Save Money with Free Tax Filing for the Military
Caroline Sposto & Julie Provost
Free Tax Filing for Military and Military Tax Guide
Update: The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers.
By law, Washington, D.C. holidays impact tax deadlines for everyone in the same way federal holidays do. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia for everyone except taxpayers who live in Maine or Massachusetts.
Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states. Taxpayers requesting an extension will have until Monday, October 17, 2022, to file.
The Internal Revenue Service announced that the nation’s tax season will start on Monday, January 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.
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.
Tax Time! Military Tax Guide
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, bonuses, 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 maintain 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.
If you are in the National Guard or in the Reserves and might drill in one state, and live in another. If the state you drill in has state taxes, and the state you live in doesn’t, you will still be taxed on your drill pay.
Military Spouses and State Income Tax
Military spouses can either claim the 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.
The Veterans Benefits and Transition Act of 2018 allowed military spouses to choose the same state of legal residence as their service member. These rules covering the military spouse state income tax apply to local taxes and for voting purposes. All this even if they have never lived in that state.
How Does Military Spouse State Income Tax Work?
Let’s say a military spouse from California marries a service member from Texas. They are stationed in California and she has a full-time job. Tax time comes and while her husband is a resident of Texas, a state without personal income tax, she has to file in California, a state with the highest personal income tax.
She has never lived in Texas, and they have never been stationed there before. They also have no plans to move to Texas after military service.
Up until December of 2018, the spouse would have to file in California, even though her husband was a resident of Texas and filed there. A new law went into effect, and it will make it so some military spouses will receive a bigger tax refund.
Wait…Hasn’t This Always Been the Case?
But wait…hasn’t this always been the case? No, before, due to the Military Spouse Residency Relief Act in 2009, spouses could change to the legal resident of their service member spouse. However, they would have had to establish a physical presence in that state. In addition to becoming a resident of the state, they would have had the intent to remain in the state permanently.
In the case of the couple mentioned above, the spouse would have had to have lived in Texas at some point. Now, after this change, they will be able to claim residency without having to live there or have plans to move there in the future, as long as their service member spouse has residency in the state.
Applies to Tax Year 2018 and beyond for Military Families
Since this change is retroactive to 2018, military spouses who change their residency from a state with an income tax to a state without one, or to a state with a lower rate, will have received a tax refund of the taxes they already paid. This will, of course, depend on the state’s tax requirements.
Because of SCRA, The Servicemembers Civil Relief Act, service members can maintain their legal resident as they move around during their career. If they are from Texas, they will pay taxes to Texas, vote in Texas, and won’t have to pay taxes in the state they are currently stationed in. This tax change will allow the spouse to do the same.
For more on state-provided veterans’ benefits, please visit CollegeRecon’s State Veterans’ Benefits page.
Decision About Residency Required
Because of this change, military spouses need to make a decision about if they will change their residency, and if it would be worth doing so.
For some, changing their residency wouldn’t be the best option. Sitting down and looking over the different tax rates for each state would be a good idea.
Military couples can go to legal assistance on their military installation to help figure out what would be best for them.
A Change for the Better
Another benefit to this change is that it will be easier for military couples to file in the same state and that will save a little bit of tax time headache. While it might take a bit to sort everything out, this change will be for the best. It will allow military spouses to benefit from the tax laws of the state their service member is a resident of.
States with No Personal Income Tax
If your spouse is a resident from any of these states, then you may be in luck. According to TurboTax.com, these states do not have a personal income tax.
- South Dakota
New Hampshire only taxes interest and dividend income, not wages, earnings, or other income.
Pennsylvania’s 3.07% flat tax ranks as the lowest in the nation.
Personal Income Tax Top 10 Highest States
41 states and Washington, DC levy a personal income tax. If you’re from one of these states, there’s a good chance savings may be possible for you.
Please note that each of these states has a personal income tax floor, deductions, exemptions, credits and varying definitions of taxable income that determine actual payment.
The 10 highest income tax states or legal jurisdictions for 2022 are:
- California 13.3%
- Hawaii 11%
- New Jersey 10.75%
- Oregon 9.9%
- Minnesota 9.85%
- District of Columbia 8.95%
- New York 8.82%
- Vermont 8.75%
- Iowa 8.53%
- Wisconsin 7.65%
TurboTax notes that “low personal income tax rates can be misleading; a lack of exemptions and deductions can raise the effective rate you pay.” Please keep that in mind.
Military Tax Exclusions
Military personnel and their families also have a lot of different exclusions they can take advantage of when filing their taxes. If you want to learn a lot about filing your taxes, reading through the Armed Forces’ Tax Guide will be extremely informative and helpful.
Different things to consider that correlate to an exclusion/adjustment include:
- Travel Expenses
- Moving Expenses
- IRA Contributions
- Income for Armed Forces members in combat zones
- Do you have children?
- First-time homebuyers
Extra Time to File Your Tax Return Available
Extra time to file your tax return may be allowed if you are stationed abroad or are in a combat zone during the tax filing season.
Military who are:
- Serving in a combat zone
- Serving outside of a combat zone, in direct support of military operations in a combat zone
- On deployment, while participating in a contingency operation
- Hospitalized outside of the U.S. due to an injury or disease contracted while serving in a combat zone or contingency operation
- Missing in action or a prisoner of war as a result of serving in a combat zone or contingency operation
To find out if you qualify, reach out to your nearest VITA location or explore the Armed Forces Tax Guide here.
The IRS Updates Military Tax Benefits Guide
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.
This guide was posted on the IRS.gov website with useful tips for all members of the military, including reservists and the national guard. There is important information in this guide, such as what the special benefits for those serving in a combat zone are and figuring out refunds as well as reservist-related travel expenses. Basically, anything you need to know as a military service member.
You can see the new guide here!
MilitaryOneSource and MilTax
Members of the military have free tax prep and filing available to them through the Military OneSource website.
This is probably the most important benefit that all military should take advantage of. Paying a professional to prepare your tax filing can conservatively cost around $250, and most civilian financial advisors aren’t experts when it comes to rules and exemptions that apply to the military.
Through Military OneSource and the DoD, MilTax offers free tax services for the military, including easy-to-use tax preparation and e-filing software, personalized support from tax consultants, and current info about filing taxes in the military. The e-filing software is available from mid-January through mid-October and the software is self-paced.
Through MilTax you can also find free military tax assistance & filing. This free assistance is available online as well as at CONUS/OCONUS Volunteer Income Tax Assistance locations (VITA). These advisors are trained to help military personnel, therefore, they know what to look for to get every deduction as well as ensure that nothing gets left out.
Even if you want to prepare your filing on your own, you can utilize this resource by having them double-check your work to ensure that you didn’t miss anything.
IRS Free Tax Filing for Military
How IRS Free File Works
- Begin at the IRS.gov website to take advantage of Free File offers. Do NOT go directly to the vendor’s website or you will not receive the benefit.
- Choose between an IRS Free File offer of Guided Tax Preparation or Free File Fillable Forms.
- You will be forwarded to the IRS partner’s website where you will then create an account. If you’re a previous user of that vendor, then just log in.
- Prepare and file your federal tax return.
Once completed, you’ll receive an email from the IRS once they’ve accepted your return.
Guided Tax Preparation
Guided Tax Preparation is an option for those whose Adjusted Gross Income (AGI) is $73,000 or less.
You will answer questions regarding your income and other related topics. The Guided Preparation takes care of the math and then files your taxes with the IRS for you.
Some state tax return preparations are also available through this service.
Free File Fillable Forms
Wow. Say that five times fast.
This option is available for any income level. The forms are free for you to download and fill out yourself.
However, it is advised that you already know how to file your own taxes, as there is no tax preparation guidance available and any calculations are limited in scope.
For 2021 taxes, enlisted active duty and reserve military members can file their state and federal taxes for free with TurboTax. You can use this offer on TurboTax’s Free, Deluxe, Premier, and Self-Employed versions. Commissioned officers, warrant officers, veterans, and retirees do not qualify. Not valid on TurboTax Live, or TurboTax CD/Download.
You would need to enter your W-2 and verify your military rank when prompted by the product. The discount will be applied when you are ready to file.
For more info, please go here.
If you are a USAA member, there is a TurboTax military discount. You can get $20 off TurboTax as a USAA member.
Active Duty Military can file a federal tax return for $0 using TaxSlayer Classic. Filing state taxes is an additional cost.
For more info about TaxSlayer, please go here.
At TaxAct you can get free federal and state filing for all members of the military. It will be free for Basic, Deluxe, Premier, and Self-Employed.
For more info on TaxAct’s free filing for military, please go here.
At FreeTaxUSA, everyone, including active and former military can receive free federal filing. They can also help with military tax breaks and more.
For more info on FreeTaxUSA’s free filing for military, please go here.
Deceptive Practices to Look Out for and Avoid
In the past, some companies have engaged in deceptive advertising practices that may have misled military personnel and their families. However, you should still be cautious about similar practices now and in the future.
Some advertisers such as Intuit, the maker of TurboTax, created and promoted a “military discount” that misled the military and charged service members who were eligible to file for free. They did this by deliberately hiding their TurboTax Free File Program from Google’s search results.
So, when people Googled something similar to, “free tax filing for military TurboTax” the free filing version of the program did not appear. Instead, the only result that appeared was for a paid version of the software.
I’m Eligible to File For Free. How Do I Do It?
Start from the IRS’s Free File Page . Do not start at the TurboTax Military Discounts page and you may not wish to start with Google or another search engine. Starting with a search engine, despite what you may have searched for, may lead to a paid product or service from the advertiser instead of the free version. The best way to ensure that doesn’t happen is to use the IRS’s free file page.
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