Top 10 Military Tax Quirks You Need to Know

Military spouses start navigating lingo, acronyms, insignias, ranks and traditions from day one of service. When it comes to filing taxes, there’s a whole new language lexicon. Make the tax filing process easier on you by learning about these 10 quirks that can impact military families.

1. Combat pay exclusion. Some income may be tax-free if you worked in a qualifying combat zone.
2. Capital gains breaks from sale of main home. A special exception allows military families to receive the same capital gains exclusion as civilians ($250,000 for single/$500,000 for married).
3. Moving deductions. You may be able to deduct some of your moving expenses.
4. Itemized deductions. Deduct travel, uniforms, transportation, education and other employee business and separation assistance expenses. You’ll need to review the specifics.
5. Individual Retirement Account (IRA) deductions. You may be able to deduct some of your IRA contributions, but there are exceptions and rules that apply to this deduction.
6. Credits. These include child tax credit, earned income credit (combat pay exclusion can come into play here), credit for excess Social Security tax withheld and first-time homebuyer’s credit repayments.
7. Tax forgiveness. Depending on the circumstances, if a service member dies, the spouse can apply for tax forgiveness (meaning tax payment isn’t necessary, or a tax refund is possible).
8. Filing extension. Extensions are possible, and you typically have to file for permission to receive an extension.
9. Payment extensions. It is possible to request and receive a payment extension, but be careful and know the fine print so you don’t end up with penalties or interest on top of what is due.
10. Signing your tax return. If your service member is deployed and the spouse has power of attorney, they can sign and file a joint return on behalf of the service member.

Because every military family’s situation is different, and because there are so many caveats and fine-print details to each tax exclusion, credit and deduction, you’ll need to learn more about each one of these and how it specifically pertains to your situation. Luckily, free, easy-to-use MilTax software and support services can help you do just that. No need to pay for outside tax assistance or risk missing specific military tax breaks. MilTax is made for military life, so you get more, including:

• MilTax software. This free software is tailored to military life – addressing scenarios including multiple moves, deployments and more. You can work anytime, anywhere, at your own pace.
• Specialized phone support. Call to set up an appointment with a trained consultant free during tax season (January through April 18) seven days a week from 7 a.m. to 11 p.m. EST or EDT at 800-342-9647.
• In-person tax assistance. The Volunteer Income Tax Assistance program offers free in-person tax preparation and filing assistance at locations on and off base worldwide.  Services vary by location.

If you do a little bit of prep a little bit at a time, you’ll save yourself a headache when it comes time to file. Make sure you take advantage of all of the benefits available to you and your family. Happy filing!