Tax write-offs for military personnel

It is important to be aware that if you are serving in the military or have military personnel in your family you may be eligible for certain tax write-offs. The purpose of these tax write-offs is to help defer the cost of being in the military. Please be aware that this article is meant to serve only as a guide. As with any financial issue it is recommended that you consult a tax professional for the specific concerns of your tax liability.

Here is an overview of tax write-offs for military personnel-

You can exclude certain pay from your income while working in a combat zone. If you are a member of the U.S. Armed Forces who serves in a combat zone, you can exclude certain pay from your income thereby reducing your tax liability. In addition you can also have additional time to make a qualified contribution to an IRA. Keep in mind though that a combat zone is an area designated by the U.S. President by Executive Order as an area in which U.S. Armed Forces are engaging in or have engaged in combat. There are other specifications to consider since service outside a combat zone is considered to be inside a combat zone if the service is in direct support of combat zone military operations. There are other limitations as well since service outside a hazardous duty area for support of operations in a hazardous duty area is treated as serving in a combat zone only for the purpose of getting an extension deadline. So, know the qualifications necessary, and whether or not the place you served works before you try and use this tax write-off. If you are an officer your write off is limited to a certain amount, so you can't write off all of your combat pay, but you can write-off a portion of it, so be sure to check with your tax professional to take advantage of writing off as much as possible.

Income-There are certain specifications on income that can and cannot be claimed. The following income received during service in a combat zone does not have to be reported as gross income:
1. Active duty pay that is earned in any month served in a combat zone.
2. Imminent danger/hostile fire pay during a month served in a combat zone.
3. Re-enlistment bonus if re-enlistment or voluntary extension occurs during a month that is served in a combat zone.
4. Pay for any accrued leave (keep in mind that the department of defense must determine the unused leave was earned during the month served in a combat zone).
5. Pay that was received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other non-appropriated fund activities earned during a month served in a combat zone.
6. Any award or achievement pay made for a suggestion or achievement made in a month served in a combat zone.
7. Student loan repayments if the entire year required to earn the repayment was performed in any combat zone.

• Military reservists' travel expenses-If you are a member of the National Guard or military reserve, you may be able to take a deduction for travel expenses to drills or meetings. In order to qualify, you must travel more than 100 miles and be away from home overnight. If you do qualify, you can deduct the cost of lodging and half the cost of your meals, plus 48.5 cents per mile (and any parking or toll fees) for driving your own car. You are able to get this deduction whether or not you itemize, but you have to track them, so you will want to keep track of receipts, and be aware of what write-offs are available so that you do not miss anything you could be deducting. To claim this deduction you will enter your travel expense amount on your Form 1040, on line 24, and not on your Schedule A as a miscellaneous deduction.
• A portion of what you are paid is not taxable. For example, the living allowances you are given such as Basic Allowance for Housing is not taxable, and you can still deduct your mortgage interest and real estate taxes on your 1040 even if you use your BAH to pay them. Basic Allowance for Subsistence, housing and cost-of-living allowances, and Overseas Housing Allowance benefits are also not taxable. So, you should not include them as part of your taxable income. This is an added benefit for military personnel because the average person pays taxes on their income, which they use to pay for housing and subsistence, but for the military, you kind of get a double write off, in that you do not pay taxes on the money used, and can write off any interest or points just like anyone else can.
• Other benefits given by the military are not taxable either. For example, payments like defense counseling, disability, group-term life insurance, professional education, ROTC educational and subsistence allowance, survivor and retirement protection plan premiums, uniform allowances, and uniforms furnished to enlisted personnel are all non-taxable military payments. Again these should not be included on your W-2 for taxable income. You will want to look at the benefits you receive and determine if you can write off any of the cost of those fringe benefits.

•     Equipment and supplies-The deduction taken on any of these items is considered to be anything that the military personnel bought to be used in the course of doing his or her job.  This is perhaps the most wide ranging military tax write-off so it is crucial to keep receipts and consult with a tax professional before taking this deduction.  This write-off extends even to items that were bought to aid in job performance but were never used. So, this would include your clothing as it is specific, and any other item you need. It is important to note that you are given a uniform allowance that is not taxed as income, and so you can only write off your uniforms if you have to purchase more and that exceeds the amount allotted to you for the purchase of that. You have to document it. If you can talk to a tax professional before the year starts, you can keep better track of such write-offs during the year, and not miss out on any because you will know what to record.

In addition:

If you were married to someone in the military that was killed, you will be given a death gratuity, which is not taxable. In the past you did have to pay taxes on this benefit, but the rules have changed, and if you paid taxes on it after the rules were changed, you can still file an amended return to get a refund on that money.

You can also take tax write-offs given to the general public. This means if you make charitable contributions, such as to a church, food drive, shelter, etc. If you end up doing jury duty, have a home mortgage, or other common write-offs, you can take advantage of those. As a military personnel you get additional write-offs, but that does not mean you should overlook the ones available to all, including children, earned income credit, and more.

Basically, as a military personnel your income is going to be taxed slightly differently than any other citizen. You are going to be given tax breaks for some things because you are serving the country, and you are going to have the same write-offs available to anyone else as well, such as charitable contributions, mortgage interest, etc. However, just like any other person, if you do not know of the things you can write-off, you can't take advantage of it. Uncle Sam does not review your tax return and say, oh, you should have written this off, I will send you the refund anyway. So, if you want to lower your tax liability, and qualify for as big of a refund as possible, it is critical that you talk to a tax professional that specializes in military tax write offs. The rules and qualifications are somewhat complicated as they can be dependent on where you serve, what kind of pay you receive, whether or not you are given awards, etc. So, talk to a professional that knows the ins and outs of military tax write-offs, and explain your situation to them, and have them help you recognize what you can write-off, and what you cannot. That way, during the year, you can keep track of the receipts and expenditures you can write off, and be prepared come tax time to get the lowest tax liability possible.