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PostHeaderIcon Taxes for People Serving in the Military

If you know someone serving in the armed forces and is helping protect our country, like everyone, they have to file a tax return.  While most of the regular rules apply to those serving in the military there are a couple of things that those in the Armed Forces have to look out for.  Most of those special situations are discussed in Publication 3, the Armed Forces’ Tax Guide.  Rather then letting you read the 30 page publication, here are some of the highlights.

1)  People in the armed forces have several income types that are excluded from gross income.  Combat zone pay, your Basic Allowance for Housing (BAH) and your Basic Allowance for Subsistence (BAS) are all excluded from your taxable income as are moving allowances and travel allowances.

2)  There’s a combat zone exclusion.  If you’re serving in a combat zone, you can exclude certain pay from your income.  If you qualify for the earned income credit, you can choose to include your combat pay in your income and include it for purposes of the earned income credit.

3)  While grim to talk about it, a decedent can have their tax liability forgiven if they served and passed while in active service in a combat zone.  This can go back multiple years and you’ll need to amend prior years’ tax returns to take advantage of it.

4)  The normal deadlines don’t necessarily apply.  If you serve in a combat zone or you’re away from your permanent duty station you may qualify for an extension of the normal tax deadline.  Your extension of the deadline is 180 days after the later of either the last day you are in a combat zone or the last day of any continuous qualified hospitalization.  You can also add the number of days to the 180 that you would have had when you entered the combat zone as well.

5)  Similarly, you can defer any payment tax under many of the same rules in number four.  In this case you have to notify the IRS that your ability to pay the income tax has been materially affected by your military service.

6)  If you’re overseas, there are additional rules that might let you exclude some or all of your income from tax.  This isn’t covered in Publication 3.

For more information, the IRS has a resources page on their website.  There’s a couple of videos and several links (including one to Pub 3) to help you out.