you have already paid the tax, you may be eligible to claim a credit.
  • Educational distributions from a Coverdell ESA or other qualified tuition program may not be subject to the 10% tax if the student attends one of three military academies, including West Point, U.S. Maritime Academy at Annapolis, or U.S. Aviation Academy at Colorado Springs, and the distribution amount shouldn't exceed the tuition.
  • Combat pay can be included into the calculation for the Earned Income Tax Credit (EITC), which may help you meet the required qualifications
  • National Guard and Reserve individuals have above the line travel deductions when reporting for duty over 100 miles from their home.
  • Income tax is suspended for any member who is killed during combat. Tax assessment is excluded for the year ending on the first day served. If taxes have already been paid, a refund may be granted. Unpaid back taxes are also forgiven.