Basic Training for Taxes for Military
Basic Training for Tax Time for Military
Taxes are due on July 15, 2020, though if you’re serving in a combat zone, you have additional time to file. Whether you have one month or several before your deadline, taking these steps can help you make sure you don’t overpay.
Earned Income Tax Credits
See if you’re eligible for any Earned Income Tax Credits (EITC).
Understand Your Combat Pay Exclusion
Money earned in combat zones recognized by the IRS, is usually tax exempt. You shouldn’t have to do anything to receive the combat service exclusion, but if it isn’t reflected on your W-2, contact your military pay office ASAP so they can make that correction and send you an amended W-2.
Know Which Income Is Taxable vs Non-taxable
In general, Taxable Income includes: non-combat pay wages, bonus, and incentive money, and student loan repayment from specific programs.
Non-taxable income includes:
- Allowances received for living and family expenses
- death expenditures
- moving and travel costs
- group-term life insurance
- professional education
Take Advantage of Travel & Lodging Deductions
If you travel more than 100 miles and stay overnight as a National Guard member or Armed Forces reservist, you can deduct those expenses – even if you don’t itemize.
You can also deduct 50% of the cost of your meals while traveling, but be sure to not deduct more for food and lodging expenses than your per diem rate allows. Those rates are updated annually, and vary by state.
Deduct Any and All Non-reimbursed Moving Expenses
Even if you don’t itemize. (Military moves don’t have to meet the distance or time requirements of civilian moves before they’re deductible.)
Decide to Take the Standard Deduction or Itemize
Determine your Standard Deduction and then figure out whether or not your legal itemized deductions add up to more. Choose the option that works in your favor.
Typical itemized deductions include:
- Home mortgage interest
- Property, state, and local income taxes, (and in some cases, sales tax)
- Medical and Dental expenses
- Charitable contributions
- Miscellaneous itemized deductions including the cost of purchase, cleaning, and maintenance of your military uniforms.
Decide Whether Keep Your Home Residency State
If you move for military reasons, you can keep your permanent legal residence in your home state, or choose the new state. Generally when you live in a state that collects income tax, but keep residency in a state that doesn’t, you don’t have to pay income tax in the new state. If income tax is withheld from your paycheck, you can file a nonresident return with that state to receive a refund.
Your Spouse Needs to Decide State Residency
Military spouses can either claim same state of legal residence as their partner, or claim the state they’re living in. In certain cases they’re allowed to claim the state of legal residence they had before marriage. Under the Servicemembers Civil Relief Act (SCRA) you won’t be double taxed if your spouse works and is taxed in one state and has a permanent legal residence in another.
Important: SCRA doesn’t apply to military children. If they’re filing state income taxes, they need to file in the state where they live.
To decide which strategy works to your advantage, you’ll need to compare state income tax rates.
The states with no personal income tax are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.
Tennessee and New Hampshire have no personal income tax on wages – though there is tax on interest and dividend income.
For more information on taxes, you can review this newly-revised IRS tax guide for members of the armed forces. Whether you’re planning to file your taxes on your own, or with the help of a professional tax preparer, here are some additional tax information and tax preparation resources you’ll find worthwhile.
- Resources for Military to Thrive this Tax Season
- Tip to Help Military Families Save on Taxes
- Free Tax Filing for Military
- State Benefits for Veterans (Including State Taxes)
- Top Personal Budget Plans
- 3 Basics of Budgeting for Military Families