Military Zone

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Thank you for your service!

US Army Soldier in Universal Camouflage
Image by Lucas Sankey

Free Tax Preparation Options for Servicemembers

Department of Defense's MilTax Service

  • Managed by the Department of Defense, MilTax provides FREE tax preparation and filing software for all military servicemembers, regardless of income. Eligible individuals include members of the Air Force, Army, Navy, Marines and National Guard. Coast Guard members serving under Title 10 authority are entitled to the services as well. Retired and honorably discharged members are eligible for up to 180 days past their separation date. Access MilTax using the following link:

  • For Coast Guard members not serving under Title 10, CG SUPRT offers a service similar to MilTax. To learn more, visit the Coast Guard's information page using the following link:

Volunteer Income Tax Assistance Program (VITA)

  • Military members, including retirees, are eligible to receive free tax consultation and preparation through VITA locations. VITA specialists are trained to address military-specific tax issues like combat-zone benefits and applying Earned Income Credit guidelines. Find your nearest VITA site using the following link:

Free File Program

  • Servicemembers who made $69,000 or less in 2019 qualify for free online tax preparation services through the IRS Free File program. The program is made possible through a public-private partnership between the IRS and the Free File Alliance---a coalition of leading tax preparation software companies. Active duty servicemembers and their spouses who meet the income limitation may choose from nine of the ten Free File companies without regard to additional eligibility requirements. Use the IRS's Free File Lookup Tool to quickly find a qualifying Free File company based on your specific situation:

Military: Frequently Asked Tax Questions

General

Recordkeeping: What records do I need to keep for tax preparation purposes and how do I need to keep them?


According to the IRS, you must keep records such as receipts, canceled checks, and other documents (W-2s, 1099s, invoices, etc.) that support either an item of income, a deduction, or a credit appearing on a tax return for as long as those records may become material in the administration of any provision of the Internal Revenue Code. In short, you are required to keep all records that support anything reflected on your tax return for at least 3 years. Taxpayers should also remember to keep copies of their previously filed tax returns, including any amended returns, to assist in preparing future returns. For more information, see Taxlete's Recordkeeping Best Practices as well as IRS Topic No. 305 (Recordkeeping).




Change of Address (PCS): My mailing address changed, do I need to notify the IRS?


Yes. If you change your mailing address, be sure to notify the IRS as soon as possible by submitting a Form 8822 (Change of Address). Mail it to the appropriate IRS Service Center based on the location of your old address. The addresses for the IRS Service Centers are listed on the back of the Form 8822. Business Address Change If you are changing a business address, notify the IRS by submitting a Form 8822-B (Change of Address or Responsible Party—Business).




Military Pay: What types of military pay do I need to include as income on my tax return?


According to the IRS, the following types of pay should be included as part of your gross income and reported on your tax return: Basic pay for:

  • Active duty
  • Attendance at a designated service school
  • Back wages
  • Cadet/midshipman pay
  • Drills
  • Reserve training
  • Training duty
Special pay for:
  • Aviation career incentives
  • Career sea
  • Diving duty
  • Foreign duty (outside the 48 contiguous states and the District of Columbia)
  • Foreign language proficiency
  • Hardship duty
  • Hostile fire or imminent danger
  • Medical and dental officers
  • Nuclear-qualified officers
  • Optometry
  • Other Health Professional Special Pays (for example, nurse, physician assistant, social work, etc.)
  • Pharmacy
  • Special compensation for assistance with activities of daily living (SCAADL)
  • Special duty assignment pay
  • Veterinarian
  • Voluntary Separation Incentive
Bonus pay for:
  • Career status
  • Continuation pay
  • Enlistment
  • Officer
  • Overseas extension
  • Reenlistment
Incentive pay for:
  • Submarine
  • Flight
  • Hazardous duty
  • High Altitude/Low Opening (HALO)
Other pay for:
  • Accrued leave
  • CONUS COLA
  • High deployment per diem
  • Personal money allowances paid to high-ranking officers
  • Student loan repayment from programs such as the Department of Defense Educational Loan Repayment Program when year's service (requirement) is not attributable to a combat zone
Non-taxble Military Pay For pay that is not subject to federal tax (which means you do not have to report the income on your tax return), see Taxlete's FAQ: "What types of military pay can I exclude from reporting as gross income on my tax return?" See also IRS Publication 3, Table 2.




Non-Taxable Income: What types of military pay can I exclude from income?


According to the IRS, you may exclude the following types of military pay from gross income on your tax return. Combat pay for: Compensation for active service while in a combat zone (See Combat Pay Exclusion , later) Note. The exclusion for certain officers is limited. See Commissioned officers (other than commissioned warrant officers). Other pay for:

  • Certain amounts received under the Armed Forces Health Professions Scholarship and Financial Assistance Program payments
  • Certain disability retirement pay, including payments received for injuries incurred as a direct result of a terrorist or military action
  • Disability severance payments (See Disability Severance Payments to Veterans , later)
  • Group-term life insurance
  • Professional education
  • ROTC educational and subsistence allowances
  • State bonus pay for service in a combat zone (See State bonus payments , later)
  • Survivor and retirement protection plan premiums
  • Uniform allowances
Death allowances for:
  • Burial services
  • Death gratuity payments to eligible survivors
  • Travel of dependents to burial site
Family allowances for:
  • Certain educational expenses for dependents
  • Emergencies
  • Evacuation to a place of safety
  • Separation
Living allowances for:
  • BAH (Basic Allowance for Housing) (See also Can I deduct expenses paid with my excluded basic allowance for housing (BAH) , later)
  • BAS (Basic Allowance for Subsistence)
  • Housing and cost-of-living allowances abroad paid by the U.S. Government or by a foreign government
  • OHA (Overseas Housing Allowance)
Moving allowances for:
  • Dislocation
  • Military base realignment and closure benefit (See Military base realignment and closure benefits , later)
  • Move-in housing
  • Moving household and personal items
  • Moving trailers or mobile homes
  • Storage
  • Temporary lodging and temporary lodging expenses
Travel allowances for:
  • Annual round trip for dependent students
  • Leave between consecutive overseas tours
  • Reassignment in a dependent restricted status
  • Transportation for you or your dependents during ship overhaul or inactivation
  • Per diem
In-kind military benefits for:
  • Dependent-care assistance program
  • Defense counsel services
  • Legal assistance
  • Medical/dental care
  • Commissary/exchange discounts
  • Space-available travel on government aircraft
  • Uniforms furnished to enlisted personnel
For more information, see IRS Publication 3, Table 2.




Tax Residence: Can I claim my spouse's state of residence on my tax return if he or she resides in a different location than I do?


Yes. Beginning in 2018, if you are the civilian spouse of an active duty servicemember, you may elect to have the same tax residence as the servicemember.




TSP Withdrawals: Do I need to pay taxes on the money I withdrew from my Thift Savings Plan (TSP)?


Generally yes. If you receive a distribution from your Thift Saviings Plan account, then you are generally required to include the amount as part of your taxable income on your tax return. Exception: If your TSP contributions included tax-exempt combat pay, then part of the distribution attributable to those contributions is tax exempt. However, any earnings on the tax-exempt portion of the distribution is still taxable. Do not struggle in trying to determine what portion is taxable vs. nontaxable, your TSP administrator will provide you with a statement showing the taxable and nontaxable portions of the distribution. For more information on TSP distributions, see TSP-536 (Important Tax Information About Payments From Your TSP Account).




Disability Severance Pay: Do I need to pay taxes on my disability severance pay?


No. Veterans discharged from military service due to medical disability may receive a one-time lump sum severance payment that is not subject to federal income tax if either of the following two scenarios apply:

  1. The veteran has a combat related injury or illness as determined by the veteran's military service at separation that:
    • Resulted directly from armed conflict; or
    • Took place while the veteran was engaged in extra-hazardous service; or
    • Took place under conditions simulating war, including training exercises such as maneuvers; or
    • Was caused by an instrumentality of war.
  2. The veteran is receiving VA disability compensation or has received notification from the VA approving such compensation.
Filing for a Tax Refund If you received a disability severance payment that was taxed to you, and either: (a) the amounts received were by reason of a combat-related injury; or (b) the Department of Veterans Affairs later determined that you were entitled to receive disability compensation, your severance payment is not subject to tax and you can file a claim for credit or refund using Form 1040X for the tax year you received the disability severance payment. For more information about amending prior year returns to take advantage of this change, see the Instructions for Form 1040X.




Funds Received for PCS: Do I need to report the reimbursement funds I received for moving?


No, unless the total amount of reimbursement exceeds the amount of actual expenses incurred. Generally, if your total reimbursements or allowances for a PCS exceed your actual moving expenses, then the excess amount is included as part of your gross income and should be reflected in the wages column on your Form W-2. However, if any reimbursements or allowances (other than dislocation allowances, temporary lodging expenses, temporary lodging allowances, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess amount still must be included as part of your gross income and reported on your Form 1040.




Mistakes: What should I do if I made a mistake on my federal income tax return that I already filed?


It depends on the type of mistake you made. Many mathematical errors are caught during the processing of the tax return and corrected by the IRS, so you may not need to correct these mistakes.

When filing an amended or corrected return:
  • Include copies of any forms and/or schedules that you're changing or didn't include with your original return.
  • To avoid delays, file Form 1040X only after you've filed your original return. Generally, for a credit or refund, you must file Form 1040X within 3 years after the date you timely filed your original return or within 2 years after the date you paid the tax, whichever is later.
  • Allow the IRS up to 16 weeks to process the amended return.
Check out the following resources for additional information:





Reservists

Reservists Defined: Who is considered a member of a Reserve Component for tax purposes?


You are a member of a reserve component of the Armed Forces for tax purposes if you are in the:

  • Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve;
  • Army National Guard of the United States;
  • Air National Guard of the United States; or
  • Ready Reserve Corps of the Public Health Service.




Travel Expenses: As a reservist, can I deduct my travel expenses connected with attending training or drill?


Yes, but only if you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves. If this is the case, you may deduct your unreimbursed travel expenses on your tax return. Be sure to include all unreimbursed expenses from the time you leave home up until the time you return home. You can calculcate your deduction amount by completing a Form 2106 (Employee Business Expenses). You will find the total deduction amount on line 10 of the Form 2106, which will ultimately be reported on line 21 of your federal income tax return (Schedule 1, Form 1040).




IRS Distributions: As a reservist, are distributions from my Indiviudal Retirement Account (IRA) subject to the 10% early withdrawal penalty?


It depends. A qualified reservist distribution is not subject to the 10% additional tax on early distributions from certain retirement plans, but only if ALL of the following requirements are met:

  • You were ordered or called to active duty after September 11, 2001;
  • You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component;
  • The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement; and
  • The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period.





Deployment Issues

Extensions for Overseas Deployment: If I am serving overseas, do I have more time to file and pay my taxes?


Yes. Members of the U.S. Armed Services deployed overseas are entitled to an automatic two-month extension (i.e., until June 15th) to file and pay their federal income taxes. You are not required to file any paperwork to receive the extension. Servicemembers deployed to a combat zone are entitled to much longer extension (see below). Serving in a Combat Zone Members of the U.S. Armed Forces who serve in a combat zone are entitled to an automatic extension of time to file and pay their taxes (in addition to an extension of other tax deadlines). The extension lasts for the period of service in the combat zone, plus 180 days after the servicemember's last day in the combat zone. Serving outside a Combat Zone Members of the U.S. Armed Forces who perform military service in an area outside a combat zone qualify for the suspension of time provisions if: (1) their service is in direct support of military operations in the combat zone; and (2) they receive special pay for duty subject to hostile fire or imminent danger as certified by the Department of Defense Other Individuals Serving in Combat Zone Note, the deadline extensions also apply to individuals serving in the combat zone in support of the U.S. Armed Forces, such as merchant marines serving aboard vessels under the operational control of the Department of Defense, Red Cross personnel, and civilian personnel acting under the direction of the U.S. Armed Forces in support of those forces. For more information, see the IRS's Extension of Deadlines --- Combat Zone Service page.




Deployment Pay: Is military pay I receive while depolyed to a combat zone subject to federal income tax?


According to the IRS, compensation received while deployed to a combat zone or qualified hazard duty area is not subject to federal income tax if you are either an enlisted member, a warrant officer, or a commissioned warrant officer. There are special exclusion rules for commissioned officers (other than commissioned warrant officers). Enlisted | Warrant Officers | Commissioned Warrant Officers If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income:

  • Active duty pay earned in any month you served in a combat zone.
  • Imminent danger/hostile fire pay.
  • A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone.
  • Pay for accrued leave earned in any month you served in a combat zone. The DoD must determine that the unused leave was earned during that period.
  • Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. The pay must be earned in a month you served in a combat zone.
  • Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone.
  • Student loan repayments. If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion.
Commissioned Officers If you are a commissioned officer (other than a commissioned warrant officer), there is a limit to the amount of combat pay you can exclude. The amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. For 2018, the exclusion amount was $8,586.00 per month (i.e., $8,361.00 for the highest enlisted pay, plus $225 for imminent danger pay).





 
 
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